Should a Singapore forex trader choose a locally regulated broker or an overseas forex broker? This is what we think.
Forex traders in Singapore have a lot of options available to them when choosing a forex broker. They can choose from overseas online based brokers or local brokers. In fact, many make their choice purely on the fees that they charge.
Should that be the only consideration? No, it should not. Here’s what you should be looking out for.
6 top considerations for choosing a forex broker
1. Your forex broker should be regulated
Forex trading is among the most liquid markets globally, with trillions worth of trades changing hands daily. Given that it is traded OTC without any accountability, traders would do well to protect themselves from possible fraud or manipulation by trading with a reputable and regulated broker.
Having a forex broker that is regulated can help to ensure that your money is in the right hands. The Monetary Authority of Singapore provides oversight on the forex brokers that are based in Singapore, so you can be assured of a greater level of accountability over your trades and your money. Check the MAS financial directory for all verified institutions.
2. Your broker should offer lower fees for your trades
While fees are not the only consideration, they have a large impact on the long-term success of a forex trader. Plus, they can vary widely from one forex broker to the next.
The cost of your trades can come in many forms, such as commissions and spreads. Some brokers may charge you a commission, or a percentage of the spread. The spread is the distance between the bid and ask price of the forex pair you are trading in, and is expressed in pips. Others do not charge any commission, but will offer a wider spread on your trades.
Pepperstone based in Australia has been a leader when it comes to spreads and commissions while in 2020 the global broker Interactive Brokers is expected to have a growing presence in Singapore. A source of low fee brokers can be found at the Compare Forex Brokers List.
3. Your forex broker should provide the trading platform you want
You spend hours looking at charts and planning your trading strategies. After all that work, you don’t want to be let down by your trading platform.
Your trading platform needs to be well-designed, intuitive to use, with clear buy and sell buttons, and all of your charting tools available at your fingertips. The most popular forex platform is MetaTrader 4. Other popular forex platforms include the MetaTrader 5 (which is more suited for CFDs) and cTrader. Selecting a popular forex platform means you can switch brokers more easily down the road if you are unhappy with the forex broker you originally chose.
4. Your broker should provide support, training and news
Forex trading occurs round the clock, and your forex broker should support that, so find out if your broker’s customer support is available at whatever time you are trading. Also, find out if your customer support hotline provides you with a person to speak with quickly, as opposed to making you jump through many hurdles to get there.
Most brokers offer online training guides and videos. Some do this better than others, while some also hold seminars in Singapore. Training can be further tailored to beginner, intermediate or advanced forex traders, so you may want to match your experience to the broker who can provide you with the most suitable training.
Another aspect you need to consider, is getting the latest news, so you can be updated on the global events that are impacting the currency markets. Many forex brokers have live feeds to sources such as Reuters.
5. Other considerations
What if you have other considerations to contend with?
ZUU online spoke with Justin Grossbard from CompareForexBrokers.com who recommended finding a provider that offers multiple markets. “Many individuals now want to trade CFDs on new markets such as cryptocurrency so finding a broker that offers these markets will save the headache of requiring multiple accounts,” he said.
Grossbard added that investors who are new to forex trading, trading a new currency pair, or just trading in a particularly volatile market and want to protect their funds, should consider a broker that offers Guaranteed Stop Loss Orders (GSLO), and protect themselves from slippage.
Investors who want to make frequent withdrawals and deposits, or foresee themselves not trading for extended periods of time, might also want to consider a broker that offers no withdrawal or deposit fees, and no inactivity fees.
Finally, for more experienced traders who utilise leverage in their trades, the amount of leverage your broker offers, along with the required margin you have to maintain in your margin account will affect your ability to trade.
Understand the risks of forex trading before you start
Leverage increases a forex trader’s exposure to the market, and it can magnify both your profits and your losses quickly. If your losses exceed your required margin, you will experience a margin call and will need to top up your margin account.
As such, it is important to understand the risks of foreign exchange trading before trading. You can learn more from the MAS forex section about these risks and trading in Singapore.
If your looking for more information on forex or events that impact currency markets, check out the ZUU Online forex section which is updated regularly for Singapore traders.