Can I help you find a good broker
Before you dive into the financial markets, it is important to find a reliable broker. There are few things to do yourself before you take the plunge.
Do your research
It is important to do analyst research about the broker. Few questions might strike you as does the broker have high rating performance in financial market? Does he provide all the products and services and has full knowledge and competency in dealing with it.
You can do online research or check broker’s information from other investors or can do analytical research drawn from filings by regulators, firms and investment professionals.
This will let you know their current licensing status and history, employment history and, if any, reported regulatory, customer dispute, criminal and other matters. It should be your choice then to do business with them or not.
Is this broker registered with any regulating authorities?
Check to see if your broker of choice is currently or formerly registered with FINRA or national securities exchange, as well as current or former investment adviser firms and representatives.
Suppose you are looking for a broker in US then he should be registered with the National Futures Association (NFA) or Commodity Futures Trading Commission (CFTC) If the broker is based in the United Kingdom, check for his registration with the The Financial Conduct Authority (FCA) or with The Prudential Regulation Authority (PRA).
If the broker isn’t registered with any of these or any other recognized regulating firm, then you may want to think twice before signing up with them.
UK – Financial Conduct Authority
US – Financial Industry Regulatory Authority, Inc. New York Stock Exchange. Office of the Comptroller of the Currency. Securities and Exchanges Commission. Commodities and Futures Trading Commission. National Futures Association
Australia – Australian Securities and Investment
Dealing Desk or Non-Dealing Desk broker
Success in trading currency markets is dependent on their broker. There is an “artificial market” that has been creating and fully controlled by most of very well branded brokers that claim that are Non-Dealing Desk. Due to broker’s full control over every traded transaction the “Artificial Market”, the odds are stacked against you. Such brokers are not there to look after your interest, but they take trades against you, they sell you when you are buying and buying when you are selling, they make an impression that you are transacting with “interbank” but in reality orders ends up on a Dealing Desk of a Broker.
Dealing Desk Brokers do not like or even allow for scalping the trading. Find broker who is offering “low leverage”. Dealing Desk Brokers “SPIKE THE RATE” of up to 10-20 pips on routine bases to fill “unbalanced” trades, leverage their own account or to meet immediate liquidity requirements
ADVANTAGES OF THE NON-DEALING DESK
- Such brokers do not trade against their clients. As facilitators of trading, they do not take positions that may from time-to-time conflict with the interests of individual traders.
- They offer every trader, no matter of a size, equal access to the interbank market. The rates (bid and ask prices) are not set by an individual broker but those derived from active trading between participating banks, institutional investors, FCM’s and individual traders. The process itself makes every trader regardless of size an independent market maker.
- Trading is done in total anonymity.
- The broker rates as well as bid/ask prices come directly from the interbank system. They are not filtered or otherwise manipulated to maintain established (undisclosed) profit margins or spiked by the broker to gain a trading advantage.
- There is total transparency.
- Spreads are Variable, Not Fixed. Spreads are in a constant state of flux and when traders trade through a STP non-dealing desk their tickets are cleared through BBO model Best Bank Offer. During peak trading hours, spreads can drop to zero, a fact most traders using a dealing desk are not aware of. During off-peak hours, spreads can be considerably higher.
- Such brokers don’t offer or execute trades based on fixed spreads. They charge a nominal
How much or how little leverage will a broker give you?
We highly recommend you review “Leverage the Killer” before deciding on how much leverage would be suitable for your trading style. The phrase, “Less is More,” can save every It should be remembered that although higher leverage can lead to higher profits, it also increases the level of risk. There are brokers that offer fixed leverage levels, but some others adjust their leverage based on the currency that is being traded and may also have special policies for carrying a trade over the weekend.
Also take into account broker’s margin call policy. Some companies follow the FIFO (first in first out) method to close trades when margin requirements are not met by current equity, others follow the LIFO (last in first out) procedure, and some simply close all the trades.
Depending on one’s preferences, this is an issue that should be clearly identified before opening an account. Leverage levels are more of a concern for aggressive traders who like to use the highest possible leverage, whereas a moderate or conservative trader would be happy with the average leverage levels.
Of course, you’re not going to start trading with real money right away, right? Well, when you do having a winning strategy and you are ready to trade live; knowing how much risk capital you have to start with makes a big difference. If you have $2000 or less to start with then you probably want to start trading “micro” lots. Not every broker has this feature.
The better capitalized the market makers are, the more credit relationships they can establish with their liquidity providers and the more competitive pricing they can get for themselves as well as for their clients.
Over the counter nature of the market makes extremely difficult for a broker to get competitive pricing without a margin deposited in a lending institution or bank. As a result, it is extremely important for to do extensive due diligence on the broker with which they choose to trade. If a broker states that they are safe to work with because they trade in the interbank market, you know what this means. To date, the interbank market is an unregulated and loose conglomerate usually traded by central banks, investment banks and extremely large corporations.
As a member of a regulatory authority, a broker must comply with a minimum capitalization level. This fact has a direct relationship with its ability to stay solvent and is also indicative of the size of the company.
Does the broker offer fixed or non-fixed spreads? How wide are the spreads?
These questions are more significant to those traders who like to take quick profits on a few pips. Large and/or variable spreads can cut into the profits of this type of trading strategy.
On the one hand, you may think that the fixed spread is the right choice, because then you know exactly what to expect. On the other hand, you might think you are getting a good deal paying a variable but smaller spread.
First of all, consider that the best deal you can get is choosing a reputable broker who is well capitalized, has strong relationships with the large foreign exchange banks and can provide the liquidity you need to trade well. Second, you need to calculate the impact of all possible fee structures on your trading model to know which one is more favourable to you.
Some brokers don’t charge a commission, so the spread is how they make money. The lower the number of pips required per trade by the broker is, the greater the hypothetical profit that the trader makes is. Comparing pip spreads of half dozen brokers will reveal different In the case of a broker who offers a variable spread, you can expect a spread that will, at times, be as low as 1 pip or as high as 7 pips on the most major pairs, depending on the level
of market volatility. While market makers provide two-way pricing to customers throughout the day, these prices can be quoted on a fixed basis, meaning that they do not move throughout the day. But they can also use a dynamic spread system, which means the prices change as the liquidity in certain pairs change.
While market makers provide two-way pricing to customers throughout the day, these prices can be quoted on a fixed basis, meaning that they do not move throughout the day.
But they can also use a dynamic spread system, which means the prices change as the liquidity in certain pairs change.
A lack of liquidity in the markets or very volatile market conditions can force the broker to apply a slippage on the pricing. Slippage, also called “requote”, occurs when your trade is executed away from the price you were offered, when you end up paying more pips than the average spread. This is perhaps a cost that you don’t want to bear if you are trading very short term or if you trade the news.
You can decide to trade with fixed spreads, even if they are a little higher in average but receive, in exchange, an instant fill of your trades at the desired prices.
Some brokers even offer you the choice of either a fixed spread or a variable one. Other brokers, like ECN brokers, charge a small commission, usually in the order of two-tenths of one pip. Whether you should pay a small commission depends on what else the broker is offering. For example, the broker may pass your orders on to a large market makers conglomerate. You might choose a broker with such an arrangement, if you look for very tight spreads only larger investors can otherwise get.
Micro and Mini Account
Many brokers offer two or more types of accounts. These can be very small mini-accounts and even smaller micro-accounts, or standard accounts, depending on the lots traded. A lot consisting of 100,000 units is called a standard lot; a lot consisting of 10,000 units is called a
mini lot; and a lot consisting of 1,000 units is called a micro lot. Some brokers even offer fractional unit sizes which allow you to establish your own position size.
The micro and mini-accounts allow you to trade with a very low minimum of capital, while the standard accounts often require a higher minimum initial capital, varying from broker to Choosing a specific account type should be relative to your amount of capital.
Does this broker offer premium services such as charting, news feeds, and market commentary? How important are premium services to my trading?
Easy access to real-time charts, news and economic data is a must for any trader. However, a trader must think of these and any other added-value service as part of the broker’s package rather than as the most important feature on which to base a decision.
This is a point a trader of any nature should address correctly to make sure the firm complies with the basic standards of providing real-time charts, news and economic events.
Open demo accounts and ask questions
Pick at least two brokers that fits most of your criteria and open up demo accounts. Trade in different market environments. Learn all the different features of each trading platform. If you have questions, don’t be afraid to ask. Many brokers have excellent customer service support and would be happy to answer your questions.
Most demo trading platforms are very similar to their live counterparts, but not exactly the same. There may be a difference in speed of execution, slippage, and platform reliability (most of the time live accounts are more reliable than demo accounts). When you do have your strategy down and you are ready to move to a live account, start off small, test the waters, and see if this particular broker will suit your trading needs.