Lesson 6: How to Select the Best Forex Broker
Unlike the share trading where there is a central marketplace, the Forex market is decentralised. Therefore, you need a Forex broker and trading platform to help you place trades. The Forex Broker facilitates your trade and the platform is where you place your trades.
If this sounds complicated. Please visit our ranked post on the best Forex brokers in South Africa.
With a growing number of Forex Brokers in the market in this lesson we discuss the qualities you should look for when selecting a Forex Broker.
Proper Regulation / Regulatory Compliance
There are regulatory bodies across the world who keep brokers in check and separate the trustworthy from the fraudulent. Regulation is a crucial factor when considering a Forex Broker. Regulated brokers keep your funds in secure and segregated accounts, and maintain fair dealing practices. This means that your money is kept separated from the broker’s own assets, and so the broker is not allowed to use it.
Most developed countries regulate forex trading. In South Africa, we have the FSB / Financial Service Board who promote and maintain a sound financial investment market. The FSB is an independent body set up to oversee the South African non-banking financial services industry. Here at FXTSA we endorse Forex brokers regulated in South Africa as well as those regulated in the main financial hubs in Europe and the US.
Other reputable regulatory bodies are:
South Africa FSB Regulated Brokers
So, in short, brokers with a flashy website, offering huge deposit bonuses does not necessarily mean they should be held in high regard. Always make sure that your chosen forex broker is regulated in South Africa or one of the main financial hubs.
Rules when picking a Forex broker.
- If the FX Broker has been in the industry more than 5 years it means that people trust them and they care about their clients.
- If your chosen broker is regulated in South Africa it means that this broker is serious about doing business with South African clients. For any brokerage firm to become regulatory compliant in South Africa it means aligning with rules and requirements laid out by the FSB. Internationally regulated brokers should not be ignored or avoided, just make 100% sure your broker is licensed and regulated by a reputable governing body.
- If a broker offers more than one product for example, Futures, Stocks, Options, CFD, etc it means that it is larger business, carries more responsibilities and has more clients trading with them.
- Read reviews. There are quite a few websites which offer user reviews. Take note of them. Any number of bad reviews for a specific forex broker is most certainly one to avoid.
- Make sure they have the instruments you want to trade. For example, if you want to trade Bitcoin, Ethereum or Ripple, make sure your brokers offers cryptocurrency trading before you sign up.