Unbiased Forex Broker Experts

Part II. Things to Think About

Things to Think About - Forex School
Commander in Pips:
Since we have briefly discussed types of brokers, let’s take a look what particular points to pay attention to when you are in the process of choosing broker.

How to choose a broker - Forex School
Pipruit: Right, I’m just wanted to ask – how to choose one, because I think that can spend all my life just to list them.

Commander in Pips: Absolutely. So, the first thing that you have to worry about is the safety of your money:

1. Broker’s security and safety. 

It is very difficult to estimate it easily, but some government authorities will help you to do this. Crooks will find it very hard to stay untouched under their supervision. In different countries there are different regulators, but they have similar functions.

These are some of the major ones:

- They are NFA (National Futures Association) and CFTC (Commodity Futures trading commission) in US;

- ASIC – Australian Securities and Investment Commission;

- Financial Services Authority in UK;

- Swiss Federal Banking Commission;

- Federal Financial (Bundesanstalt für Finanzdienstleistungsaufsicht);

- AMF or Financial Markets Authority in France (Autorité des Marchés Financiers).

2. Money transfer security, speed and convenience.

In fact, your broker holds YOUR money, and the single reason why he is doing it is just because it is practical from a trading standpoint. Hence, you should not have any problems, delays and other barriers to deposit your money or to withdraw some or all of it. At the same time, broker has to provide sufficient safety of money transactions and avoid any mistakes during transfers.

3. Customer service.

In the beginning it seems not as important as, say, security, until you will start trading. The fact how broker is perfect or not in customer relations will be an important sign how it is perfect in trading. If you can’t resolve something technical like common question or even trading conflicts – what we can say about this broker? Questions should be resolved fast and easy – call back, internet on line consultations, 24/7 support by e-mail, phone and other things – must be presented in customer support service. Multi language is also preferable.

3. Customer service continued. 

At the same time be careful, since a broker could serve differently before opening an account and after that. Sales personal can be very polite and earnest while trading and technical support could be rude and hardly reachable. It’s better to spend some time and read feedback about a particular broker.

4. Next is a Trading platform – here we’re passing to trading process. 

First, the trading platform should function stably. Second – it should be friendly. You should have any tools that you need – necessary technical tools, free news announcements, statistical statement and other tools. At least it should have options that are not worse than with rivals.

5. Orders execution


I have to say, since I trade futures, that CQG DOM software shows time spent on execution of every order – even on transferring it to the CME exchange. It comes with tens milliseconds – approximately 20-40 milliseconds. This is really fast. What am I talking about? You have to get fast execution. If you have fast internet and a relatively calm market – you should not have some pips different between your order and execution or trading delays for 10 seconds. Your order should be executed fast and preferably without difference, although some pip fraction is possible. Another important signal of a broker’s quality is execution during real Doom & Gloom time – important macro data release. So, it would make sense to open a small account initially and test the broker during a couple of releases before trusting him at 100%.

6. And, finally transaction costs.

The cheaper your transaction costs as more money you leave for yourself. You may depress transaction costs with higher security, faster execution and other important issues, but if you see the broker with relatively similar quality but higher transaction costs – why should you have to pay more?


7. Be careful with fraudulent brokers, a.k.a. bucket shops. 


Since internet on-line trading has become readily available, the amount of those crooks is still growing, not so fast as it was some years ago, but still there are a lot of them. Those guys we also call forex scam brokers – These companies are the major object of destruction and disclosure by the Forex Peace Army. Although we intend to speak about it in more details a bit later – here we still say couple of words. Those crooks accept clients’ orders, book them, but never transfer them to the marker as brokers that we’ve mentioned before. Instead of real transactions with acceptable quotes, even from a DD broker, all client bets against those bucketeers. Their scamming comes from the fact that they skew real quotes or even boldly give “not of this world” quotes and grab clients’ money. Others let you seem to make money on trades, but never allow withdrawals of profits, or even your initial deposit.

Pipruit: Sir, you make me nervous…

Commander in Pips: Don’t be afraid…

Pipruit: Afraid? I’m in PANIC! I’m terrified!​

Commander in Pips: Calm down, son. I have good news – lucky for you we are the Forex Peace Army. So, we have a lot of information to help you to avoid those crooks. To help you separate real and reliable brokers from the scam we have:

- Traders Court – where you can view cases that have finished already, read reviews and get assistance with your personal case (I hope you will not ever need it). Since FPA Scam findings were implemented in early 2008, well over 50% of the websites that the FPA has declared to be SCAMs have gone out of business.


- Review and ratings – this is not quite about the scams, but it will help you to separate good brokers from bad, working signals and systems from non-working and so on, so as performance tests;

- And, finally, education and services – this is not just our School. Here a lot of different stuff – as practical (researches, daily signals) as theoretical kind. Particularly Pharaoh Financial Blog highly recommended, especially to you.

Pipruit: Wow, thanks sir, looks like my pulse is stabilizing. I was just thinking that all is lost…

Commander in Pips: Heh, do you think that FPA will leave you one-on-one with market? Nope. We are always near, to support and lend a shoulder to lean on.

Pipruit: Thanks sir. That’s really important to me.

Commander in Pips: Also you can make something by yourself for your own protection.

Pipruit: Aye-aye Sir. What is that? Since I feel like all advantages on their side.

Commander in Pips: Mostly it is. But you can get some odds on your side with simple action:

1. Open 2-4 demo accounts with different brokers – may be even in different countries beyond your real trading account. This should be done even before you will enter your real account with some broker. This will not cost you any money, but with this action you will be able to compare quotes that you trade at with quotes from other brokers. You can control how real they are, do they move in the same direction without tangible deviation. So, you can see the market. It will be much better if you will be able to get exchange futures quotes also, say CME EURO FX quotes.

2. Keep a trading journal and fix all trades and orders, even canceled there. Remember what we’ve said about this before? You must have 100% understanding and control over all transactions on your real account, you have to understand every number in the statement and every pip. Problems usually come along when you least expect them. And if this will happen you have to have some evidences to confirm that. If you will just say that you feel like you were deceived but have no proof– who cares about it? But if you fix every step – nobody will be able to deny your proof.

By the way, the simple way how you can do it – is just make a screen shots. For that purpose press “CTRL + Print Screen”, then open any graph editor, say, MS Paint and press “Ctrl + V” (paste). The picture of your screen will be fixed as graph file.

3. If this will not help – take a legal action.
 That’s why we’ve recommended to choose brokers that have a license issued by some government regulator of financial markets. In US they are CFTC and NFA. Very often brokers, if you will bulldoze them with law suit and risk of their license, since it is better to fulfill your complaint and fix things now, than to face the risk of license issues, fines, and more. Still if the broker is too obstinate – take legal action. Both the CFTC and the NFA have special tools for communication with brokers’ clients. CFTC has Repatriation Program, while NFA Arbitration & Mediation one.

4. And finally, do not overestimate “Broker stuff”. Yes, there might be problems, and sometimes big problems from the broker, but whether you succeed or not depends personally from you, your diligence and discipline. You may to drop the whole thing into broker’s lap – but often this is just a run from real problems you caused. Be truthful with yourself!

Opening a trading account

Commander in Pips: Ok, finally we’ve passed through labyrinth of traps and pitfalls on the way of choosing the broker. Let’s suppose that you’ve found some – they look really good and reliable. What’s next?

Usually procedure of opening an account includes four steps:

1. Choosing the type of account;

2. Paper work – analyzing of all documents and contracts;

3. Money transfer;

4. Activation of account and start trading.

Choosing the type of account and corresponding paper work

Today it will be hard to a find retail broker who provides only a standard account value, or only a mini account. The competition amongst brokers is so tough now that they fight for every client. And of course most of them have several types of accounts that could be popular. Depending on your assets size you can open standard account, mini account (allows trading with 0.1 standard lots) or even a micro account (allows trading with 0.01 standard lots or smaller).

You may choose a different account currency or even gold and silver as account asset.


Currently many brokers give clients possibility to trade not only spot forex but also on the CFD market, futures market and/or stocks. CFD means “Contract For Difference” – you may learn more about it, just Google “CFD”. In fact, this is some kind of derivative asset that has almost the same quotes as underlying asset but in different contract sizes. Applying CFD is how non-exchange brokers can provide clients with possibilities to trade futures and stocks with small start-up capital. For instance, a standard Gold contract is 100 Oz and initial margin at 1 contract will be around 9-10K USD. This is just the initial margin to open 1 contract. Trading a CFD on Gold let you to trade, say 0.1 standard lot (or even 0.01). The major difference here is that real futures on Gold are traded on an exchange market, while CFD’s are also the product of over-the-counter Forex brokers. That’s why CFDs could have different carry, slightly different quotes and so on. In fact the same differences exist between currency futures and spot forex. Still CFDs could significantly widen your choice of assets to trade.

Another type of account that could be offered to you is managed accounts. Brokers can offer you to trade on your account – some kind of trust trading. If the broker will make some profit – it will get a solid percentage of it. But here are some problems. First, this account will usually require larger initial assets – 20K+ USD. Second, why have you studied so much just to trust trading to other person?

Some brokers could also let you to choose – Dealing Desk or Non Dealing Desk execution – that is what you really want. But usually, NDD execution demands a so-called “Professional Account” with a much larger start-up sum – it could be 20K USD at minimum.

And the last but not least – pay extraordinary attention to Agreements, Terms and Conditions, Rollover and Interest Policy. In other words - to all the papers that you will have to sign to open an account, and especially to text that will be written with small print.

Money transfer

Now it is common for brokers offer to transfer money to and from you in different ways – by bank wire, card or electronically. Here you have to look at some issues. First, try to find out what the broker’s bank is, what kind of reputation it has, where it is and in general what the bank is. If this is an unknown bank in some emerging country, then you can have some suspicions about the safety of your money, at least the possibility to have problems, if something will go wrong are significant.

Second, take a note that all banks will demand a fee for your bank transfer – both your own bank and the broker’s bank. Usually this fee is 0.5-2% of the transferred sum. Terms of wire execution also could be different, but usually, it takes no more than 2-3 business days.

Third, some countries could have laws restricting money transfer to some other countries, as well as maximum transfer sum and currency.

Activation of account and start of trading

When you will finish with the preliminary routine, you finally will get an e-mail with your login and password anddetailed instructions how to activate your account. Also you have to get your exemplar of papers – contract, terms and conditions and others. Many brokers also provide some kind of private room for clients on their website. There you have access to deposit/withdrawal operations, statistic, your personal data and so on. So, pretty easy, right?

Still as we’ve said earlier we strongly recommend you to trade on demo first, at least for 6-12 months. This is free and extremely useful. The point is that trading with real money is specific. Even success on a demo account will not guarantee the success on a live account. What we can say if you can not become successful with demo? When you deal with real money – you feel it. You have no such feeling on demo, despite how you try to develop the same responsibility. Think about it.

Comments

Balla Appavoo
4 years ago,
Registered user
Oh Yes! I definitely going to share this
One-fm
9 months ago,
Registered user
Thanks for this piece.

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