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Until the start of the XXI century, the exciting world of the global financial markets was reserved mostly for the rich. However, thanks to the rapid technological advancements and the ever-growing list of online financial brokers, today the markets are open to both professional traders and to those of us who simply wish to earn some extra income from their living room couch.
But with so many companies offering great trading conditions these days, how is one expected to find an intermediary that ticks all the boxes on the “trustworthy” list? This mission is not as impossible as it may first seem. The only things you will need are a bit of patience and a solid plan. Without further ado, here are the 8 steps to finding a reliable financial broker.
Step #1: Set a clear goal (and stick to it)
Almost all financial intermediaries offer a wide range of products and services, which is why you’ll need to do careful research and decide upfront on how you want to do things. Will you trade on your own through an online platform? Or perhaps you don’t have the time to babysit the markets and instead want your funds to be managed by someone with experience?
Once you’ve defined your goal, the next step is to choose a financial broker. Typically, companies that offer more than one type of services tend to be more reliable overall.
Step #2: Check if the company is regulated
The second (and probably most important) thing on your to-do list is to ensure that your chosen investment intermediary owns a license. For example, some financial brokers in Bulgaria are legally required to have a license that enables them to operate as an investment intermediary, which is issued by the Financial Supervision Commission (FSC). Others still operate under licenses issued by regulatory authorities pertaining to countries within the European Union.
The license serves to guarantee that the company manages its entrusted assets with great care, while the failure to do so will lead to heavy sanctions. Another benefit of using a licensed intermediary is that some of your deposited funds will be protected in case of a default.
Step #3: Ask how they safekeep private data
Even if a company is licensed this doesn’t automatically guarantee that your private information will be secure. Visit the intermediary’s official website to learn what steps it actively takes to protect your privacy. The lack of such information may indicate that the company is illegally selling this information to third parties or doesn’t have an adequate protection against hackers.
Step #4: Ensure that they are experienced
While the list of companies to choose from is indeed lengthy, unfortunately not all of them are keen on doing honest business with their customers. One sure way to determine if the intermediary is trustworthy is to check the total time they have been active on the markets.
If the company has been offering its services for a number of years and is constantly improving or adding new things—great! However, be very cautious of companies that have existed for about a year (or even less) and offer trading conditions that are just too good to be true—more often than not these are get-rich-quick schemes that are designed to empty your wallet, so be careful.
Step #5: Test their trading platform
With most financial intermediaries, you can create a free demo account in order to study their trading platform in more detail, without risking any real funds. Take full advantage of this opportunity and test several platforms until you find the one that best meets your needs.
During this “test drive” it’s advised that you write down everything you’re unsure about on a piece of paper (or note-keeping app). We’ll explain why this is important a bit later. In the meantime, here are some examples of the questions you can ask yourself while you assess the pros and cons of each trading platform:
– Does it offer a wide range of financial instruments? Typical instruments that every platform should offer (whether as CFDs or in some other form) are currency pairs, shares, indices, precious metals, futures, and cryptocurrencies.
– What technical indicators does it provide? The more, the better. Some of the more popular indicators include Relative Strength Index (RSI), Moving Average (MA), and Moving Average Convergence Divergence (MACD). Of course, you should also be able to add as little or as many indicators as you want to a desired instrument chart.
– What types of orders can you place? Check whether the platform offers market, limit, and stop orders, as well as more advanced variations such as trailing stops and OCO (One-Cancels-the-Other) orders.
– What customisation options are available? Can you create your own watchlists which you can then use to receive signals about your most traded instruments? How about changes to the platform’s interface so that it suits your workflow better?
– What does the trading process look like? Check if the quotes are delivered in real time, whether you can buy and sell financial instruments quickly and easily through your desktop and mobile devices, and if the platform offers extended hours trading.
Step #6: “Interrogate” their customer service team
Do you remember when we mentioned to take notes of everything you don’t understand? Now is the time to check how quickly the company will respond to your queries by sharing them in their online chat, sending them via email, or just giving their customer department a call.
Regardless if you’re an experienced trader or are just now entering this dynamic profession, you’ll probably need guidance either way as you might encounter some technical issues or have specific questions about the company’s fee policy. If the person on the other end of the line can’t present you with adequate answers and solutions or is being condescending, you can safely scratch this broker from your list of potential candidates.
Step #7: Check if they offer free educational resources
The presence of accessible and informative educational materials, be it through extensive video lessons, real-time economic calendar, daily technical analysis and others is a sign that the company is genuinely invested in helping you become better at your craft.
Step #8: Expenses, expenses, expenses!
If your chosen company ticks all the boxes so far, then congratulations! Before you take out your wallet, don’t forget to ask this last set of questions to ensure that you won’t spend a penny more than intended:
– Does the intermediary require a minimum deposit when opening a live account?
– Do they offer trading conditions with tight variable spreads?
– What other fees are included as part of the service?
If you didn’t like the response to any of these questions then perhaps you’ll be better off finding another intermediary who can offer you better (and more transparent) trading conditions.
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