No retail trader can open an individual Forex account by himself and he must take the help of a broker to execute the trades. Brokers may be compared with the demi-god in the market and to some of the beginners, they may prove as an angel who can rescue them from the problem in trading. But broker selection should not be taken very easy as newbies may suffer later if they fail to choose the right broker. In this writing, we will discuss the procedures of choosing the right brokers so that rookies may not get confused.
Guidelines for the broker selection:
1. Membership
Online is full of scammers and getting the honest one can be greatly tough. But to solve this problem, newbies may check if the brokers have necessary legal documents or not. This check can be possible by going to the footer section of the websites of the broker. If an investor checks the bottom of the website of the broker he going to select, he may find the necessary documents regarding the licensing of the broker.
Generally, these licenses or memberships are taken by them from the regulatory authorities such as NFL or FCA. If we find the legal documents of them, we may advance to execute our trades with the help of them. On the contrary, we should move away from there as they can be scammers too who may exploit us by taking our money.
2. Spread
Before working with the brokerage house, we have to find out what their spread or commission rate is. Spread indicates the difference between the asking price and the bid price. Generally, the brokers take the spread as their commission and do not ask any extra service charge. But there are some of them who take some extra fees as their service charge too. Before, choosing one of them, the investor must ask what will be the commission rate of him to execute the trade in the Forex platform. But if you deal with the options market, be sure that you have the premium trading paltfrom. Chose broker like Saxo as they always provide premium service to the retail option traders.
3. Leverage
It is a powerful financial tool which helps the investors to trade in the lowest deposit with the help of the brokers. This option varies one to another and the common ratio leverage is given by most of them is 1:10. This indicates that if you invest $10, it can work as the investment of $100 by taking the power of leverage. Some of the powerful brokers can provide 1:50 leverage facility too but that also depends on the amount of investment of the traders too.
When a newbie is going to take the leverage facility from the brokerage house, he must be careful. Taking a great amount of leverage may destroy the whole career of him in the Forex market. It happens because the leverage facility works as the loan from the broker. It indicates that he has to repay the money later after a certain period. When this duration will be over, if he fails to make enough profit, the money will be repaid from his real account balance. In such a way, when the account balance will be zero and if the trader does not have enough capital to invest, his account can be closed shortly. For this reason, experts suggest rookies not to take a large amount of leverage even his chosen broker has the facility to provide the largest amount of leverage facility.
To conclude, it can be said that these are the most crucial things that must be maintained before taking the services from the brokerage houses. If the selection procedures are performed well, it can provide the best outcome in the trading career. Otherwise, newbies may have to leave the Forex platform with a huge burden of loss.
