Every forex trader, whether short-term FX day trading or long-term hedging against currency fluctuations, has special requirements and special wishes for their best-suited forex broker. These requirements can be very complex, especially when trading foreign exchange.
You have the best chance to find the right broker with the test options (demo account or demo deposit) of almost all common FX brokers that offer a demo account. This way, you can test the Forex broker and its FX trading platform and see if you like the system.
To make it more comfortable for you to find a good Forex broker, we will give you a few requirements and tips in this area.
1) Demo accounts:
Demo accounts enable the interested trader to test a broker. Without being exposed to the market risk, the trader can usually test and learn trading with real-time courses on the respective platform with the exercise account.
Demo accounts with most brokers of FX-List run for 14 to 30 days and have a fictitious start-up capital between 50,000 and 100,000 dollars or euros. Trading is simulated like this under real market conditions.
2) Portfolio size:
Those interested in trading who want to open a trading account with a forex broker should not only concentrate on the criterion of the portfolio size. In general, the size of the deposit is an indication of the amount (initial capital) and above that traders can open an account. It is also advisable to open standard accounts instead of opening mini accounts (test these differences in demo accounts).
Please note: It is not advisable to operate on an extremely low capital base, as you can be thrown out of an existing position very quickly. In general, it is better to operate with a larger capital base and a reasonable leverage ratio geared towards this. This protects you from a too quick, unwanted forced exit!
Your broker should be able to offer low spreads in the most common currency pairs. On average, 3-5 pips spread should not be exceeded for the main currency pairs. Many large forex brokers offer spreads in the major between 3-5 pips without any problems, depending on the size of the account. After some trading experience, you should also check for yourself whether you are better off with the fixed spread model than with the spreads that change due to the fluctuation range of the market (especially around explosive economic data).
4) Guaranteed stop-loss order:
With a guaranteed stop-loss order, the trading partner guarantees that a position is actually closed at the desired price – regardless of the actual market trend. For some brokers, guaranteed stop-loss orders are chargeable.
5) Airbag function:
A so-called airbag function should definitely be observed! It guarantees you that in the case of the market going against you, you will actually only lose your deposits and are not subject to an “additional obligation.”
6) Tools and chart technique:
Your broker should have the most common chart technique. Foreign exchange trading is shaped by chart technology, technical analysis, indicators, and other instruments like no other market. Ideally, some brokers also offer trading from the chart. This is also useful for those who do not have a 22 ″ or 24 ″ monitor or even have several monitors connected in series, like a professional trader.
7) MM – Market Maker:
A Market Maker provides the customer with a platform for currency trading. A Market Maker is a broker that provides buying and selling prices. Banks or brokers are examples of market makers. They buy and sell financial resources (e.g., derivatives/CFDs) or, in the case of a forex market maker, constantly bid and ask for their currency pairs offered for trading.
Customers usually do not pay a commission for their services, only the respective spread. The Market Maker usually takes the position of a counterpart and takes the other side towards the customer. As the name suggests (making a market), it prepares a market for its customers. An example should clarify this: Customer A of the Market Maker buys EUR/USD at 1.4850, and customer B sells EUR/USD at 1.4850. The Market Maker now does nothing but execute these two orders against each other.
The customer orders are, therefore, processed internally. Concerns? The market itself is so big ($ 3-4 trillion a day around the world) that a single market maker can never affect the market.
8) STP – Straight Through Processing:
STP Forex brokers send customer orders directly to the market to the respective liquidity-creating participants in the interbank market. The more participants and liquidity in the FX market, the better and more advantageous orders are executed by customers. You trade “straight-through” – without the “dealer” (the market maker)!
9) ECN – Electronic Communications Network:
The ECN trading account is particularly suitable for experienced traders who are looking for a Forex broker with customer service orientation. An ECN account gives you direct access to more than 40 streaming currency pairs and precious metals. Most of the time, you trade on well-known trading platforms such as “MetaTrader 4” or other ECN platforms.
With an ECN broker, you trade directly with the institutions participating in the interbank market and other trading partners, which lead to the best possible pricing. ECN brokers are pure Forex brokers and not market makers. There is a big difference between a market maker (dealing desk) and a broker (ECN)! The ECN broker is a “no-conflict broker” (he only passes the position on to the respective markets), the market maker with the dealing desk often takes positions against the customer. ECN brokers are ideal for scalping.
10) Other underlyings for trading:
In addition to the pure foreign exchange business, some forex brokers also enable trading in the most important raw materials, such as gold, silver, crude oil (crude), and the world’s best-known indices. This should not be an absolute selection criterion, but these are absolute plus points for every trader. On top of that, correlation effects could be traded directly in the respective markets.
11) Account/Fees/Deposit Security:
Account management fees, various transfer terms, and deposit security are top priorities. Prices or expenses for, for example, transfers to the trading account and, in turn, debits can add up if the fee rates are too high and unnecessarily affect personal performance. Any additional fees that the forex broker charges are also not insignificant. Check the complete list of prices and services of the broker you are considering. Inquire about the account-holding bank, the responsible supervisory authorities, and the deposit insurance assigned to the respective country.
You should note this when trading foreign exchange
It is the supreme discipline of trading, and you do not compete against laypeople in this market environment! Even professional traders have enough losing trades intraday because they are also not perfect. Move in the foreign exchange market with the necessary respect and healthy caution and never overestimate yourself!
We cannot say it often enough
Practice with demo accounts and gain experience with various Forex brokers. Try these extensively before you actually trade, and if you do right, start with a lower leverage ratio for now! We wish you much success in Forex trading!