7 Things to Think about When Considering a Broker

7 Things to Think about When Considering a Broker

1. Where is the broker regulated ?

Assuming that the broker is in fact regulated, it is important to consider that regulatory protections may only apply to traders within the jurisdiction of the regulatory body. Traders outside of this area may be regulated by another body. Some kinds of products may not be covered by the regulatory body.

2. What kind of spreads are on offer ?

A broker may offer low variable spreads but these spreads can widen considerably when the market becomes volatile, for example around news events. A broker offering fixed spreads, which will tend to be higher than variable spreads, can also widen at such times as well.

If a broker offers low fixed spreads which stay fixed then they may not welcome traders who use this to their advantage, for example by scalping.

3. Is it reasonably easy to withdraw ?

It may be easy to deposit but harder to withdraw. However the main thing is that one can withdraw, even if it takes a few days. The best way to know whether this is the case is to withdraw of course. Ideally withdrawal should be possible with a few clicks of a button, but this is not always the case.

4. Do they provide decent charts for free ?

It might not be too controversial to say that charts are a necessity. Decent charts means candlestick charts at a minimum. Candlestick charts are a popular price type used in Forex trading.

5. Are certain styles frowned upon ?

Scalpers can have a hard time at dealing desk brokers to the extent of having their account closed. So this kind of strategy may need a no dealing desk format which also explicitly welcomes scalpers, as no dealing desk privileges can be withdrawn.

However news trading can be a less clear cut issue. Many brokers accept this as a strategy, but it can still be a problem for those who actually trade into the news, in that dealing desks may reject orders or spreads can widen.

6. Does the brokers intervene in trades ?

Some brokers say they never intervene in the order process. This particularly applies to ECN brokers and no dealing desk brokers. Other brokers may intervene in the order process. This means that requotes and order rejections may happen.

7. Is there a newsfeed and is it essential ?

It might be considered that it is necessary for news trading, but the reality is that it may not update in time for those trading into the news. Otherwise it can be useful for providing fundamental information, or just a good read, but for those who get their information from the chart it may not be entirely essential.

The reason this is an issue is that brokers which focus on offering low spreads by not having features like newsfeed have appeared and even if a broker has a newsfeed it may not be dedicated to the traders needs.

For news trading it can be useful in this way, it can provide explanations for sudden movements of prices, for example surprise statements by central banker.

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