Forex trading, with its compound concept, can be a daunting journey for newcomers. The journey of a trader is no joke, and it’s a fact known to many traders globally. Thankfully, there’s a plethora of Forex resources accessible on the internet.
Now once you’ve learned the ropes of Forex trading, or when you’re already confident to assess your trading skills, it’s time to look for a broker to trade use. Forex brokers, as we’ve previously discussed, are your pass to the Forex market as they provide you entry to the trading platforms needed to begin trading currencies. But with such a long list of Forex brokers on the market for traders, selecting the right one could be tricky.
Which Forex Broker to Use?
As we’ve just said, a ton of best international brokers of 2020 have emerged over the years, which makes it a little difficult for traders to sort out the goods. In our previous blogs, we’ve said that you’d need to study your trading needs and be sure that these needs are met. But of course, you must give much importance to the reliability of a Forex broker. This involves doing a rigorous background check on stuff like their regulation, services offered, as well as trading conditions.
Why is Regulation Important?
We can’t stress enough how crucial it is to only transact with Forex brokers licensed by credible regulating bodies. For each country, there are designated agencies that implement rules and guidelines to protect the integrity of the entire financial system.
In Europe, one regulator stands out that comes from the UK – the Financial Conduct Authority. Regulating the operations of about 58,000 financial firms, the agency is known for its stricter rules that FX companies must comply with. Professionals and experts in the industry recommend newbies to choose FCA-regulated Forex brokers given that the agency is known for keeping the Forex industry stable and safe.
Another well-known regulator is the Australian Securities and Investments Commission. As Australia’s main regulator, it enforces strict regulations and measures to protect investors and consumers. ASIC is another known authority in the Forex business.
Other authorities that regulate brokers include Cyprus Securities and Exchange Commission, and the Financial Services Commission.
Now once you’ve checked the regulation of the broker that has gotten your interest, it’s time to prepare for your trading.
Steps to Start Trading with a Forex Broker
- Practice with a Demo Account
Forex trading for the first time can be a nerve-racking experience and it’s normal! Remember that you’re risking money in this venture. But with a demo account, you’re able to have a taste of trading in the Forex market without any financial risk. By using a demo account, you get to experience the trading services of your chosen broker. This includes testing their trading platforms, execution time, and spreads – all without risking real money. In essence, a demo account is a practice account with virtual or fake funds.
Another advantage of a demo account is it allows you to do some trial and error when it comes to testing different trading strategies or systems.
- Select the Account Type
The account types offered differ from one Forex broker to another. The usual account types offered include the mini account, the standard account, and the VIP account.
For inexperienced or beginner traders, a mini account might be the best choice. It only requires a low deposit requirement which can go as low as $50. Meanwhile, the standard account is for intermediate level Forex traders. The usual starting deposit is $500. Because it’s higher, this type of account has more perks. A broker may offer free signals or VPS to standard account holders. The last type of account, the VIP account, requires a deposit of at least $1000. This account suits those experienced or professional traders who have higher risk tolerance.
- Select Your Leverage
The leverage offered by different Forex brokers can go as high as 1:1000. This means that if your initial capital is $50, you can control 1000x of it ($50 x 1000 = $50,000). With the said leverage, your $50 capital is boosted to $50,000 which gives more trading power. But be careful about using leverage. It might boost your trading volume, but it might also work against you when you’re on the losing side of your trades.
- Develop Your Trading Plan
Your trading plan is like a daily journal in which you detail your plans before, during and after trading. It contains your enter and exit strategies, your technical and fundamental analyses, and your notes about your trading day. A trading plan is an important tool of a Forex trader because it helps them be on track on their trading journey.
- Prepare Emotionally
When you begin trading, never let your emotions rule over you. This is arguably the number one thing you should do. Keep your emotions in check. Make sure that you’re emotionally ready before and during your trading. You see, when we’re disoriented emotionally, we tend to make impulsive decisions, and this is the last thing you’d need in trading Forex, otherwise, you’ll suffer a string of losses.