Thanks to the no-cap deposit and overnight trading options, forex trading has emerged as one of the most lucrative investment options for beginners. Moreover, with a daily turnover of $6.6 trillion on average and a total worth of $2.409 quadrillion in 2021, it's also pretty rewarding to choose the right broker and trading platform.
Despite being one of the highest trading markets, forex doesn't have a central regulator like NASDAQ, Which means if you're not careful, you might end up losing your money to a shady broker. To avoid this occurrence, it'll bode well with you to research brokers and trading platforms to pick a credible and reputed forex broker.
Half the battle is won once you have found a broker with a good track record and the one who has your best interest in mind. Here are the top five tips that will help you select the right forex broker.
This is the most basic check that a novice trader must perform before engaging with a broker. Make a list of all brokers that you find reliable and do some investigation. There are various online forums dedicated to forex trading, where users leave reviews or their experience with the traders they have dealt with.
If you cannot find reviews for a particular broker, it could only mean two things. Either they are relatively new to the market or have gone to the extra lengths to get the reviews taken down.
In such cases, ask your broker to share testimonials of past and current users as well as their references. If a broker has no testimonials on their website and no client references, it's best to look in the other direction.
In the absence of a central regulator, the broker must be a member of the National Futures Association (NFA) and the Commodity Futures Trading Commission (CFTC). A good forex broker will be transparent about their license and registration details. Moreover,
The licensing and registration ensure that the broker has complied with the local regulations and has implemented standard security measures to protect all trades. Moreover, the license and registration come with a sense of security that you'll be able to hold them accountable and recover your money in case they try to scam you.
If the broker you are negotiating with is not sharing the registration or license details, there's something shady about the broker. Ideally, as a beginner trader, you must do due diligence and verify a forex broker's credentials before employing their services. The first step would be to check a credible fake forex broker list and steer clear from those brokers.
One of the bullet-proof ways to identify a forex scammer is to look at their return promises. If a broker is promising guaranteed returns on your trades and is not walking the walk, it's pretty clear that they are scamming you. The logic is that it's nearly impossible to guarantee fixed returns in a volatile and unregulated market like forex.
A good broker with your best interest in mind will tell you how much of the return to expect and give you a clear picture of the risks involved in forex trading. Therefore, provide a wide berth to brokers promising returns that are too good to be true. For example, if your broker is assuring that a particular trade will double your money in so and so time period, it's time to look for another broker.
As a trader, you'll never interact with the broker directly; instead, you'll be trading on their platform. Therefore, it becomes imperative that you choose a broker with an intuitive and simplified trading platform in place. As a novice trader, a complicated platform might confuse you and result in poor trades.
A good trading platform will have a demo account to learn the ropes, additional resources related to forex trading, and trading tips to help new traders. Moreover, it should have a straightforward user interface to let traders place trades, check balances, modify transactions, and withdraw quickly.
Look for trading platforms with enhanced security options like end-to-end encryption, SSL security, and others. If the broker's platform is complicated and lacks standard security protocol, it's your cue to look for other brokers in the market.
As a novice trader, it's but natural to face many hurdles and have lots of queries about the market and the trade you have made. You might also find the trading platform confusing and have questions related to it. A good broker will have a strong customer care team in place to handle all of your queries.
A scamming broker will have customer care in place, but when you try to reach them, they will either not respond or lack any experience to answer those queries. Before employing a broker, visit the platform and engage with their customer support. If you get satisfactory responses to your queries, go ahead; otherwise, look for other brokers in the market.
You’re now aware of what to look for in a good forex broker. However, it’s not that easy as it seems and some scammers might be too sophisticated and cover their tracks very well. Therefore, always be on the lookout for any red flag that may present itself.