A major step in creating a forex trading system is doing an extensive forex broker review. It is vital to your success that you find the broker that best fits your trading plan.
Having the wrong broker can be very detrimental to your success regardless of how solid your trading plan is. This is due to the fact that you are going to need this broker to perform trading deals, the caliber of their forex implementation service and their pricing can have a direct impact on the profitability of your trading.
Do your due diligence to find the best broker for your system. There is a wealth of information on the Internet. A great way to research a particular broker is to read other trader’s comments on Internet forums.
No Such Thing as Identical Brokers
During your research you will be able to compare forex brokers so that you can learn about the different types of forex brokers out there. There are dealing desk brokers, market makers, non-dealing desk brokers (NDD), straight through processing brokers (STP) and electronic communication network brokers (ECN).
Performing a thorough review will make it obvious that there isn’t necessarily one broker that is better than the other. What it will come down to is your trading plan.
Let’s take an STP and ECN broker…they both typically provide rather tight trading spreads. If you plan on using a scalping trading strategy, then using one of these types of brokers is important. Conversely, position traders and swing traders aren’t going to find the tight trading spreads important; rather, they are going to look for dealing desk brokers.
Safety of Funds
Making an assessment of the caliber of trade execution is not going to be enough. Assessing the broker’s financial strength, knowing if it is regulated, and the security of your funds is important.
Remember this is your money. Once you deposit it with your broker, you have exposed your money to a risk of loss. You may lose the funds in your trading account if your broker becomes insolvent. There are also less-than-honest and unethical brokers that just may decide to take off with your money.
Fortunately the forex broker industry does have regulations; the goal is to increase the safety of your money. While there aren’t any guarantees, money deposited with a regulated broker is safer than with a broker that is not regulated.
You monies are safer with a broker that is highly capitalized as well. A broker with a solid amount of capital runs a much lower risk of becoming insolvent.
Aside from regulation, a broker can take additional measures to keep your money safe. Keeping customer accounts separate from company accounts is one way. Providing insurance is also another way to protect customer funds.
When doing a forex broker review, these are all important aspects to consider. They will help you find the perfect broker for your trading system.