CHARACTERISTICS OF AN EXCELLENT BROKER

When choosing a Forex broker it is very common to research all the features that are available as they should directly affect your buying decision. While this makes sense as a consumer, some of the features may not be necessary, and frankly even be overbearing.

One of the biggest overrated features that is commonly found is something called Auto chartist. This piece of software, randomly, chooses the technical patterns in the table, putting them to your attention. In theory, it's a great idea. But the reality is that by using this software, you are doing nothing to advance your knowledge as a marketer. There is no reason to trade in the forex market if you are not willing to learn it.

Another big problem with this software is that often technical guidelines are given that are suspicious by nature. For example, a pennant pattern on the five-minute chart is nothing to worry about. While the pennant pattern is displayed on the weekly chart as well, the truth is that it shows too many poor quality patterns since the software seems to lack filters to keep away some of the technical adjustments that are not so relevant.

Other factors to consider

Forums are a complete waste of time when it comes to your Forex broker. Most of the forum discussions that can be seen in these topics tend to be non-real. In other words, it's just a lot of people lighting each other on the Internet. At best, you will have plenty of ignorant people trying to convince you that your trading setup is correct, even though you have no idea what they are doing. In the worst case, it becomes a primary school including insults and nicknames.

The analysis may be exaggerated at times. It all boils down to the particular analyst that the company hires. Most of the known analysts are working for the larger brokerage firms. Quite often this is highly respected analyst, but the smaller broker may hire someone who does not necessarily know what they are doing. One of the biggest signs for a suspicious analyst is if they focus primarily on short periods of time. If the analyst tends to display a large number of graphs of five, 15, and one hour, it is very likely that your goal is to generate more trading and thus split your money faster.

One of the most common time wasters you will encounter with Forex brokers is the Dow Jones news source on their MetaTrader4 platform. Although the content of the news is certainly acceptable and professional, at the moment of receiving the news of the platform, the markets are already affected and therefore become useless. It is almost impossible to compete with brokers who use Bloomberg terminals and T-1 connections for their news services.

While not all of these services are dangerous, they may necessarily be a reason to open an account with a specific Forex broker. You will find that most forex brokers are essentially the same, and offer very identical packages. To be honest, the industry is simply not as innovative. By focusing on what is truly important to you in particular, you will find that you will not be absorbed by a Forex broker based on "empty calories."

The Uncertain Future of US Brokers

The United States of America has long been known as the "land of the free and the home of the brave", but when it comes to the Forex market, this term takes on a completely unique meaning. Increasingly restrictive NFA policies designed to protect US investors have been chasing and, in some cases, punishing US currency brokers. The rates imposed to maintain a brokerage firm are prohibitive for most, and trading conditions are limited compared to those in other regions of the world where regulation is less stringent.

In August 2012, FX Club (also known as Forex Club), formerly one of the best brokers in the United States, abandoned its RFED license, the regulation required to accept retail customers. Since then, the company has been accepting only institutional customers, and will likely continue to do so, at least for the foreseeable future. As part of this change, FX Club became another currency broker, replacing its CEO (after OANDA and GFT, among others), with Michael Klena, of E * Trade, who came to lead the change of the company.

Although the FX Club abandoned its RFED license, the NFA continued to investigate the broker, charging the company for $ 300,000 administrative violations, which the broker solved the day the claims were made.
Just two months after the FX Club closed its doors to US retailers, Advanced Markets made the same strategic decision, opting to give up its RFED license and operate only with institutional traders. This decision is much less surprising, since Admiral Markets (aka AMIFX) has always held that only a handful of retailers are admitted who presumably can transfer their accounts quickly with the broker's help if necessary.

What comes next in the forex retail market in the United States is uncertain, but if the NFA fines and increased regulations on brokers are a clue, it would not be surprising if other US brokers throw in the towel . Although I do not think that industry giants like FXCM or Forex.com will disappear in the short term, smaller entities may find themselves fighting an uphill battle. Some may not be interested in fighting much longer.

How to choose a broker to invest in the forex market?

The Broker or Broker is the financial institution in which we are going to deposit our funds to open an account and invest in Forex.


You have to take into account a number of factors to make the right decision since there are many brokers in the market and each offers a range of variables that must be taken into account.


Below we will describe the main variables that should be taken into account when choosing a broker to invest in the currency market.


1. The capital of the Broker: It is important to know the capital of the Broker because at the time we make a profit we have to be sure that the Broker has enough funds to pay us. In general Brokers do not disclose this type of information, but you can find out the payroll of employees who work for the broker, how big the organization is, how many clients operate with it, and several more factors may come to our notice.

2. Market and products offered: We have to know in which markets we plan to operate, and in what products we want to invest. There are brokers that offer foreign exchange, commodities, futures, among other financial instruments.


3. Commissions: There are brokers that do not charge commissions and that their profit comes only from the spread or exchange differential (difference between the purchase and sale price of an asset).
If we choose a Broker that if it charges commissions, we have to take into account what those commissions are; can be commissions for the purchase and sale, commissions for withdrawals of funds, commissions for maintenance of accounts.


4. Spread: The spread as we said before, is the difference between the purchase and sale price. Investors always prefer a small spread to pay less to the Broker. Spreads can be fixed or variable. If the spreads are fixed, this means that in times of greater volatility they will always remain fixed. If the spreads are variable, then in times of less volatility the spread is lower but in times of greater volatility, the spread will be greater.


5. Services: Brokers usually provide a number of services that can be of great help to traders. Technical analysis, fundamentals, recommendations, news and graphics are usually the key. Beginning investors have to take this service very seriously as the customer managers in Spanish can assist in all these issues.


6. Customer Service: We have to verify if the Broker we choose there are people who speak Spanish and can help us with any inconvenience or doubt. There are Brokers that also enable communication through chats, telephone assistance, email, and all this during the 24 hours. Besides of course those who assist us must have knowledge in financial markets.


7. Execution: One of the most important variables to take into account when choosing a Broker is the speed of executions. The best thing is that the execution is automatic, then when we want to enter or leave the market at a certain price, generally the Broker respects.


8. Stop Loss and Limits: It is necessary to find out if the broker respects the Stop Loss and limits that we place in our platforms. It is important as these are the limits of profit and loss that we allow ourselves.


9. News: Not all brokers allow their traders to trade in news feeds as the market is very volatile. For operators that operate with news, this is one of the most important points to ask.


10. Regulation: There are official entities both nationally and internationally that regulate the operation of brokers. Broker regulation is not a 100% guarantee, but it can help. The most important regulatory agencies are the NFA (United States), CFTC (United States), FSA (United Kingdom) and the CNMV (Spain).


11. Fund Withdrawals: Each Broker has different times to respond to our requests. The security of our funds is a must, therefore receiving the requested funds on time is essential. It is also good to corroborate that the bank with which the Broker works is known and respectable.


12. Trading Platform: There are different forex platforms in the market, it is important to first try out the free demo, see which tools the platform has, and if it is complete. In addition, platforms can be download, no download, for mobile phone, and more.


13. Investment: We must find out what the minimum deposit required by the Broker is if we are interested in investing small amounts.


14. Broker Type: There are different types of brokers like Market Makers, NDD, Dealing Desk or ECN. The differences between them are as follows:
- Market Makers: they are market makers.
- NDD: "No Dealing Desk". No intermediary operating room. The operations are executed automatically.
- Dealing Desk: They have an operating room that intervenes in the operations that the Investors do.
- ECN: "Electronic Communications Network". They operate directly connected to the market where market makers, banks and traders are operating offering the best bid / offer prices.

In short, it is important to choose a broker who is serious and professional and suits our needs.

Is a Good Idea to Change Forex Broker?

One important reason you may have to switch Forex broker is certainly fear for the security of your deposits. If you ever ask your broker to withdraw some funds from your account, and it becomes excessively slow or unresponsive, then this is an excellent reason to switch brokers immediately. Of course, if you hear some reliable information about your broker's financial situation or ethics, it will also be good to consider a change. It is advisable to check from time to time the professionalism of your broker, even if you have obtained some good results, requesting the withdrawal of some of your recent earnings. If there is an unwarranted delay, it is advisable to close the account immediately and, if necessary, threaten to contact the corresponding regulator.

Moving from critical reasons to more common reasons, one of the factors that urged more than one customer to change brokers is the average level of spreads that are charged. For example, there are still brokers charging a spread of 3 pips in the EUR / USD pair. While this was the norm a few years ago, today it is considered extremely expensive. Switching to a broker that offers the EUR / USD at 1.5 pips or less makes sense, since the spread becomes the "cost of doing business", and over time can generate a loss in operator income, especially if you trade frequently using short time frames.

Another good reason to switch brokers can be an unstable platform. If you find that the trading platform is disconnected very frequently or that it takes a long time to execute an operation, then this is a convincing proof of incompetence or dishonesty. Dishonesty is more likely if these disconnections or freezes happen every time you are trying to enter a trade where you would have made profits quickly. Of course, it is important not to be paranoid and not to blame your broker for all your losses. However, as the Forex market does not have a centralized place, brokers have a commercial incentive to "shadow" their spread just above levels where many of their customers have stop-losses set in open trades. determining whether your broker is acting shady is to see if these price movements do not match the price feedback of other brokers.

Watch two or three. If your broker tends to produce sudden and unexplained spikes in price, which are not followed by other brokers, it is time to think about moving away from it.
A good way to get a better understanding of whether a particular agent is the best for you is to think about what the brokers are actually doing, and see things from their point of view. In order to do this, it is helpful to start with some facts about Forex trading:

1. Most currency brokers are not really trading any currency in the market. They are simply providing a price indicator, in the movements of which their customers can bet in exchange for two effective quotas: the spread or commission, and a small charge during the night that incurs each night any position that is left open. These brokers are in antagonistic relationships with their customers: they make money when their customers lose and lose money when their customers win.

2. The remaining currency brokers tend to monitor the trades of customers who have profitable trading data, and cover the aggregate positions of these traders with a bank. These brokers have a less contradictory relationship with their customers, but they may still face problems in the proper way of covering themselves in rapidly evolving markets.

3. The real Forex market is dominated by four large banks which together account for about 85% of the market volume. These banks provide liquidity to the smaller banks, which in turn do the same with smaller banks, who then provide liquidity to the brokers, and so on in the chain in size and importance. This tends to mean that the smaller the broker, the worse the price and the spread that is willing to give, since they themselves will not be able to get premium prices. The dilemma here is that these smaller brokers tend to offer lower minimum deposits. The more money you have to deposit, the better the service that will be available to you. Of course, this does not mean that you have to go higher up the chain than the one that is appropriate for your account size. In general terms, it is a good idea to adapt the Forex broker to the size of your account.

4. Much of the Forex market has a bad reputation and is poorly regulated. When these facts are combined with the natural tendency of the human being to be tarnished by greed, it creates a profitable vacuum for unscrupulous brokerage houses that have no reputation to protect. This is not to say that small Forex brokers are fraudulent, but do not assume that your deposit is secure just because you opened an account with a broker. However, if that broker has a public reputation and is subject to regulations, you will surely be able to sleep peacefully.

There are other good specific reasons that may play a role in determining the choice a broker are as the availability of a specific pair that you want for trade, platform, quality of customer service and other "concrete" things. Now that we have covered all of the critical aspects to consider when choosing a broker, it is time to shift your focus on how you can conquer the forex markets - with hard work and patience, of course!

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