If you are just starting out as a forex trader or are even just casually considering the idea of forex trading, working with a broker can be extremely helpful. It also comes with some risks. Figuring out where to find a forex trading broker or brokerage firm offering forex trading services can be a confusing task, and a bit of a challenge making sure the broker or brokerage firm is reputable and able to meet your needs
Why a Broker Is an Important Decision
Ask yourself what kind of company you would call if there was a trade dispute. The purpose of this question is twofold. Firstly, is this a reputable company dealing honestly with a trade where you feel you have been wronged? Second, and arguably more importantly, is its financial information publicly available and regulated?
Both financial transparency and regulation are paramount when it comes to how comfortable you should be with your broker. As volatility has increased in the forex market, we have seen undercapitalized brokers close their trades without warning. This can create significant confusion for traders. By understanding your broker's financial positioning, you can understand if they will be able to weather the forex storms and volatility ahead.
The Importance of Regulation
Whether a brokerage firm is regulated determines who you can turn to if you are unhappy with the resolution of a commercial dispute. Think of it as a form of insurance. Of course, you hope you never have to use the policy, but you'll be happy to see it made available on a rainy day.
Some of the most troubling calls I've received from FX traders are those that come about because an unregulated broker shut down overnight or refused to process withdrawals. The trader had nowhere else to turn when the unregulated broker refused to honor his side of the trade deal.
Now that you understand why, it's time to answer another important question: how do you do it? How does a new Forex trader or enthusiast find a Forex broker?
1. Demo accounts
Once you've found a broker you'd like to work with, open a demo account to try them out.
2. Forex broker reviews
Check out forex broker reviews. Be sure to read reviews from multiple sources.
3. Use google
You can do Google searches to find forex brokers, but this method may not tell you much about the brokers themselves. Be sure to read all reviews and try demo accounts to ensure you are comfortable with a broker before depositing a large sum of money into an account.
4. Forex forums
Visit some forex forums to get input from people who are already trading. There is a wealth of information hiding on forex trading forums. It's a place where you can research both bad and good experiences with different forex brokers.
You Can't Be Too Careful
The number of forex brokers has fallen sharply since late 2007 and many "weak hands" have been flushed out of the market. But due diligence is still necessary when deciding who to work with for your trade.