Before getting started in FX trading, there are numerous factors you should take into account first. From essentials, such as which currency pairs you want to trade and the infrastructure of the platform, to protections, like whether your chosen broker is regulated and ensuring stop-loss orders are included as standard, we’ll give you the lowdown on the crucial aspects you need to be aware of before choosing where to invest your money in the forex markets.
Check that your ideal currency pairs are offered
If you’re reading this article because you’re ready to begin forex trading, you probably have an idea as to what currency pairs you want to be buying. If you don’t yet know what currency pairs are suitable for your strategy, then you’re not ready to get started! You must have an idea as to which currency you want to go long or short on, and why that makes your strategy strong, before you can begin to select your chosen forex broker.
Whilst every forex trading platform offers all major currency pairs, if you’re a more experienced investor, then you are likely interested in a combination of minor pairs, and perhaps even some exotic pairs too. If your strategy relies on having a specific group of pairs, it is essential that you double-check that your chosen platform offers the pairs you’re looking for. Not all platforms offer a wide range of pairs, but a broker like Exness offers over 60 different exotic currency pairs.
Make sure the platform is regulated
Once you’ve made sure that your broker offers the currency pairs you want to trade, it is very important that you also check whether the broker is registered with a reputable regulator and is compliant with the financial authorities. This is your due diligence and helps protect you from falling victim to a scam broker.
You should be confident that the broker you choose is registered with a regulator in the currency that you are most often looking to trade, as this makes sure you’re protected by financial standards and that your investment is as secure as possible. One of the strongest benefits of doing this is that the top regulated forex brokers often offer negative balance protection, in case your investment sees a huge loss in a short space of time due to real-world changes in economic circumstances.
Demo the platform and its transaction speed
Another important aspect of selecting a forex broker is to assess the quality of their platform itself. An ideal forex platform has a fairly simple and clean infrastructure because this means the loading time of the app or webpage is not going to delay the trade you want to make from going through. The worst possible scenario is that your choice of forex platform has a slow loading time, which means the price of your currency pair trade changes by the time the broker registers your buy/sell order. Platforms with a simpler layout and infrastructure are quick, and the best brokers ensure that transactions are processed in less than 50 milliseconds, which gives you the confidence that you get the price you want for your trade.
Most top brokers do offer a demo of their platform, so you can make sure you’re confident in how it works – and the currency pairs offered – before you set up your own account and commit your investment to their platform.
Stop-loss orders are essential protection
On the same subject of protecting your investment, it is also wise to make sure that the platform you want to use as your forex broker also has built-in stop-loss orders that are registered when you make your currency trade. A stop-loss order automatically closes your trade at an agreed point that limits the losses you would incur if the market makes a significant change while you sleep or are otherwise occupied.
This specific security measure is a crucial part of risk management and ensures that you don’t lose your entire investment in seconds. It’s an essential safeguard in more volatile markets, particularly if you’re looking to invest in exotic pairs, rather than more stable major pairs.
By using stop-loss orders as standard, it can also help you take the emotion out of investing. You decide in advance, based on your investment strategy, what your exit point is, and the automation will kick in before your emotions perhaps tempt you to hold your loss longer in the hope that it will bounce back, but when it doesn’t, you’re even further into a loss than you would have expected or hoped for.
Consider if the spreads are narrow enough
A final factor to take into consideration when selecting a forex platform is to assess the spreads offered on your ideal currency pairs for your FX strategy. Spreads and fees across your trades do add up, so you want to make sure you’re getting the most competitive spread price. Spread in forex is calculated as pips, and is the exact difference between the price at which you purchase the currency and the price at which you can then sell it at a later time. The lower the spread, the lower the difference between buying and selling.
Instead of being charged a commission by your forex broker, the platform makes its money on the spread prices instead. So this is why we recommend that you do your research into the spread prices on your desired currency pairs before selecting the best broker for your investment strategy.
Do your due diligence before investing
After you’ve taken all of these crucial factors into consideration, you will be ready to get started in forex trading. Many different platforms will likely suit your strategy and meet your requirements, so make sure you also read the reviews from experienced traders who have invested in forex with your shortlisted brokers. This way, you can be confident that you are investing in the right place and are set up for success, and understand first-hand experiences of other investors who have used the forex broker you’re considering.
