Long-term, experienced professional Forex traders at the retail level often have trading accounts with several Forex brokers. They realize that nothing other than direct personal experience with a broker will reveal their favorite, because that determination cannot be achieved solely through simulated trading accounts or broker review websites.
For new traders, however, the ones that may be limited to one broker initially, it requires an exercise in due diligence and a willingness to research candidates thoroughly in order to avoid details that may negatively influence their experience at some future point.
Here are a few basics to serve as a launching point for selecting an acceptable Forex broker, using details of the AlfaTrade forex trading platform for examples.
Minimum Funding Level
Most Forex brokers will market their services as attractively as possible. Whenever possible, finding a broker with low minimum funding requirements is desirable. It is nice to have options in this regard. Our example broker with various account types offers starter or standard accounts that can be funded for $500. Accounts for more experienced traders often require deposits ranging from $5,000 to $50,000 in order to gain certain benefits.
Minimum Trade Size
Smaller is better and our broker for this review has a minimum trade size requirement of 0.01 lots. A “lot,” often called a “standard lot,” is 100,000 “units” of a currency pair. In this case, 0.01 equals 1000 units, so in the example of the EUR/USD currency pair, each minimum price movement, or “pip” equals $0.10 or 10 cents. This is a good starting point and even experienced traders will trade at this level in times of uncertainty over the direction of currency markets. This minimum trade size applies to every type of account our broker has available.
The principle of “leverage” takes some time to understand and time to observe in action. Our broker offers maximum leverage of 1:200, meaning that for every dollar by which the exchange rate in the example EUR/USD currency pair changes, a trade of 1000 units will experience a change in account value of $40. Most beginning traders will want to consider trading at lower leverage levels. U.S. based traders are limited to maximum leverage of 1:50, so the same scenario described here would result in a change in account value of $10.
Our broker offers low “spreads.” This term simply means the difference between the buying and selling price of a currency pair. Our broker charges 2.5 pips of spread for the standard account, 2.1 pips for the premium account and 1.5 pips for the VIP account. These spreads are for their no-commission accounts and they are minimum spreads, meaning that in times of extreme market volatility, they will become higher. Our broker also offers the same three account types with commission fees in addition to the spread, in which case the spread is much lower, beginning at 0.2 pips for the standard account, 0.1 for the premium account and 0.1 for the VIP account. These lowest spread levels apply to major currency pairs and are higher for cross pairs and exotic pairs. A recent look at current spread rates on their website showed the USD/JPY pair to have the lowest spread at 1.6 pips and the highest on the GBP/USD at 4.0 pips. The commission for these accounts is based on a standard lot, or 100,000 units. For the standard account, it is $8, $3.50 for the premium account and $2 for the premium account. On a 1000 unit trade, commission on the standard account would be $0.08 in addition to the spread.
AlfaTrade offers the MetaTrader 4 platform, along with the mobile version of that platform. It is considered the gold standard of trading platforms due in parts to its widespread acceptance and use, its reputation for stability and its large community of users that develop Expert Advisors, which are essentially mini applications designed to facilitate profitable trading. They also offer a Mirror Trading platform that permits traders to follow and copy the trades of experienced traders. In addition, a proprietary web-based platform does not require downloading or storing software on the client’s computers. All trading platforms offer traders a service to evaluate their trading effectiveness.
Funding and Withdrawal
Our broker being reviewed here accepts credit cards, Skrill, Neteller and bank wire transfer. Withdrawals are by the same methods and are subject to the rules and regulations of those entities.
Careful research will ensure that a selected Forex broker will perform according to realistic expectations. This broker did not seem to make any outlandish claims, therefore the conclusion is that they are reputable, but it is ultimately up to the trader to determine the suitability of any selected broker.