In order to start investing, it is necessary to choose the right forex broker through which it will be possible to trade in the currency market. Perhaps, it is one of the most important steps as incorrectly selected brokerage service, even with a successful and profitable trading strategy may result in large losses or even a loss of all the amount invested. In the market there are many brokerage frauds hiding behind big marketing budgets. In our experiment participants will have to decide themselves which broker to use. Naturally, they will have to search and read reviews about brokers. It is important to emphasize that experiment participants will have initial investment of EUR 150, so a number of brokers have to be excluded from the list. A small initial investment amount is chosen in order to avoid a possibility to lose all investment in a single trade. Experiment participants will have to choose from brokers which allow micro-transactions in the currency market. Mostly, micro transactions are used by beginners.
However, how to choose a broker which is not expensive and at the same time does not scam clients? We believe that every trader has to deal with this issue. Are the biggest market participants the most reliable and safe? Should we 100% trust them?
Most Forex brokers have minimum initial investment requirements, so a part of these brokers falls away very quickly. Also, it is very important to take into consideration the following criteria:
1) When was the broker established? The longer the broker has been active the more we should be confident.
2) How is the broker regulated? Priority is given to the following regulatory and supervisory authorities: SIPC, SEC, FINRA, NFA, CFTC, FSA, FCA, FSC, IFSC. If the broker is not regulated - the risk of losing money grows by several times.
3) Commissions and spreads. Try to find brokers with the lowest spreads and other commissions.
4) Broker’s size. The more offices and partners broker has, the less possible it is a fraud.
5) Awards. How many International awards and assessments does the broker have?
6) Media. Reliable and trusted brokers are always presented and analyzed by the media.
7) Forums and subrredits. Search for reviews. Of course, focus on negative feedback and other complaints about specific broker.
Experiment participants selected 6 brokers - IronFX, LiteForex, ActiveTrades, Alpari, Dukascopy, InstaForex which they assume to be reliable. All these brokers are regulated, with the minimum deposit from $ 0, and no big complaints. Both participants of the experiment choose to use Metatrader 5 trading platform, so several brokers from this list should be excluded. After thinking for a while about selected brokers, participant X has chosen broker IronFX, while the participant Y has decided to open a trading account at InstaForex.
To Be Continued…