First and foremost, What is Forex trading? It is an online business activity that is about buying one currency while selling another simultaneously with a view to making profit. We are talking of conversion of one currency for another
How Forex Trading Works
Forex trading involves pairing of two different currencies while trading them against each other. You have hundreds of different pairs you can choose from when you want to engage in the trade. Some of the popular pairs of currencies you can choose from are: the euro against the US dollar, which is written as EUR/USD, the British pound against the US dollar, which is written as GBP/USD and the Japanese yen, written as USD/JPY.
Retail forex market is decentralized and currencies are traded 24 hours a day and five days within a week. Forex trading continues to grow globally as people get to understand how it works. At the moment the global market of forex trading worth about $6.6 trillion
Who is a Forex Broker?
To engage in forex trading, you need the service of a professional forex broker. A forex trading broker is a financial firm which gives you access to its online platform where you can engage in forex trading. A broker is like a medium that connects you with the market.
The type of broker you choose goes a long way to determine your success in the trade. However, have it in your mind that the trade is a two-edged sword, that is, it involves both risk and profits. In this article, you will know the factors you should look for before choosing a forex broker
1: Regulation
Since forex trading is not yet regulated in some countries it is very imperative to patronize registered and regulated brokers for the safety of your funds. Dealing with regulated ones would go a long way in preventing you from falling into the hands of scammers.
How to Know If a broker is regulated.
To know if your broker is regulated, just go to the website of the regulator the broker is claiming, then search for the section where you can verify the registration status of the broker. Put the registration number or the name of the broker in the space provided to check the authenticity.
Financial Sector Conduct Authority, FSCA is the regulatory body of forex trading in South Africa. For example, to know if Exness (a broker) is regulated by the body, you just
put the registration number, 51024 or type ‘Exness’ in the space provided on the Exness website to check.
After inserting the name ‘Exness’, the results indicate that truly, Exness is under the regulation of Financial FSCA in South Africa.
There is also what is called regulatory arbitrage where forex traders from third world countries shun brokers regulated by top tier agencies like FCA and ASIC and patronize brokers in countries that their regulations are not ranked among top tiers. Clients do so because the laws of the latter are seen as more favorable.
2: Read Online Reviews: Before choosing a broker, ensure that you take your time to read about what other traders and professionals are saying about the broker.
Try and read reviews on platforms like Trust Pilot and Google Play Store reviews. You can also check the professional reviews on online platforms like ScamAdviser, Scamdoc, Scamdetector, and others. The reviews may not be perfect, but they would go a long way in guiding you.
Also, endeavour to find out about the owners of the brokerage firm. Research their achievements and reputation. Don’t patronise a brokerage firm that doesn’t reveal the identity of the founders. That’s a red flag.
3: Check The Trading Fees: You need to consider the fees of the broker before choosing to patronise them. If a broker charges several or too many fees that are not in sync with your trading plan, it is better not to go with it because the trading fees can eat up all your potential profits and destabilise your trading plans.
On some occasions, the fees depend on the currency pairs you choose. For example, Major currency pairs like EUR/USD and GBP/USD usually have tighter spreads compared to some other currency pairs that have larger spreads. These are some of the things to consider.
Check out the platforms offered: Your broker will give you access to forex trading platform. Ensure that the broker is very simple to use and navigate. Ensure that the platform is not too complicated for you. especially if you are a beginner.
The platform should have user-friendly features, which you can easily navigate. It should have sections where you can access special education, relevant news feeds, and different technical tools for your market analysis. To know the quality, you can check it on the demo account first.
4: Check tradable instruments: It’s good to patronise a broker that has a wide range of tradable instruments. This is because it would give you the opportunity to diversify your trading funds because of market vulnerability. Thus, diversification would help reduce your exposure to risks.
5: Check Support/Customer Care: Dealing with a good broker would help increase your trust and confidence in that broker. Before choosing a broker, check the efficiency of its customer service. Check the social media presence. Check if it is available on weekends, and also check if they respond to your questions or complaints swiftly, as this goes a long way in making you feel comfortable while trading with a broker.
What steps can I take to start forex trading
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Open an account with a broker
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Fund your account
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Choose a currency pair or trading instrument
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Place your trade using the broker’s platform
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What are the steps on how to make money from forex trading.
Learn some basic things about forex trading.
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Choose a regulated broker
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Learn about some strategies of the trade.
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Start the trading with a Demo account
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Move to real trading and start with a small amount.
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Familiarize yourself well with all the trading signals, charts and indicators.
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Have a trading journal.
