Attempting to interpret product disclosure statements is overwhelming for most Forex traders seeking the services of a reputable foreign exchange (Forex or FX) broker, particularly if you’re unsure of the specifics. To help select a regulated broker, the following piece touches on important considerations, such as fund security, customer service, trade execution, trading platforms and education.
What is a Forex Broker?
A Forex broker is an intermediary between retail traders and the interbank market. The interbank market is a place banks exchange currency, either dealing with one another directly or through electronic brokering platforms. The amounts involved are often large with trades generally in excess of at least one million dollars.
Although dependent on trade execution, a Forex broker typically provides clients tradeable bid/ask prices derived from the banks of which they have lines of credit and access to FX liquidity. Many Forex brokers use numerous banks for pricing, therefore can offer the best prices available.
Security is Paramount
While the foreign exchange retail market is swamped with Forex brokers, with this number increasing yearly, some are more dependable than others. A well-capitalised and reputable company is generally what you would look for when performing any Forex broker comparison – one that’s preferably regulated by an official agency with high standards.
Some of the most well-known regulatory agencies in the world are the National Futures Association (NFA) in the United States, the Financial Conduct Authority (FCA) in the United Kingdom and the Australian Securities and Investment Commission (ASIC) in Australia.
According to the ASIC, the role of a regulatory body is to:
- Maintain, facilitate and improve the performance of the financial system and entities in it.
- Promote confident and informed participation by investors and consumers in the financial system.
- Administer the law effectively and with minimal procedural requirements.
- Receive, process and store, efficiently and quickly, the information we receive.
- Make information about companies and other bodies available to the public as soon as practicable.
- Take whatever action we can, and which is necessary, to enforce and give effect to the law.
Having the ability to quickly contact your broker is vital.
Trustworthy brokers afford several means of contact, with most providing round-the-clock support. A dedicated online message portal is an encouraging sign. So is having the ability to call and email the broker directly.
When comparing Forex brokers and testing customer service, look for a quick response. You’ll want to know you can reach someone on the trading desk in the event of an emergency.
The competence of brokers when dealing with account or technical support issues is as important as their performance on executing trades. For that reason, it’s important to test drive these services before committing.
How a Forex broker executes trades is an important consideration. Having low spreads is a good sign, as is having orders executed at the bid/ask price with little slippage.
Several business models exist, all of which have different ways of executing orders for customers. The most common are:
- Dealing Desk (DD) brokers make money through spreads and providing liquidity to their clients. Dealing- Desk brokers createa market, often taking the other side of the trade.
- No-Dealing Desk (NDD) brokers do not take the other side of their clients’ trade and provide direct access to the Interbank market.
- Electronic Communication Networks or ECNs provide real-time order book information, with tradeable quotes directly from the Interbank market, typically charging a commission on traded volume.
- Straight Through Processing or STP adopts a system that processes trades straightinto the Interbank market, hence the term ‘straight-through processing’.
User Friendly Trading Platforms
Both platforms provide automated trading systems with expert advisors and fast execution features.
MetaTrader 4 offers the leading trading and analytical technologies, as well as additional services. It has everything you need for Forex trading.
MetaTrader 5 is a multi-asset platform that allows trading Forex, stocks, and futures. It offers superior tools for comprehensive price analysis, use of algorithmic trading applications (trading robots, Expert Advisor) and copy trading.
Another consideration is the offer of a simulated trading account, preferably one that emulates live trading conditions. This helps traders familiarise themselves with their chosen platform and test strategies, risk-free.
Education / Analysis / Webinars
Having access to in-depth educational material, and market research that emphasises different trading styles, such as scalping and day trading that focuses primarily on technical analysis, is a strong point for reputable Forex brokers. It demonstrates an understanding of client needs by providing an arena catered to professional traders. Although most Forex brokers provide this service, you’ll soon appreciate not all provide reliable education and comprehensive market analysis for new traders.
Search for the best Forex brokers who offer detailed articles relating to both technical and fundamental analysis. Also, investigate whether there are extensive daily and week-ahead analysis. Extensive research from industry experts should highlight currency pairs that offer high-probability trading opportunities.
Social trading has also gained prominence over the years and is available through most reputable brokers, allowing traders the opportunity to share ideas.
Why Consider FP Markets?
Do not make the mistake of rushing when searching for the right broker; it could prove a costly mistake. Reputable brokers offer comprehensive resources, low trading costs and access to the interbank system, and that’s why traders choose FP Markets.
FP Markets has been regulated since 2005 in the financial markets and is a trusted global CFD and Forex broker. Our vision was to create the ultimate Forex trading experience where traders could access a full suite of trading products in the global markets. The convenience of being able to trade CFDs across Forex, equities, indices, commodities, futures, and cryptocurrencies all from a single account is one of the key reasons traders choose FP Markets.
What sets us apart from our competitors is our deep understanding of what traders need. We’ve learned that the combination of pricing, execution speed, cutting-edge platforms, product range, customer support, and market analysis are the key ingredients that give our clients the confidence to trade.
As a broker offering ECN Pricing, FP Markets streams prices directly from liquidity providers. We understand today’s traders value deep liquidity, the highest levels of price transparency, tight spreads and ultra-fast execution to ensure minimal slippage.
Being an Australian licensed Forex Broker, our client’s interests are a priority for us. It is our firm commitment to excellence that makes us one of the leading Forex brokers in Australia.
The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.