How to choose a legit forex broker – the ultimate checklist

April 18, 2022

Forex traders today are spoiled for choice when it comes to choosing a broker. With so many great options, it can be difficult to decide on which broker would be the perfect fit for your trading needs. 

In this article we have compiled the ultimate checklist which traders should follow in order to find a reputable Forex broker that provides excellent trading conditions and competitive pricing. 

Ensure that your Forex broker has sound regulation

When selecting from a range of Forex brokers, it’s important to look at the company’s track record. In the “About Us” section of a broker’s website, the regulatory member number is usually listed. 

Each country typically has its own regulating organization. Accounts should only be opened with regulated Forex brokers because of worries about the safety of deposits and the integrity of the organisation.

Examine the account features

Various account types are available from various forex brokers. Leverage and margin, commissions and spreads, initial deposit requirements, and simplicity of deposits and withdrawals are all things to keep in mind when comparing brokers.

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Consider the available leverage ratio

Participants in the forex market may have access to leverage through their margin account, depending on the broker. 

A trader with a $1,000 account can maintain a $50,000 stake employing 50:1 leverage, for example. Leverage can go up to 200:1 with some brokers. 

With successful positions, leverage works in the trader’s favour because the possibility for earnings is substantially increased. Because losses can be amplified, leverage can swiftly devastate a trader’s bank account, so be sure to use leverage with caution. 

Find a broker with competitive pricing

Commission-taking brokers may charge a percentage of the spread (the difference between the bid and ask of a currency pair). Wider spreads are used by many Forex brokers that charge no commission to make their money. 

As an illustration, a three-pip spread might be used as a constant spread, or it could be made flexible according to market volatility. Making money in the stock market becomes increasingly difficult as the spread widens.

Make sure you can afford the minimum deposit

To get started trading forex, you only need a little sum of money to get going, usually no more than $50. 

One of the reasons forex trading is appealing to beginner traders and investors is that the buying power is significantly more than the minimum deposit. Standard, mini, and micro accounts, each requiring a different starting deposit, are all quite common among brokers.

Consider the deposit and withdrawal methods

For each forex broker, there is a unique set of conditions regarding account withdrawals and funding. 

Account users can fill their accounts online using a variety of methods, including credit card, ACH payment, PayPal, wire transfer, bank check, or personal or company check. 

As such, online deposits are the most common methods of withdrawal. For any given service, the broker has the option to charge a fee, so check the pricing attached to making deposits or withdrawals.

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