How to pick a Brokerage: 5 Easy Steps

The World is a flood with different Forex brokerages and trying to decide which Brokerage to deposit with can This article isn’t going to mention or name any brokerages it’s merely meant to provide a guide on how to find the best brokerage for you with a series of helpful hints. 

1. Determine What Instrument You Intend to Trade  
Not all brokers offer all instruments. Many Contract for difference providers are limited to Forex, Commodities and Indices, while others offer more exotic instruments such as Bonds and ETF’s to trade. If there is one particular instrument you want to trade whether that be a Forex pairing or a particular ETF you have developed an arbitrage strategy for, your going to want to do a lot of your research around which brokerage is going to give you the best trading conditions for a particular instrument. If your interested in a more general range of instruments then work out which broker provides the best overall level of service for that instrument.

2. What your trading style will be and how that fits with the Brokerage  
Many brokerages have different rules and terms when it comes to CFD trading. For example a number of brokerages completely ban scalping or partly ban scalping activity. Rules surrounding MetaTrader Expert Advisors also vary from broker to broker, some brokers allow unlimited scalping while others don’t let scalping expert advisors on their sites. News traders for example may favor a brokerage that has fixed spreads so the spreads don’t widen just around the times they need them to be tight. Your trading style should help you narrow down which brokerage to deposit with. Frequent re-quotes and slow servers may also be problematic for some depending on what their particular trading style is. 

3. Find out about regulation and reputation  
This is probably the most important point when picking a brokerage. In this day and age there is no reason to deposit with an unregulated brokerage considering the huge number of reputable regulated brokerages. This means when considering a brokerage you should first determine if their regulated by a proper regulator researching and discovering whether a regulator is genuine shouldn’t take more than a couple of minutes. Then you can search the relevant regulators site for any disciplinary action taken against the company, if you find such action this may be a good reason not to deposit with the said brokerage. After you have checked that the company is properly regulated and has a clean disciplinary record you should check and read about the reputation of the company. This should further narrow down your choice of brokerages. 

4. Check if they provide value for money in terms of spreads and commission  
Hopefully you have some idea of what instrument(s) you will trade the most. This will allow you to shop around for the best spreads. Getting the best value for money that you can is vitally important and can make a significant difference over the long run, a single pip greater spread may be a huge difference especially for those who scalp for a only a few pips profit from each trade. Some brokerages may offer very tight spreads but charge you commission at either a fixed quantity or typical a very small value of the trade say 0.1%. Brokerages that don’t charge commission tend to have wider spreads, however fixed commission can really eat into your profits if your positions are relatively small. So you should spend some time calculating which brokerage would offer the best value for money on the instrument(s) you trade and at the size which you intend to trade them at.  

5. Talk to the Brokerage and see what they say 
Talk to the brokerage through live chat, sign up for a demo account and wait for the marketing phone call. If a brokerage is too aggressive in their selling technique I generally see that as a bad sign. Again if a brokerage offers free learning, or tutoring, why not take them up on their offer and see if the information they provide is of any value or if it is merely a sales pitch. Getting a sense of how a brokerage regards and treats it’s clients can give you a good insight to what they will be like when you trade with them, I would personally say that things such as long winded sales pitches and hard selling are things which should put you off. 

These five broad categories are the main things you should take into consideration when picking a CFD brokerage to open up an account with.


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