What Are The Factors In Choosing A Foreign Exchange Broker?

With foreign exchange brokers located all around the globe, the complexity of choosing the right FX broker for you may

Now, lets say I open only two trades of one (1) lot only, meaning I open two lots and close two lots, having a total trade of four lots. By undertaking these hypothetical trades I am trading a yearly volume of aprox 100 millions USD. And, because I do daily trading (only 2 trades of 1 lot), I am paying 17.2 USD daily, or 86 USD per week, or 344 USD per month, or 4,128 USD per year. Option 2: If I take the spread-only option (Broker ‘B’ ), I am paying approximately 26 USD daily, 130 USD per week, 520 USD per month, and 6,240 SD a year.

So as you can see, by choosing Broker ‘A’ (Option 1), I am saving around 30% of my trading costs annually (or over any measurable increment of time) for the same execution service.

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By creating mathematical examples like this for yourself, as you research fee structures, you can gain high visibility into how much more or less you might pay by choosing one fee-structure over another. I encourage you to perform these calculations with any real-time examples you will face, BUT VERY IMPORTANT…

One note to consider: In addition to considering and comparing costs among options, you’ll want to be mindful of any other factors that may be important to you when dealing with a broker. For instance, you may ask yourself: “What else is Broker ‘B’ providing me ( other services) that might justify an extra cost that I’m willing to pay?” We turn now exactly to that point.

Factor #3: Other services provided by your selected broker

This is an important factor to consider. To recap the other two major decision-making factors in prioritized order: (1) the broker needs to be regulated in a stable country; and (2) the cost of the fee-structure aligned with your broker needs to treat you favorably compared to other fee structures. Now, you are ready to ask the third large question:

(When) Might I be willing to pay an extra fee for additional services that I value?

When does the value of additional service(s) provided by a broker more than cover the cost I pay to secure the additional service(s)? This will depend heavily on your preferences and on the individual or combined services that your broker offers. Since there are many such services, I summarize for you below, the most important services, based on my experience (you might agree or disagree about the relative value of each specific service to you).

Personalized service and support

You can seek and receive very good, personalized service. This often derives from a “dedicated” account manager who is willing to guide you through the entire process, from prior to opening your account to the period of ongoing maintenance and growth after your account is open. This is likely to include trading facilities with access to markets 24 hours per day.

You may seek and receive a steward who will understand your needs, speak your native language, and share the same culture with you, a person upon whom you can rely, who will look out for your interest in a transparent way and help you by using his capabilities, knowledge, and ethic that drives him to go the extra mile for you. This level of service is appreciated by traders from many cultures, especially, for example by traders from Latin America and the Middle East, where sometimes a hand-shake is worth much more than the signature of a contract.

Fx Community and web-based TV

Working with a regulated broker, in a stable country, with a good cost/fee structure and a personally dedicated service can often be very good, but not enough. You must be sure that your broker is continually adapting the most modern approaches and is able to provide you tools and venues that will cover your personal and human-side needs, including value that you derive from social interaction with others with similar interests, rhythms, and ambitions as you. Your broker can be a highly valued source of providing you with an interactive, social FX trading platform and FX community.

Why is this important?…

Because traders don’t have the same live as many “mainstream” individuals; they don’t work from 9am to 6pm in an office where they can interact with colleagues and clients. Traders pass most of their time in front of a computer, reviewing charts, monitoring markets news, creating strategies, and executing trades. Much of this can be done at 3am or at 2 pm. The human-side need for interaction is real, and my experience in the industry indicates that traders feel these needs as much as anyone else. Having access to an FX community can make your life as a trader more simple, normal, and fulfilling.

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As part of an FX community, you are able to meet people, have video face time with them, exchange emails, chat online, share markets news, collaborate on trading strategies, and even share photos. Certain FX community elements have already accumulated 50,000 users from all nationalities, countries, and cultures.

FX community platforms and venues also provide stimulating opportunities that include demo contests for traders, trading strategy contests, love letter contests, or best-article contests. Not all off the contests and features of the FX community are related to trading. For example, maybe I’m not especially good at trading (yet!), but I might be pretty excellent right this moment at expressing my love in a letter, so I can enter into a love-letter contest and be able to win. (Maybe I’ll meet someone fun too 😉 On the other hand, the web-based TV feed features daily videos of market news, analysis, products, reports, interviews that provide up-to-date information for your clients to consider and use.

You can read more about the combination of features that merge to create value within an FX community by visiting this particular previous article.

Tutorial Videos

As an included, value-added service, video tutorials can save your time, meet your need for flexibility, and educate you about features and benefits associated with many platforms, service attributes, and industry topics. You can choose to watch any video many times, at any time, and from anywhere. You may watch in your local language or with subtitles.

Participating in tutorials enables you to better understand trading skills, strategies, and reports. Even though all brokers don’t offer such tutorials, studies show that some videos can be 100 times more effective than reading materials in delivering education with impact and efficacy.

Some brokers may provide a wiki page so that you as a trader can surf on it and find needed content, but wiki links often to lead to reading material, rather than video. If your current broker does not provide you with tutorial videos or wiki request them, and start implementing your learning. (Make sure they are available on mobile devices too.)

Custodian solution – Private Banks

Some clients have special needs or requests, and a broker should be able to tailor-design the service to meet nuances of demand. One very common situation is when a client asks a broker: “Are my funds segregated?” What does this mean? A client asking this usually wants to have the funds sent to his own personal account under his name (not to a corporate name, including that of the broker).

He would like to be able to trade from an account in his own name directly from the trading platform. The name for this solution is called a “custodian” solution, and here is how it works:

A client opens a private bank account (with the bank that the broker uses); then he opens a trading account with the broker. He seeds his private account with an initial amount of funds. For example, imagine he deposits 100,000 USD. The broker then provides the client with a trading account linked with the 100,000 USD. The client trades daily, and each day there is a reconciliation of his P/L (profit or loss) from his trades. So, if for any reason something happens to the broker at any point, the client’s funds and his winnings are not affected, as they are in a private account under the client’s name. This custodian solution is a vehicle that is increasingly emerging, and it will gain prevalence in the future.

Different platforms and trading instruments

Finally you need to consider what products each broker can offer you: FX only, CFD, Binary, stocks? Maybe you only want to trade FX, and you don’t care if the broker has other instruments, or maybe you need these other instruments so that you can trade all of them with the same broker. Also what platforms does the broker offer me? Only MT4? ECN platforms? Others? Does the broker offer Currenex? Jforex? Unitrader? Etc.

What limitations of trading technology may I experience if I open an account with this broker? Only you can determinate the importance of this, based on your needs. In the future, more and more brokers will offer multiple platforms. One example of this is the online trading services provider FXDD. This provider offers MT4, Jforex, Currenex, Swordfish, Viking trader, ZuluTrade, and other platforms. Today more FX brokers are following this path like BMFN, Tradenext, Commexfx, Falcon Brokers, Tier 1, Divisa Capital, NSFX as examples.

Invitation to comment

So once again, my readers, I hope you find this article helpful as you decide which broker to choose. I am curious, what one point shared here stands out most meaningfully to you?

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