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How to choose a broker: three main steps

How to choose a broker: three main steps

A modern financial market is full of brokerage companies. It is difficult to choose a broker for both professionals and newcomers.

The Money investing portal has prepared an easy and clear scheme to help you in the choice of a broker. It has three stages. The guideline is based on the opinion poll of the novice traders. We hope that our tips will make your way to the world of finance and trading easier.

STEP 1: INVESTIGATION

When you choose a broker, clarify some principal aspects, i.e.:

  • The broker must be registered in any regulatory organization. If the brokerage company was founded in the USA, the broker must be registered in National Futures Association (NFA) or Commodity Futures Trading Commission. If your potential broker is performing in the UK (Great Britain), the registration must be in Financial Service Authority (FSA). There are a great number of regulatory bodies in the global financial space. Don’t trade with the broker who has not been registered in any of these organizations.
  • Also, it is a-must to wonder if the broker has the Dealing Desk or Non- Dealing Desk. You should get to know if the spreads are fixed or not. It will be useful to find out how far the spreads are expanded if they are non-fixed. These are the most important questions for the traders who do the scalping. Remember, the scalping is a small steps strategy. It lets withdraw the profit at several points. Big and variable spreads can decrease the profit of this trading strategy.
  • Gathering the information about the broker, verify the limits of the leverage. The broker can provide you with it. Note that the optimal leverage is 1: 100. It is usually recommended for any trading style. Even if you prefer the high-risk trading, try not to exceed the leverage of 1:300. Please, adequately estimate the state of the market and your abilities as a trader. Don’t risk without necessity. They say: “Diligence is the mother of success”. This principle also works in trading.
  • Remember, you shouldn’t trade with real money. First of all you have to study the profitable strategy and mentally prepare yourself for the trading. You have to clearly understand how to manage the risks of your funds. In practice, if you have $2 000 or less on your account, it’s better to start from “mini” lots (transaction size: 0.01 lot).
  • You have to know if the broker uses credit or debit commission for the rollover. Some of the brokers provide the customers with both services. Make wonder if the brokers subtract the percentage or not. This information is important for the traders who open long and medium positions.
  • On the stage of the market investigation you ought to know whether the broker provides premium services. They are the news, trading signals, bonuses and discounts. Decide how these services are important for your trading style and strategy.

 

STEP 2: THE COMPARISON OF THE BROKERS

  • Link below for the detailed studying of the comparative table which was made by our team.

 

STEP 3: THE OPENING OF THE DEMO-ACCOUNTS

You have already investigated the market and studied the table. Now you can choose two or three brokers. Open a demo- account at each brokerage firm and start trading. So, you will be able to estimate the comfort of the trading platform. Ask any questions as you have. It lets understand the level of the customer service of the broker. We remind you that even the best platforms can be useless without timely and qualitative support. Most demo-account platforms don’t act as the platforms for real trading accounts. However, there can be a great difference in the speed of order implementation, slippage and the platform stability of the real and demo-accounts. Real accounts are usually more reliable and quicker. We recommend you to start a real trade after studying the strategy and getting used to the platform. Try not to make large investment. Open transactions with small volume. In this way, you will understand if the provided services of the broker satisfy your trading needs.

Finally, we recommend you to concentrate your efforts on one brokerage company. It must be the most comfortable for you.

REMEMBER, THE BROKERAGE COMPANIES THAT ARE FAVORABLE FOR ONE TRADER CAN BECOME THE WRONG FOR ANOTHER ONE. THE CHOICE OF A BROKER IS DIFFICULT AND SPECIAL. HOPE, OUR ADVICE WILL MAKE THIS PROCESS EASIER.