Choosing Forex and CFD Brokers by determining the ideal trading conditions and the maximum safety of funds.
Here are almost all the crucial factors that you should know about before opening a new Real Forex Trading Account.
Here are the 5 factors in a glance:
(1) Suitability of available Trading Account
(2) Cost of Trading
(3) Margin Policy / Level of Leverage
(4) Execution Efficiency & Platforms Offered
(5) Safety of Funds & Regulation
Each of these 5 crucial factors is divided into a number of sub-factors, as follows. Here is an Analysis:
(1) Suitability of the Trading Account
1.1 What is the minimum deposit required to open an account?
Usually the minimum deposit is from $100 to $1,000.
1.2 What are the available Deposit / Withdrawal Methods?
All brokers are accepting Bank Wire and Credit Cards. Some brokers are accepting additional other methods too, such is Paypal, MoneyBookers, SafeCharge etc). Another issue is if the Forex Broker allows you to withdrawal money using the same method only as the one you have selected when deposited funds.
1.3 What is the minimum lot size?
Get informed about the lot sizes. In other words, if that particular Forex Broker provides a mini lot size account which is ideal for Forex Beginners.
1.4 Is there any interest earned for the unused account funds?
1.5 Is there a Demo Account Available?
Every broker that respects his clients must offer a Demo Account. Using a Demo before opening a Real Trading Account is absolutely important for every Forex Trader. As I like to say a Demo account offers trading experience for free.
1.6 Are there any Forex Bonus / Trading Rebates available?
It is far better to concentrate in finding a good and reliable Trading Rebate Program than to seek for a high Forex bonus. ECN brokers usually don’t offer a trading bonus, instead they offer sometimes a trading rebate. In order to enter a rebate plan you must find an IB. FxPros.net cooperates with dozen of Forex Brokers and may help you joining a good Forex Rebate plan for free. »Contact us for more…
(2) Cost of Forex Trading
2.1 What is the spread of you Favor Currency pairs –is it Fixed or Variable?
EUR/USD and GBP/USD pairs in general are offering the narrowest spreads. Minors on the other hand are usually offered in extremely high spreads and that makes them unsuitable for day-trading. Another parameter concerns the type of the spread. Some Forex brokers offer trading accounts with fixed spreads others with variable spreads. Focus on the currency pairs that you will probably trade most and find which brokers offer the best trading conditions. You can use also multiple trading accounts and take advantage of more brokerage choices at the same time.
2.2 Are there any trading commissions?
Usually trading commissions are charged only by ECN and STP brokers. Some ECN Brokers even offer zero (0) spreads and make profits only by charging trading commissions. From the other hand, Market Makers don’t charge commissions, but they charge very wide spreads (EUR/USD 2 pip minimum) while the execution is usually slow.
2.3 Are there any other charges?
Other charges may be incurred on withdrawals or on maintenance (not-active fees).
(3) Margin / Level of Leverage
3.1 What is the Leverage / Margin Requirement of that Broker?
If a Forex Broker has a margin requirement of 2% then he offers leverage 50:1 (100%/2%)
3.2 Do Margin Requirements change for different Assets?
You must be sure about the margin requirements on the currency assets that you are particular interested in.
3.3 When does this Broker issue a Margin Call?
This is another issue of the broker’s Margin Policy.
3.4 What is the Rollover Policy of that Forex Broker?
At this point, you must answer questions concerning:
3.4.1 What is the min. margin requirement for earning rollover interest?
3.4.2 What are the particular swap rates for the particular currency pairs that you are interested in?
3.4.2 Are there any additional conditions to earn interest on margin?
(4) Order Execution Efficiency
4.1 What is the Forex Broker execution model (ECN, STP or Market Maker)?
In general professional traders are preferring ECN brokers which offer direct access to Forex liquidity providers.
4.2 Are there any delays on execution / price manipulation?
ECN brokers are performing better in terms of execution speed without price manipulation.
4.3 Which Trading Platforms are Available?
MetaTrader4 is the industry’s standard. Usually most brokers offer a Web-Trader too. In addition mobile trading is offered by most brokers nowadays (apps for Android, iPhone and iPad).
4.4 Is Automated Trading an Option?
Automated Fx trading using Expert Advisors has become considerably popular nowadays (popular signal providers include ZuluTrade and Currensee).
4.4 Does that Forex broker allows Scalping?
In general most ECN brokers are allowing scalping and most Market Makers don’t.
4.5 Additional Trading Features
There are many additional features making trading easier. For example trading from charts, one-click-trading, free trading signals etc.
(5) Safety of Your Funds
5.1 Is that Forex Broker Regulated?
It is absolutely important to choose only among high regulated Forex Brokers. Some trustable regulation authorities are: NFA USA, CFTC USA, FSA UK, BaFIN Germany, FSA Japan, MiFID Europe etc.
5.2 Where is the Forex Broker headquarters base?
Generally speaking it is better to choose among Forex Brokers that are situated in developing countries and not those who are situated in offshore countries where the legislation framework is more flexible in favor of the Brokerage Firm.
Ratings Forex Brokers using all Those Factors
In order to define the quality of a Forex Broker using multiple factors a mathematical model was produced that I call the “Rating Forex Formula”. This formula uses 4 factors to rate brokerage services:
(1) Safety of Funds | (2) Trading Cost | (3) Trading Options | (4) Technological Efficiency
Here is the version history of the Rating Brokers Formula:
» Rating Binary Option Brokers Formula -V.3.5, at BinaryValue.com
Giorgos Protonotarios, Financial Analyst, FxPros.net
■ Choosing Professional Forex / CFD Brokers