Guide: How To Choose The Best Forex & CFD Broker In 2020
Choosing a Forex broker is a crucial part of any trader’s journey. Everything you will ever need to know as well as every possible tool you will require — your broker has got it. The challenge, however, is actually making the right choice. With the current offer of currency exchange brokers, finding one that will deliver to your specific needs is tough. Today we explore how to choose the best Forex broker for traders at any level of expertise.
The Primary Criteria for Choosing a Forex Broker
What is the first quality that comes to mind when you think about choosing a Forex broker? The majority of traders will answer: trustworthiness. Brokers handle our money and needless to say, we want this matter to be taken care of with maximum attention and respect.
But how do you measure trust?
Well, there are certain things you can look at to know whether a broker can be considered trustworthy. As you learn how to choose a Forex broker, the first thing you’ll need to look at is the length of service. Legitimate brokers have earned the trust of their traders by working with them for a long time. Time in this case immediately translates into experience. An old broker is usually a good broker.
Take a good look at the brokers website and check the “about” section to see how long the company is in business for. No luck there? Then you can go to a blog section and look at old posts. In general, good brokers are the ones who spent at least 10 years doing what they do.
Another important aspect of choosing a Forex broker is evaluating their ability to stay up-to-date with the newest market’s tendencies. The currency exchange market is always growing and evolving, it is only logical that professional brokers will grow and evolve alongside.
Study the website or start a conversation with one of the broker’s team members. Check how fast they react to world news, what is their policy on trading cryptocurrency, how often do they update trading software and so on. All of these will give you a good idea on the level of professionalism and effectiveness.
Since we have already mentioned the software, it makes sense to pay it some extra attention. Online trading is fully supported by a series of computer programs, powerful servers and tools. A large part of how to choose a forex broker is looking at what kind of trading platform solution they offer and how fast they react to software updates released by the developers.
The majority of brokers go with Metatrader 4 (MT4) as it combines highly functioning algorithms with easy to navigate interface. MT4 is fast, effective and relatively simple to understand. But if you are having trouble getting started, the broker you chose should be able to walk you through the set up and provide you with step-by-step instruction on how to use the trading terminal.
So far, we learned that choosing a Forex broker depends on the amount of time they spent at the market, the forward-looking mindset, an ability to adjust to the newest updates of the market and the selection of the most effective trading tools. But we also know that a productive trader-broker relationship goes beyond just that. Which brings us to the next question: how to choose a good forex broker for different categories of traders?
Forex Broker for Beginners
The hardest part of the trading journey is getting started. With so much to learn and understand, a lot of novice traders quickly get overwhelmed and abandon the idea of profiting off Forex. Good broker’s job is to make the initial process easy and stress free.
How to choose the best forex broker for beginners? Look at what they offer to beginners specifically. The foreign exchange market is a gigantic collection of events, facts, numbers and concepts. Getting to know each and every thing there is can take up some time. Good Forex broker knows how challenging it can be at the beginning and does everything in their power to ease up this process.
Great learning tool for anyone who is just starting to consider Forex trading is a specialized learning course. A well-organized course is going to take you through the most basic concepts and provide a good idea of what trading is going to be like. Since most of the lessons will be oriented at the entry level traders, there won’t be too many complex concepts and lingo. But it is also a good idea to find a trading dictionary at your broker’s website and get familiar with as many items on there as possible.
Understanding the basics and knowing the professional slang will significantly simplify the getting started process. After you are done with them, move on to slightly more detailed descriptions of how different parts of the market work. And once you feel like there is a decent amount of knowledge to work with, consider taking a couple of days to practice.
Yes, that’s right. Another aspect of how to choose a forex broker for beginners is to see whether the broker is offering an option to polish off your skills for free in some version of demo mode.
Demo accounts for Forex trading are irreplaceable for beginners. In there you get an opportunity to study the platform, practice navigating the charts and actually open and close trades. The only difference from the actual trading account: demo trading is a simulation. Demonstration account looks and works just like the real thing, including the live market data, but it does not have any impact on the market.
And since there is no money involved, demo trading is absolutely free. For any trading beginner having an opportunity to trade in simulation mode is a game changer. Take your sweet time getting to know the ups and downs of trading currencies without risking any money. Choose the best strategy for your trades and experiment with various techniques. And then feel free to take all this knowledge and experience to rock the actual market.
Now we know that choosing the best Forex broker for beginners is built around convenient learning tools and practice solutions. But after some time every beginner is going to become an expert. Does this mean they will have to switch brokers? This brings us to our next segment: how to choose Forex broker for professionals.
Forex Broker for Professionals
For a beginner, a broker is a teacher. And for an experienced trader, a broker is more of an adviser. Professional traders know what they are doing and have their own tricks on how to tame the market to their benefit. But there are situations when expert traders decide to explore the unfamiliar territory or get a second opinion on the decision they are about to make. This is where they turn to a broker.
A self-respecting broker company will have several professional traders and market analysts on board. Even if a trader chooses to perform their own market analysis, comparing the results with others can be very helpful. Especially when it comes to highly subjective fundamental analysis.
In fact, a lot of professional traders only focus on technical analysis themselves and trust their broker with the fundamental side. That way they save a good amount of time that can be invested otherwise. Additionally, a lot of old-timers know that market analysts dig deep enough and have more data on their hands to work with, simply because it’s their job. This means that a professionally done analytical report is most likely going to be more insightful and effective.
Another way professional traders can benefit from their broker is through using the leverage. On Forex, there are roughly two major categories of traders: those who trade in minimal amounts and gather minimal profits and those who choose to go big. It is pretty obvious that going big can result in high profits, but at the same time not everyone who wants to participate can afford it.
Using leverage helps you magnify your investment by using a loan from your broker. Bigger bid brings a larger win. Leverage can be very helpful in a variety of scenarios. It is important, however, to treat it seriously and account for every possible outcome of your trade. At the end of the day you should make sure not to be left high and dry after using all your resources to open a big position.
And finally, a good broker for beginners is going to be just as good for professional traders. You can consider it one of the points for how to choose the best Forex broker: the fact that traders of all kinds of professional experience and backgrounds can equally benefit from this broker’s services. This means that you should not worry about switching between brokers as you progress, one good broker will assist you all along the way.
Now, let’s look at the things you want to consider when choosing a Forex broker for different trading styles. Especially the ones that take place on smaller time frames.
Forex Broker for Day Trading
When choosing a Forex broker, traders often pay attention to the fees associated with broker’s services. Those fees include swaps, charges that apply when a position is carried over to the next day and spreads, the difference between the bid and the ask price for the selected instrument.
Day traders don’t usually carry trades overnight and therefore don’t really need to worry about the swap charges. But the spread, on the other hand, can play a big role due to reduced position size and the frequency with which trades open and close. If day trading id your course of action — focus on finding a broker that has reasonable spread charges on the currency pairs that interest you.
Keep in mind that spread size can vary based on the trading account type. Day traders should consider going for a type with higher capacity. This way they will get access to both bigger lot sizes and lower spread fees. Alternatively, you can consider trading less within one day to minimize the amount spent on spreads.
Forex Broker for Scalping
Scalping is even more scaled down and fast-paced from day trading. Scalpers usually aim for profiting mere pips before closing a trade and moving on to the next one. Once again, spreads can be a big obstacle, since minimizing the amount of trades is not an option.
Traders who prefer scalping to other trading methods, have an option of combining a bigger account type with the usage of leverage. This way, even just a few pips will make a difference and cover up the spread fees in most cases.
In addition, you want to pay attention to how fast the broker processes a single trade. In scalping, more than in any other approach, time is everything. Take some time finding out how your broker prioritizes traders and how fast are the orders filled.
It is worth mentioning, that scalping is one of the advanced techniques and it is usually not advised for novice traders to implement it. But then again, with the right broker and a good amount of practice anything is possible.
Conclusion
To sum up, let’s look at all the aspects of how to choose a good Forex broker at once. The best broker for Forex trading is always trustworthy, ready to assist and provides the best possible solutions for all types of scenarios — from giving you access to effective software to staying on top of everything that happens at the market and in the world.
Get to know your broker’s team and make sure to take advantage of the opportunity to practice in demo mode for free. Foreign exchange market is one of those places where there is no such thing as knowing too much: the more you know and the better skills you have, the higher is your chance to stay profitable all the way through.
WHY TRADE WITH PAXFOREX?
We are one of the fastest growing Forex Brokers in the Market. Trade with PaxForex to get the full Forex Trading experience which is based on...
