There are so many brokers that are appearing right now and most of them are unregulated ones which can abused their authority over their clients. Unregulated brokers have capabilities to cheat their clients by slippage or high spread. Brokers also know where you place your stops so they might also hunt it and put you out of trade.
DEALING DESK BROKER - this type of brokers match your orders to the opposite side if there is no match for the certain order the broker will hedge it. Thus sometimes they segregate losing account to winning accounts so that those losing account can be hedge by them so if they lose the broker still wins. They can offer fixed spread because they manipulate the orders however their rates could be different from the interbank rates.
Non-Dealing Desk – This type of brokers do not hedge clients account they send the orders to their liquidity providers (Banks, Hedge Funds, Mutual Funds, or other Brokers). This NDD are commonly known to be ECN and sometimes do not offer fixed spread however they earn through commissions./volume of trade. This could be good brokers but sometimes too much volatility can occur because it is connected on most liquid financial institutions.
Things you need to consider on a Broker:
- There are so many brokers however only few are regulated ones. Some of the regulatory agency that we always hear National Futures Association (NFA), Commodity Trading Commision (CFTC) and Futures Services Authority (FSA). Check out your broker if they are regulated if not! Then do not deposit or trade with them your just giving your money to them.
2. Years of Business
- Yes! Years of business why? Because you need someone who knows how to operate their business well and is well established. This might not be important for some people but sometimes older broker means highly genuine and faster executions.
3. Transaction Costs
- You would want lesser fee with spreads and commissions specially for those who trade frequently. Tight spread means more profit for traders. Just have an average spreads is good, just don’t be fooled by some broker offering very tight spread because they might be too good to be true = scams.
- Some well known brokers have incentives after your first deposit which is somehow favorable to traders because it increases your capability to trades. 10-20% per deposit are frequently been advertised by brokers higher than that is subject to DOUBT.
- Trading Platform matters because it is where you place your orders and sometimes analyze your technical charts. So pick platform that don’t usually hang up and have good executions with regards to prices you want.
6. Deposit and Withdrawals
- For your Deposit and Withdrawals it should only take a week for it to be credited. Regulated Brokers will usually ask for documents prior to deposit and withdrawals which is good because it protects you as a client.
7. Customer Support
- A broker should provide good customer service for questions/problems that will arise. Faster and reliable support should always be on standby if you needed them.
Protect your hard earned money from those scammers. Always research on which broker is better and always check if they are regulated ones. If it’s too good to be True then DOUBT because they are after your money. If you have been scammed don’t hesitate to file case to the regulatory agency so that no more people would be catch by the Big Bad Scammers.
“Research is what I'm doing when I don't know what I'm doing.” By Werner von Braun