Before you start trading Forex through any broker, it’s best to take time out for research first. You must compare and evaluate different Forex brokerage services to ensure that you are trading with a reliable and trusted broker.
As the FX market is booming, more and more investors are actively participating in buying and selling of currencies. To cater to the high influx of investors FX brokers are also mushrooming at the speed of light in which some are reliable while several are just scams.
Therefore it is very important for traders to select the right broker before they make a big trade investment and get scammed. This brings us to the crux of this article, that is what are the factors on which Forex brokerage services should be compared?
Factors For Comparison
Here are some important factors that you must keep into account when you compare and evaluate different brokerages:
Wide Range of Currency Pair Options
Since you’ll be trading Forex, you must compare different brokerages on the variety of FX pairs offered. Always choose the broker that offers a wide range including all popular FX pairs such as USD/AUD, GBP/USD and JPY/USD. In this way you can diversify your Forex portfolio and engage in profitable trade.
Leverage ratio helps convert small deposits into large total contract values. A high leverage ratio offers you a greater chance to earn higher profits. Taking advantage of this factor, many scam brokerages claim to offer too good to be true leverage ratios like 1:800 or 1:900. So, avoid such service providers. Always go for a broker that provides a good yet credible leverage ratio for example 1:400 or 1:500.
Spread is the difference between the bid and ask price. Instead of paying commission to the broker like traders do in traditional financial markets, in Forex the brokerage is remunerated by a spread. It can be floating and fixed depending on the brokerage. So, compare different brokerages on this factor and choose the one that suits you best. Since fixed is not affected by the market’s volatility and remains the same, it is advisable for novice investors to opt for a brokerage that offers fixed spread. This is less risky. However, for advance traders who have a strong understanding and can speculate the price movements with precision, they can go for floating.
Variety of Deposit Methods
Compare FX brokerage services on payment methods. Choose the one that offers a variety of deposit methods. Scam brokers usually stick to one or two deposit methods whereas reliable brokerages tend to offer a large variety of payment options for customer convenience. The best way to choose a service provider is to opt for the brokerage that provides a payment method that you are comfortable with. For example if you find PayPal a better payment option then credit cards, then find a brokerage service that offers payment through PayPal.
Value Added Features
Compare and evaluate brokerages on value added features such as MT4 platform, Expert Advisor service, demo account and copy trading option. Demo account is ideal for those traders who are new to Forex and want to learn basic FX strategies before they kick-start real money trading.
For those who are always on the go, have a daytime job and want to engage in buying and selling currencies as an additional source of income, EA is a good feature. Expert advisors act like robots and make transactions automatically on the trader’s behalf. However, to get started, the trader sets certain parameters for EA’s first.
The copy trading feature though is not offered by many brokerages but it is ideal for those who have no financial background and lack Forex knowledge. This feature enables traders to follow and copy trading activities of advance and experienced investors and make good money with ease.
Therefore, conduct a proper research before you make your final selection. It may seem time consuming but it is definitely worth it! In addition to comparing brokerages on the above factors, you can also go through customer and platform reviews to learn and see what people have to say about the brokerage you want to sign up with!