Trading the foreign exchange market can be highly lucrative, thanks in large to the insane amounts of leverage offered by various forex brokers. Provided that you have a solid money management strategy and the discipline to implement it carefully, the potential to make massive gains is unparalleled.
It’s not all roses and sunshine, however, and you have got to be extra careful when starting out in forex. Right from the get-go, choosing a credible broker is crucial for your success, and there are a few pointers that you have to take into account when deciding upon a broker.
Extremely High Leverage
Always be wary of brokers that offer incredibly high amounts of leverage. While there are quite a few credible brokers that offer up to 1:600 leverage, it’s not that feasible to allow your customers the option to overleverage and blow up their account in next to no time. Anything above 1:1000 leverage is often a huge giveaway regarding the credibility of a broker, and there’s no way a sensible brokerage platform would offer that much advantage unless it’s a bucket shop.
Insanely Low Deposit Requirements
You may have seen quite a few brokers that allow you to open margin accounts with as little as $5. If your broker isn’t serious enough to require a reasonable amount of capital to start trading with, you may have to consider whether they have your best interests at heart. While such a broker might not necessarily be out to scam you for your money, you can’t do anything other than earning mere cents for your efforts. If you’re looking to find out what live trading is, it’s better to trade with an amount of money that you can feel emotionally attached to.
Attractive Bonus Schemes
Bonus schemes are another ploy that certain brokers use to boost their profits. While a huge bonus is an attractive proposition to newcomers looking to increase their margin account balance, you don’t own that money until certain conditions are met. Some of the requirements are so ridiculous that it’s almost impossible to perform with any decent trading strategy: 1,000 trades, for example. Bonus schemes are a surefire way to keeping your capital locked up till you either give up trading or blow your account.
It’s critical that your broker honors your withdrawals in the shortest time span possible since there is no reason for them to keep holding onto your money. Most brokers do this by citing various purposes, such as money laundering to delay your withdrawals as much as possible. Before depositing all your money at once, consider placing a little amount of capital initially and making a withdrawal just to see whether your broker does process your requests.
Poor Customer Support
There are various complications when it comes to currency trading, such as price spreads, latency problems, withdrawals issues, etc., and you want your broker to respond to your queries as fast as possible. Just as with withdrawals, try checking out how responsive your chosen broker’s customer support service is before you deposit all your money. It’s never a fun experience having to deal with a broker that takes a week to respond.
Don’t Get Scammed
Getting down your broker right the first time goes a long way towards ensuring the longevity of your trading career. In essence, you must have an excellent relationship with your broker since there are various pitfalls when trading forex. While the pointers mentioned above should help you out significantly when filtering out the bad eggs, also consider performing your research online, reading broker reviews, checking customer feedback, etc., to get an idea of how good your broker is.
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