Every trader out there has a story about being ripped off by their Forex broker. Most are less than pleasant experiences, with tales of hidden fees and bad trading conditions that range from inconvenient to outright illegal. The fact is that Forex Brokers are not regulated in the US or anywhere else in the world for that matter, meaning they can pretty much do whatever they please. That’s how this business operates behind the scenes. Also, there are plenty of stories out there about brokers manipulating prices to increase their profits. However, not all Forex broker deals are bad deals by far. There are quite a few that give you honest service for your money. You have to know how to look for them and what to look for. Here are six tips on finding a reputable Forex broker for your trading business:
One of the biggest mistakes a trader can make is going with a broker that has no recommendations or proof of experience from previous customers other than themselves. There are plenty of Forex forums on the Internet (like this one) where you can find stories and experiences about brokers that other traders have used. Look for negative anecdotes first. If there are too many, then look for more positive feedback so you can strike a balance between your research with input from others who have done business with the broker. And if you are unable to find any feedback on your broker of choice, that’s an instant red flag. Avoid them at all costs since it means they have not been in business long enough for others to recommend them, and/or their business practices could be questionable.
2. Background check
Like any other company you do business with, finding out more about the history of your broker is essential. If they’re brand new to the market, then that’s another red flag since it means they haven’t proven themselves yet. A good company should have at least five years in the business, or more if possible. Also, read online reviews on the best trading currencies.
3. Make sure you have a good contract in place
You wouldn’t just go into any business arrangement with anyone, so why would you do that with your Forex broker? You don’t want to sign anything without fully understanding all the terms and conditions involved. After all, this is your money we are talking about here. A reputable Forex broker should have a detailed contract that outlines what services they provide and how much it will cost. Do not sign anything that looks like a sales agreement or claims only to have the terms available by request. That is illegal in most countries, so you should have access to all of the relevant info before entering any binding agreement with them.
4. Look for complaints to regulatory authorities
All brokers need to be registered with Financial Service Authorities in their respective countries. If you’re not sure where your broker is based, do some thorough research before committing yourself. The FSAs regulate the Forex industry and ensure that brokers follow specific client protection guidelines. There are plenty of forums out there where you can find out if traders have had any experience with regulatory authorities against your broker of choice, so be sure to look around before making a final decision on who to work with. Also, always check their FSA approval ratings online.
5. Choose an established platform provider
There are plenty of software companies that sell their technology to brokers. That is why you may notice that most brokers use the same platforms like MetaTrader 4 (MT4) or MetaTrader 5 (MT5) because they buy the software from the company and customize it for their purposes. So the best thing to do is to choose a broker that uses an established platform provider like Metatrader and try to avoid those using “proprietary” trading platforms. Why? Because you can’t be sure if they developed it themselves or bought it from another company, there’s no way of knowing what type of platform you’ll be using.
6. Deals and promotions
If your broker is offering some “too-good-to-be-true” services, then it probably is, so don’t jump at it before thinking about the consequences. It also means there could be a catch to the offer. So always do your research before committing to anything. In most cases, “too-good-to-be-true” offers are used by brokers as a way of attracting potential clients and boosting their numbers. You may have come across some instances where new accounts were being offered 0% commission for one year, only to find out that they were charged almost ten times the standard commission after that year was over.
These tips will get you started and ensure you have the best forex broker.
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