Forex trading is the largest financial market in the world. It involves the exchange of national currencies on the foreign exchange market. Despite the huge size and turnover of the market, there is no centralized exchange for the Forex traders to conduct the transactions. You have to conduct all trading activities through the intermediary brokers.
Brokers are crucial
This shows the importance of Forex brokers in the Forex trading process. As the forex trading risk meter is up all the time owing to the rapid pace of trading and higher leverage, you need the accurate Forex list and constant monitoring, and perfect predictions to book considerable profit. Hence, if you plan to make much money from the Forex market in 2022, you have to work on the selection of the right broker.
Follow the right strategies
With thousands of brokers offering services online, you can have a really tough time finding the ideal services unless you have good guidance to select after considering the right factors. Continue reading the blog here, and you will get some valuable tips to find your appropriate Forex broker.
Tip #1: Trading conditions, spreads, and costs
The obvious factor that you have to consider above everything else is the transaction cost or pricing of the broker. Retail investors nowadays have a golden opportunity to utilize the cut-throat competition between the best brokers from all across the globe and access the most profitable pricing.
Many brokers will offer a choice of variable or fixed spreads and commission fee structures for the trading purpose.
- Account types
The variable spread account types fluctuate based on market conditions. These include:
- Commission accounts: Low spread and flat-rate commission fees.
- No commission standard accounts: Addition of no commission fees on top of the spread.
- Fixed spread accounts: Micro accounts with a constant spread regardless of market conditions.
The Commission fees depend on the trade sizes and the charges per side or the round-turn. You have to look out for the brokers who charge low commission fees if you want to minimize the trading costs and maximize the profits.
- No commission spreads
The no-commission account types do not pay the extra commission fees over and above the spread. Thus, the spreads will be wider than the commission account type.
- Fixed spreads
The best brokers always offer a wider average fixed spread than the variable, fixed account types, but if you are a beginner in the trade, you should prefer the constant pricing structure, which aids in easier calculating potential profit and loss.
- Trading and account fees
The above fee includes two types of fees:
- Overnight financing fees: here, you get the scope of keeping leveraged positions open for longer than one day on payment of overnight financing fees or the swap rates. You have to pay or will receive a financial cost deriving from the interest rates, depending on the duration of the leveraged position.
- Inactivity fees: if you leave the account dormant and don’t make any trades even for a short period, like somewhere between 6 and 24 months, the brokers will charge the inactivity fees every month.
The spreads and costs are the significant factors controlling your profit or loss values.
Tip #2: Regulatory compliance
When selecting the broker, you should check first whether the broker is compliant with the regulations of a competent regulatory agency. Hiring a regulated broker will be an assurance about the facts that
- The broker will meet the operating standards that the regulatory authorities impose.
- Knowledge about adequate capitalization
- Maintenance of segregated accounts to safeguard your funds.
Additional regulations are there to offer fund protection if the firm becomes insolvent. The broker will uphold rigorous standards as the financial service provider.
Tip #3: Use of right trading software and platform
Remember that the trading platform is your gateway to the market. So, you should ensure that the broker is using a reliable trading platform. Most brokers will offer you to select the trading platform as third-party trading solutions provide these trading platforms.
However, there are brokers who are developing their proprietary platforms for trading in an attempt to differentiate themselves from the rest of the competitors. Surprisingly, these proprietary platforms can become the ideal platforms for trading as the brokers make it, especially for the client base.
Tip #4: Monitor the additional features
While discussing the trading platform with the broker, always inquire about the following matters:
- Is there a comprehensive charting package?
- Does the platform have a wide range of technical indicators?
- Possibility of one-click trading
- Presence of risk management tools like the stop-loss order or the trailing stops
Although these factors may seem trivial initially, these elements can play a crucial role in offering a seamless and productive trading experience with Forex.
But when you need to choose the platform, it will always be a matter of personal choice. Most of the platforms have common primary features. So, the best way to find a suitable platform is to try them out sing demo accounts that your broker will provide.
Tip # 5: Business model of the broker
Retail investors will come across two basic types of Forex brokers while trading.
- Dealing desk: Forex dealers will process your trading instructions via a dealing desk within their company. The dealing desk broker will introduce you to the other sides of the trading like the broker will execute the trade as you open a position, and then they will get the exposure to the trade.
- Non-dealing desk: the NDD broker will pass the trade straightaway to the third party. They are of two types:
- ECN
When you Buy on the trading platform, the broker’s computer trading system will automatically process the transaction and transmit it through the Electronic Communications Network or ECN without a dealing desk.
- STP
The broker will pass the trade orders directly upon receiving to the third party for execution through the market makers’ dealing desk.
All the above information will help to determine which type of broker will be ideal for booking profit in 2022 without much hassle. The selection will be a significant decision of your financial progress story.
