Quality standard in the Forex market for financial services companies are the major foreign exchange brokers. Serious investors choose exactly them because of undeniable reliability. In many ways, these preferences exist due to psychological causes. So, what should we look for when deciding whether to initiate cooperation with these or that foreign exchange brokers?
Talking about the reasons why people choose foreign exchange brokers, we should start with reliability. The reliable financial agent generally considered is a broker with a long history of work, license and accountability of regulators, with the insurance industry of its responsibility to customers, well-functioning system of risk management within the company, legal transparency, and protection of contractual relations. The foreign exchange broker still has to be fairly respectable, although each of us understands this term in his own way.
By itself, time of existence has no guarantees: the above-mentioned major foreign exchange brokers have existed in the market long enough. However, the risk of losing money in the company one-day is much higher than that of a broker who provides clients access to financial markets for years. The long history of work – is well-established mechanisms for risk management (otherwise, the company would already be bankrupt), qualified staff, reliable partners, financial reserves, etc. In short, foreign exchange brokers with a history of work have the advantage over newcomers to the market.
Secondly, we should mention the documents in our talk about foreign exchange brokers. Unfortunately, in practice, licenses and controllability of regulatory agencies, whether government or industry, does it guarantee the safety of your money. However, this is a serious plus in choosing a broker. First, the licensing process itself cuts off obvious fraud. The Company shall disclose to the state its owners, to provide statutory documents, financial statements. In addition, regulating authority in one or other form controls over the operational activities and financial performance of the company. Secondly, there is always the organization, where the client can file a complaint or claim on foreign exchange brokers.
Foreign exchange brokers and the spread: usually, newcomers of the Forex market when choosing a broker primarily pay attention to the magnitude of the spread. And some brokers, in turn, lure clients with catchy advertising, saying “Once we spread on … followed by the name of the currency pair … from one point and below.” Reliable foreign exchange brokers usually are not like this.
More important about the choice of foreign exchange brokers is the execution of orders. Around the guaranteed execution of pending orders there are lots of debates. Some argue that the brokers who ensure execution of the orders take on more risks than brokers who work without it. Without going into the debate, I should note that the guaranteed execution of pending orders when dealing with a reliable dealing center – a great benefit for the client. Here is a concrete example. Imagine that before leaving the data on unemployment in the U.S. you are distracting two identical position to buy a pair of EUR / USD at a price of 1.21 per two-dealing centers. One broker has guaranteed execution of pending orders, and another – no. Fearing out of positive indicators, and as a consequence, the growth of the dollar, you are putting a stop order on the two positions at the level of, say, 1.2. After the data is that the U.S. unemployment fell much more than analysts had expected, and the course quickly drops to 1.19. In one dealing center stop order is triggered, and you commit a hundred points of loss and in the other you are left with a losing position at 200 points. Moreover, it may even increase if the rate goes lower. Of course, such situations are rare, but, nevertheless, occur, and this can lead to loss of most (if not all) funds. That is why the question with a guaranteed execution of pending orders with foreign exchange brokers is much a more important matter than the size of the spread. More post: www.profitradefx.com