Forex Platforms

How to Choose a Forex Broker

Forex is one of the fastest growing asset classes in the retail investment community, with an increasing number of investors recognising the diversification and liquidity benefits of trading currencies. 

But as the market continues to grow, so too does the number of forex brokers available for investors to choose from.  While this is an important development for retail FX as a whole, this growth and increase in choice is making it harder for investors to select a broker that not only best suits their forex trading needs, but that is also reliable and offers value for money.

However, and as is the case with making any informed investment decisions, there are a number of questions you can ask to make the process of choosing a broker that much easier.  Firstly, investors should analyse their investment objectives, trading style, and tolerance for risk.  This can be established by asking:

• How much are you are investing?
• What is timeframe for your trading activity?
• What is your trading strategy?
• What is your comfort level with risk?

Risk tolerance is a particularly important consideration, as forex brokers routinely offer leverage of as high as 400 to 1.  The forex market can move by one per cent in a day, which can have a significant impact on leveraged capital and ultimately investment returns, and reinforces the need to be clear on your appetite (or lack thereof) for risk. 

Depending on the investors’ risk appetite, it is also fundamentally important for traders to consider the regulatory environment within which brokers operate, as forex is not regulated (and by default the forex providers) in some jurisdictions.  Regulations are ultimately there to provide traders with a safer environment with which to trade, and investors should look closely at whether a broker is regulated (and by what means).

Finally, before signing up, traders should open a free trial account and test out the platform’s ‘bells and whistles’, familiarise themselves with the way the system works and how it and their strategy performs.  

Only after a solid and prolonged ‘test ride’ should you narrow your choices further to the point where you are ready to make an informed, and well-considered decision on the broker you will select as your trading partner in the long term.  For example, you can trial the dbFX forex trading platform with $50,000 in virtual money to test your trading ideas in real market conditions with no risk.

Tags: Forex Brokers

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