As we pointed out in the last post, the Forex market offers abundant opportunities for retail traders. At 1000pip Builder, we are a living testament to that. With just 2 to 7 trades per day and by concentrating on the major currency pairs, we aim for 350 pips a month. We wish that every Forex trader out there was enjoying as much success as we are!
Unfortunately, the market realities show a very different picture for the vast majority of traders. In fact, according to statistics, close to 96% of traders lose money in the Forex market and end up quitting it, for good. A lack of basic knowledge of the market is one of the reasons that have been cited for this. This is why we cannot overstate the need for you to grasp those basics before you attempt to place your first trade at all. So, here, we will continue with our discussion of them.
With all your enthusiasm (and we know you have got a huge dose of it!), you cannot participate directly in the Forex market. Instead, you need a broker as an intermediary. Forex brokers make the necessary arrangements that make it possible for you to access the Forex market. Through those arrangements, they enable you to buy and sell the currency pairs of your choice.
Most of those brokers provide their services to retail traders — that is, traders like you and me — and are correspondingly called retail Forex brokers. Institutional traders, on the other hand, have larger capital sums and are serviced by bigger brokers. In addition to their larger capital pool, they also have, at their disposal, powerful technology, better trading conditions, and a dedicated full suite of support services.
Don’t let those big players crush your hope. All you have to do first is to be careful in deciding on a retail broker for your Forex trading. We have created a checklist to help you with your choice.
Is it reliable? Before you settle for any broker, this is the first thing to consider about it for the safety of both your funds and mental health. Stories abound of unregulated Forex brokers carting away with the funds of their unsuspecting clients. The regulatory status of a broker is the litmus test for its reliability.
Hence, it is critical you check it for any broker you want to be using. Your ideal broker should be duly licensed by a foremost regulatory agency with its registration number made available to all to see. Also, it must operate segregated accounts for its clients. That is, for maximum safety, clients’ funds should be kept in separate accounts.
Generally, brokers registered with the following agencies are considered reliable to use:
Commodity Futures Trading Commission (CFTC) — United States.
National Futures Association (NFA) — United States.
Financial Conduct Authority (FCA) — UK.
Investment Industry Regulatory Organisation of Canada (IIROC) — Canada.
Australian Securities and Investments Commission (ASIC) — Australia.
Swiss Financial Market Supervisory Authority (FINMA) — Switzerland.
Cyprus Securities and Exchange Commission (CySEC) — Cyprus.
Next, what trading platform will be using with the broker? Many retail Forex brokers’ platforms are not intuitive to use or some do not fill orders on time. There are only a few brokers that offer standard trading conditions that come close to what their institutional counterparts do.
Another key considerations are the currencies available to trade and the trading costs. Does it offer stock indices, precious metals, currency pairs, commodities, cryptocurrencies, and bonds? Also, does it burden its users with unnecessary costs such as inactivity and storage fees?
Trading costs can easily become a huge financial burden. Therefore, you should use only an broker that is affordable and does not compromise the quality of its services.
Quality of Customer Service
In the course of your trading, you will inevitably run into glitches from time to time. At that point, it is the quality of the customer service of your broker that will be to your rescue. And no matter how strongly regulated the broker is and how awesome its trading conditions are, it may still not be the best to use if its customer service poor.
In fact, there are brokers whose customer support services are so useful that they help their clients during the account opening process, take them through the basics of trading, and generally make it easy for them to start. You should go only for one of those.
Ease of Deposit and Withdrawal
Finally, we know you care about the security of your funds. We do, too. Hence, we recommend you assess the payment methods that your desired broker supports, too. Forex brokers offer payment methods that range from bank wire, credit/debit cards, digital wallets (e.g. Skrill, Neteller, and WebMoney).
In this regard, there are three factors to watch. First, how many of those methods does the broker that you want to use support? Does it offer the one you would like to use? Second, what is their quality? The ways to gauge the quality of a payment method are its convenience of use and the interval for payment execution.
Finally, what are the hidden charge associated with the use of each of the methods? These charges can be on either deposit or withdrawal. For example, Neteller, a digital/electronic wallet, charges as much as $12.75 as the processing fee per withdrawal and a deposit fee of 2.5% of the amount to be deposited if it is less than $20,000.
Be sure of those before you make your choice.
At 1000pipBuilder, we care so much about your success. And we understand that it starts with the broker you choose and continues with the quality of the trades you take. About these two we have tips for you. Thus, you should sign up for a membership plan with us here.