I know that finding a decent and reliable forex broker to trade with is the dream of many traders. Indeed. There are so many scammers out there in the forex market that traders are nervous and lost when they want to find a new forex broker. That’s why in today article, I want to show you the numbers you should look for when you need a good forex broker. I sure hope some mathematical figures can make you more relaxed in this process.
The number of regulations
Forex regulation is the only proof for a broker’s credibility. International financial organizations give out regulations to brokers who can qualify for their strict requirements and standards. So how many forex regulations is enough? The answer is less than two.
Forex regulations limits several features of a forex broker that the regulators consider too risky for traders, such as: leverage, margin, maximum transaction lot… Those are all the features that experts love, because if you follow your risk management plan strictly, you can control those. That’s why a broker shouldn’t have too many regulations. The more regulations, the more restrictions. One or two reliable regulations is enough.
When speaking about the numbers of a good forex broker, of course we have to talk about money. That is everyone’s goal when trading forex. To maximize their earnings, traders would love the transaction cost to be as low as possible. Therefore, we should look at two major factors of trading cost when we test a forex broker: spread and commission.
Spread is the difference between the price you buy a currency at and the price you sell at. The number that is acceptable for spread is below 0.8 pip (I’m talking about the most common currency pair, EUR/USD). Any broker with spread under 0.8 pip is good to work with.
When the spread is too low (sometimes even zero), brokers will charge you commission for their services. And obviously, you don’t want to pay too much for that either. After scouting hundreds of brokers, we came to a conclusion that commission under $30 is reasonable. You can find several brokers with that rate.
The number of accounts
There are different levels of trader. However, I can easily put them into three groups: beginners, experienced ones, and experts. Each group of traders will need different things from their fx brokers. Therefore, a good forex broker must have different types of account that suit each level of traders.
As a consequence, I think a great broker must have at least four types of account. A free demo account for trader who want to test that broker. A mini/micro account with cheap prices for beginners who are still very inexperienced. A standard account for normal traders. Finally, an ECN account for experts, who trade really big amount of money.
Now you know the numbers of a good forex broker. Next time, when you consider a forex broker, remember to look for these numbers and make comparisons. These information can easily be found at the homepage of any forex broker.
Synthesized by top4forexbrokers.net