How to Choose the Best Forex Broker 2020 - Step by Step Guide
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How to Choose the Best Forex Broker 2020 - Step by Step Guide
Today Forex trading is known as the most efficient way to get an income, especially taking into consideration its main benefits – low investment requirements, good returns and remote “work” so to say. So basically, it totally reflects the spirit of our times. If we consider other options for getting a stable income on the Internet, trading has the best opportunities. In order to trade on the Forex market, you need to cooperate with a broker that provides intermediary services. Beginner traders need to know how to choose a reliable broker among the wide range of companies engaged in intermediary activities.
Many newcomers are being tormented by the same question - which broker to choose, what are the advantages of this particular one over the others and if you can believe everything that is said in the advertisement. These are quite reasonable questions because today it`s all about marketing overflowing with incredible and hard-to-believe promises. Of course, for those who have been trading for a long time, the choice in this situation becomes much easier - traders know what they need and what to pay attention to find the most suitable brokerage company. Moreover, they know what to expect, are familiar with real reviews or have personal experience. So today we have prepared a step-by-step guide that is meant to make the decision-making process much easier and more informed. It is best illustrated by the example of PaxForex.
First of all, let`s see what is a broker. To make it clear, a broker is an intermediary between a trader and the market itself, a bridge so to say. A broker provides an opportunity to actually trade on the financial markets. Forex broker's earning is a commission (spread) which depends on the difference between the BUY and SELL prices.
How to Determine Which Broker is Reliable and Which is Not?
First, it is necessary to determine the key parameters for a trader to estimate a broker. Many investment blogs, as well as brokers themselves, can draw our attention to some insignificant advantages, presenting them as a determining factor, on which the profit of a trader as a whole depends. At the same time, really important parameters of a company remain undisclosed, as a rule, because there is nothing left to boast of.
Further on, we will consider the most important parameters to be oriented on.
The first and the most important parameter to look at is the company`s “age”.
It cannot be unequivocally stated that a company providing brokerage services in the market for 9 years is more reliable than a company operating in the 8th or 7th year. The borderline is much thinner, but there are some clear criteria to pay attention to. We recommend you be cautious about Forex brokers who entered the market 1-2 years ago. Even if such young companies offer incredibly favorable conditions, and even if there are famous traders and financiers among the founders - there is a risk that the project may fail, and its CEO will always find arguments in his defense (with the clients' money already lost). It`s better to take 10 years to determine the reliability threshold. A broker who has worked in the market for such a period and has no reputation stains deserves a certain trust. The risk of bankruptcy of the organization is drastically minimized, because the broker has already managed to stand on its feet, at the expense of his business, established by years. Though, it is necessary to be aware that no financial company is protected from force majeure. We draw your attention that PaxForex has been in the business for 20 years.
The next thing to pay attention to is the payment methods available. Different brokers have different ways how to deposit or withdraw funds to/from your trading account. Generally, they can be divided into four categories:
Crypto-wallets (not too many brokers offer that, yet).
Almost every large broker provides an opportunity to make transactions by any of these methods. However, there are special cases. For example, the broker allows depositing or withdrawing money to Skrill (apart from standard wire transfer or credit/debit card), but the trader uses PayPal only. Thus, it is unprofitable for the client to transfer money to the card and to deposit to the account from it. By the way, the additional commission may be charged by the processing company (not a broker). Therefore, when choosing a broker, you should pay attention to all available ways of making money transfers, and immediately calculate the possible options. We advise you to check the availability of payment systems convenient for you not only to replenish the deposit but also to withdraw funds in advance. Some brokers offer a lot of convenient ways to deposit funds, but at the same time limit the possibility of withdrawing funds, leaving 1-2 unpopular methods. Besides, PaxForex provides a wide range of payment methods, from various e-wallets (Perfect Money, QIWI, etc.) to crypto-wallets, so you can deposit the account with Bitcoins or Ethereum.
The third parameter to consider is trading conditions, i.e. spread and swaps.
Spread (the difference between the bid and ask price) is key in the Forex trading since it` the amount charged each time you place any trade. Spread can be either fixed or variable. Fixed spread doesn`t change and variable one fluctuates depending on the situation on the market. It is better to choose the best forex broker with a fixed spread than a broker with a variable spread. Swap is a difference in interest rates on currencies from the traded currency pair. Swap can be either positive or negative, and its size is set by the broker for each asset. It`s charged (or added) every day, and it is worth paying closer attention to in long-term trading. The higher is positive and the less is negative swaps on, the more profitable the broker's trading conditions are. PaxForex offers the most competitive trading conditions, i.e. spread on EUR/USD is 0.4-0.8 and swap is 0.4025 (on short position).
Available assets to trade are the next essential parameter, since trading on Forex is carried out primarily in currency pairs, but the number of such assets may differ for each broker. Some companies offer to trade only the major pairs (the most popular pairs, for example, EUR/USD), while others provide such exotic pairs as USD/MXN and USD/ZAR. Besides, a derivative instrument such as CFD allows you to trade stocks, futures on indices, commodities, and even cryptocurrencies. Almost all CFD brokers work like ordinary forex brokers, only providing Contracts For Difference in addition to currencies. As a result, some brokers have thousands of assets available for trading, while other companies offer only a few dozen. For example, PaxFores offers a large number of CFD assets in addition to 60 currency pairs (including major and exotic ones). This is a significant advantage that allows you to invest in many interesting and promising assets, such as stocks of Tesla, Google and other companies with huge growth potential. Note that you can also trade on commodities and main cryptocurrencies, such as Bitcoin, Litecoin, Ethereum, and Ripple. Bear in mind that a large selection of assets expands the opportunities for trading and investing, so it is better to choose companies with a wide range of trading instruments. Be sure to pay attention to this parameter.
The fifth parameter to consider is the software. The execution speed of orders depends on the quality of the software, which has a very strong impact on profit-making. Also, depending on the functionality of the trading platform or application, a trader can get additional opportunities, such as installing a trading robot or copying the trades of other traders.
Terminals (trading platforms)
Choose a broker that offers the most functional MetaTrader 4 or MetaTrader 5 terminals. These most popular platforms are considered to be simple, reliable and, at the same time, have a wide functionality and the possibility to install additional programs, trading robots, advisor indicators, etc. Also, please note that some brokers also have their Web-terminal. This is a very convenient solution for traders who do not want to depend on the program installed on their home computers. Besides, PaxForex is working through the MT4 which can be downloaded here https://paxforex.org/metatrader4/download_MT4.
Automated Trading Services
Auto-trading and copy trading will be interesting both for beginners and professionals. For beginners, it will be an opportunity to participate in trading without having a fundamental knowledge yet and gain the first experience. Professional traders can receive additional income for signals delivery while performing the same actions as in independent trading.
Another parameter to look for is the security of trading. Some novices have doubts about sending copies of their documents to the broker. This is an indicator of the broker's reliability because without verification traders' accounts become vulnerable to fraudsters. It is much easier for an unreliable organization not to require mandatory verification, and after that to deprive clients of their money by citing a hacker attack, or by providing "fake" certificates of withdrawal request, allegedly received from the client himself. If the broker is serious about protecting the trader's capital, then mandatory verification and request of copies of documents is an integral part of the cooperation. Besides, the obligatory verification of the client is one of the requirements of any little or no authoritative regulatory organization.
The seventh parameter is leverage and margin call level. In forex trading, there is a tendency to prefer higher leverage, and sometimes brokers are chosen by this criterion. However, it should be recalled that higher leverage not only provides an opportunity to earn more but also increases the level of risk. Besides, traders need to keep in mind that there are brokers that offer fixed levels of leverage, while other brokers change leverage depending on which currencies are traded, and also, they may have special provisions regarding the execution of trades moving to the next week. Traders also need to pay attention to their broker's margin call policy. Some companies follow the principle of FIFO (first in first out - "first received, first executed") when closing transactions if margin requirements do not correspond to the current amount of funds; other brokers follow the principle of LIFO (last in first out - "last received, first executed"), and some simply close all transactions. Depending on what a trader prefers, he or she must identify these points before opening an account. Leverage levels are primarily of interest to aggressive traders who seek to use the highest possible leverage, while medium or conservative traders are also comfortable with medium leverage levels. By the way, trading with PaxForex you can choose among diriment leverage levels from 100 to 500.
The eighth parameter is the initial deposit that an online Forex broker may require. Most Forex accounts can be opened with a very limited initial deposit (even from $50). Of course, given the use of leverage, the purchasing power can be well above the minimum deposit. This is one of the many reasons why Forex trading is so attractive to beginner traders and investors. Many brokers offer standard, mini and micro accounts with different initial deposit requirements. PaxForex also offers several types of accounts, including the abovementioned ones, plus Islamic account which was designed specifically for clients of Muslim beliefs who cannot earn/pay any interest due to Sharia law. PaxForex is a global company with multilingual customer support. The service is available 24/5, by phone, email and via live chat, with a dedicated team ready to answer all your questions.
Best Forex Broker 2020 - Why pick PaxForex?
PaxForex offers more than 100 assets for trading, with industry-leading spreads, low commissions, and negative balance protection to give clients the best experience and chances of prosperity. More than 100,000 traders have chosen, including clients from over Europe, PaxForex as their broker. If you are ready to implement all this experience and boost your trading to a new level, a live PaxForex account is the perfect solution for you! Trade Forex and CFDs in over 50 currencies, choosing from a variety of major currencies, minor currencies and exotic currency pairs with access to the newest technical analysis and trading information.
Summing up let`s make a shortlist of key parameters of a reliable broker:
Age from 10 years;
Low spreads and swaps;
A large number of currency pairs and CFD assets;
Availability of MetaTrader 4 or MetaTrader 5 platform;
Security of trading;
24/5 multilingual customer support.
Having already chosen a broker and even being ready to deposit real money into your account, a trader should practice on a demo account first. In addition to learning the trading terminal and the specifics of placing trades, a demo account is needed to test your trading strategy. The presence of the strategy itself is a necessary condition for making a profit from trading Forex. If you are confident in your Forex broker, you will be able to devote much more time and valuable attention to the analysis and development of various currency strategies. Preliminary research before making a trade with a particular broker can be very important and can increase a trader's chances of success in the competitive currency market.