You are getting shiny offers from the brokerage houses and getting allured to get one who is making so much promise to you. But be aware of your greed and keep in mind that you are one step away from the great fall if you are planning to get the broker who is baiting you with the highest profit. Sometimes it may seem so difficult to identify a right broker, and we get attracted by their “get quick rich” schemes. Here in this article, we will find out the most crucial traits of an imposter so that we judge the right one.
Procedures of identification:
1. Not regulated
A wrong one is not regulated by the regulatory authorities and can conduct any type of mischievous work any time. Before choosing the right one, beginners should check if he as necessary certification from the FCA or not. If he is not a certified broker from the Financial Conduct Authority, investors should keep a distance from him.
Traders may easily check this certification by visiting the specific website of that brokerage house. If they find necessary certification at the bottom of the website, they should move forward for the deal. In the opposite case, they should search for the secured one again.
2. Membership
An ideal FX broker will be the member of the National Futures Association (NFA) and must be registered as a Futures Commission Merchant with the U.S Commodity Futures Trading Commission (CFTC). These memberships prove that he is an honest broker who provides secured transaction services to its clients. These types of brokers are really cherished by the traders, but they can be highly costly. If you visit home.saxo, you can learn a lot about the features of well regulated and respected broker. As a new investor, always try to trade with such great broker like Saxo as they will help to improve your trading performance.
3. Leverage
Before choosing a brokerage house to leverage, the facility should be considered as not all of them may provide the same leverage offer. Based on the effectiveness of them, their leverage power varies, and beginners should check how much leverage power their chosen companies can provide. Generally, the leverage works on 1:10 ratio, which indicates our $100 investment can work as a $1000 investment.
4. Commissions and spread
Most of the brokers take the difference between the ask price and the bid price as their service fee, which is known as the spread. Sometimes, this can be taken using a fixed spread or variable spread. A variable spread is taken when the brokers do not mingle with the market risk.
In case of a fixed spread, brokers guarantee on a specific spread based on different currency pairs. Difference between the market spread and the broker spread helps him to make a profit. This type of practice allows traders to buy and then sell the financial instruments consistently.
5. Customer support
Professionalism can be measured using the customer support, and beginners should utilize this option to find the right one in the shortest period. They can get the contact number and give a business call to check how responsible they are. If they respond immediately and eagerly provide the necessary answers according to the requirements, investors can believe that they have found the right one.
But newbies should be prepared for all types of challenges as sometimes it is found that at the beginning the support service is well, but with the passage of time, it becomes worse. Newbies should find the traders among their friends and families and ask them about the best brokers to get help from their practical experience.
These are the most crucial issues which must be checked identify a wrong broker so that we can be saved from the potentially fraudulent activities in advance. An investor can not be successful in a day to choose the right broker for him, and constant seeking will really support him by providing experience in the end.
