Are you new to forex trading in Nigeria? Choosing a forex trade provider can be challenging. There is no one-size-fits-all in this case, and investors have to do a thorough research before settling on one. While there are several forex trade providers, these are some questions you should ask before signing up:
How much does it cost to trade with this broker?
Once you’ve found a few forex brokers that meet your standards, you need to consider the costs associated with trading. Most of these costs are expressed as spreads and pips or commissions. You should always ask the broker what the criteria for each of them is and how they will affect your trade.
For example, if you have a strategy that aims for small gains in multiple trades, you may be better suited for a forex broker with tighter spreads and higher commissions. On the other hand, if you are looking to make large profits on a single trade, it may be preferable to choose a forex broker with high leverage but lower commissions.
Is there a fixed spread or commission charged?
A Forex trade broker in Nigeria functions as a middle man between you and the currency market. The broker can charge either a spread or a commission, and there are pros and cons to each option:
- Spread is the difference between the price at which your investment can be bought back (bid) and sold again (ask). The lower the spread, the better it is for you. For example, if a currency has a bid of 1.82 and an ask of 1.85, then its spread would be 0.03
- Commission is exactly what it sounds like—a fee that your broker charges you for every trade that they execute on your behalf
Of these two options, choosing a broker who works on spreads will usually lead to more savings over time than one who charges fixed commissions.
How much money do I need to start trading with this broker?
Don’t be afraid to ask this question when choosing a forex broker in Nigeria. It is important that you know the required deposit for trading. In fact, some brokers only require as low as $5 to get started with trading. But other brokers may need you to fund your account with $1,000 or more.
This is very important especially if you are trying out a broker for the first time and have no idea how their service works.
It is best advised to try out brokers before fully committing your funds into their hands by opening a free demo account first. Some forex brokers offer no deposit bonus which will allow you to open an account and test their services before making any deposit into your live account.
Is the broker a true ECN broker?
You should be able to determine if a broker is an ECN broker or not. Here are some things to keep in mind:
- ECN stands for Electronic Communications Network. ECNs are used by large institutions such as banks, hedge funds, and mutual funds. A true ECN broker passes on your orders directly through the network and does not take the other side of your trade order.
- A true ECN broker does not act as a market maker, but rather charges a small commission on each trade order you place. For example, many platforms charge $0.30 per 100k traded (or $3 round trip). To offset this, they have extremely tight spreads due to there being no spread markup or any conflict of interest between the client and the broker.
- If your forex account is with an ECN platform like Pepperstone or IC Markets, you will see real-time pricing and will be able to interact with other traders through their trading platforms’ order book. This can be useful when looking for liquidity providers and the best bid/ask prices at any given time during trading hours.
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