How to choose a broker: practical insights for beginning traders
There are a lot of articles telling how to select a right broker around the Web, but the majority of them are just theoretical and far from reality. Typically, they suggest choosing a broker based on users’ reviews and feedbacks, different ratings, regulations and so on. Beginning traders are inexperienced and, in most cases, fall into traps set up by fraudsters. In this overview, we will focus on things that are really important and things that can be ignored while selecting a broker.
Things to be ignored while choosing a broker:
- Availability of any regulation licenses. Many specialists state that this is the first factor to pay strict attention to. Well, it is of no importance to a trader for several reasons
- The majority of brokers have licenses issued by offshore regulators. Experience has proven that these regulators are not even able to fully prepare their reports. Moreover, even licenses of such regulators as (USA) and FCA (Great Britain) provides no guarantees of a broker’s bankruptcy. Example: MF Global, WorldSpreads.
- Regulators do not deal with individual claims, moving this responsibility to ombudsmen. Should any claim to a broker appear, its licenses will in no way affect a favorable solution of the matter. Especially, when the amount equals to several thousand US dollars.
- Reviews and ratings. It is impossible to check the veracity of reviews and feedbacks. Sometimes it goes to ridiculous lengths, when the same feedback is submitted on several different resources at different times and by different people. The same goes for ratings: practically all of them were created with the only aim – to earn money by advertising one or another broker. Here is one illustrative case: the broker that operates in a CIS country is involved in hundreds of law actions, but its ratings has been increasing steadily and it is always in TOP 3.
- Availability of education programs, contests, affiliate programs and so on. All these features are nothing but just marketing, aimed at attracting traders and insult them into making a decision.
Things to pay close attention to while choosing a broker:
- Performance guarantee. It is only possible to check this matter by putting on the line some small amount of money: place some insufficient sum on your deposit and try to make a withdrawal request. If your broker puts some limits on a number of withdrawal transactions or tries to delay it, then your money is just a payment for this experience.
- Functionality. Transaction execution speed plays a very important role on the actively growing or volatile market. It decreases negative consequences of slippages. A platform’s functionality (possibility to implement unique strategies) is a key component of the successful trading.
- Absence of restrictions and trading conditions. It is about an order execution method, spread size, leverage level and so on. If there are any restrictions for scalping or advisors, it is better to avoid such a broker.
- Availability of a free-access offer. It contains all information about the trading procedure. If it is complicated or if it doesn’t even exists on your broker’s web-site, this means that this broker has something to hide.
- Segregated accounts. These are accounts opened in third-party banks separately from a broker’s accounts and on which customers’ money are placed. If there is a strong proof of their availability, then this is a benefit of course.
And above all – you should feel yourself comfortable working with your broker. If you enjoy your trading, then you made a right choice. Remember that there is no broker that can give you 100% profit guarantee, so you should differentiate risks and try to withdraw your money as often as possible. We sincerely wish you every success in your trading!