| FOREX BROKER CHECKLIST |
|
LIST |
QUESTION |
REMARKS |
| ✓ |
REGISTRATION |
Is my broker registered with financial authority in its country? |
If a broker is registered in U.S. registration information can be found on NFA (National Futures Association) website.
If a broker is registered in United Kingdom, registration information can be found on UK FSA (Financial Services Authority) website.
If a broker is registered in Australia, registration information can be found on AU ASIC (Australian Securities and Investments Commission) website. |
| ✓ |
COMPANY HISTORY |
What is the firm's record or its business conduct? |
Registrations only show the firm is regulated and thus provide certain protection to clients. The question is what the firm's standing is with the regulatory authority. If excessive regulatory actions are taken against the firm, BE AWARE. |
| ✓ |
FINANCIAL STANDING |
How financially secure is my broker? |
NFA recently raised US FDM (Forex Dealer Member) net capital requirement to $5 million minimum. There are rumors that by the end of 2008, the requirement will be raised to $20 million. Make sure to check your broker's financial requirement. If the broker is registered in US, you can find their latest financial report on CFTC (Commodity Futures Trading Commission) website. |
| ✓ |
NO SLIPPAGE CLAIM |
Does my broker claim no slippage and guarantee trade execution? |
Make sure you read the fine (usually tiny) print within close proximity of such claim. Most brokers do not guarantee execution during volatile market times. BE SURE to ask them about it. |
| ✓ |
FIXED SPREADS CLAIM |
Do they advertise fixed spreads? |
Some brokers offer both fixed and variable spreads dealing platforms. Usually you need to pay a commission if you choose variable spreads platform. When market is not volatile, variable spreads platform could offer you as little 1 pip spread for certain currency pairs. |
| ✓ |
PLATFORM STABILITY |
How stable is the platform? |
You don't want a platform that frequently experiences disconnect. Keep the platform running and time its average up time. Some brokers such as GFT makes the system up time available on the web. Be sure to test platform reliability. Ask your broker if order by phone is available as an alternative. |
| ✓ |
HIGH PRESSURE SALE TACTICS |
It's too much sales talk, can I make them stop? |
If you already told the firm not to call you and they still do, that's a RED flag. File a complaint with regulatory authority. |
| ✓ |
FEE DISCLOSURES |
Why was I charged a fee that I am not aware of? |
All fees should be disclosed to you before you open your account. Make sure to ask your broker about transaction fees, exchange fees, administration fees, etc. It doesn't hurt to ask. |
| ✓ |
CHARTS, NEWS, EDUCATION |
How important are charts, news and education to you? |
Almost all forex brokers offer free charting package and live news. The question is how robust the charts are and how fast the news come in. Be sure to ask your broker if they offer education. Quite frequently, an investment product you don't understand is an investment you will likely to fail. |
| ✓ |
DEMO AND LIVE DIFFERENCE |
Make money in demo NOT equal make money in live? |
In most brokerage firms, demo accounts run on a separate server with automatic execution enabled. No human intervention will take place even during volatile market times. Therefore, you will not be able to get a true sense of how live dealing is. Although you may make money trading your demo account, it's very likely other factors will come into play when you trade live account. So LOSE your "I make money in demo so I will make money in live" mentality. |
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