Starting a new business relationship with a company is always a nervous time. You don’t know what to expect and trust is low. When it comes to Forex brokers, there’s good reason to be wary because many brokers come and go every year.
So this short guide will show you the 3 simple steps to test out any broker that you’re working with for the first time. You’ll learn why you want to send a test deposit, execute a few trades and test the withdrawal process.
Before you get started, be sure to put in the time to research brokers before you ever send any money. Read this guide to learn how to do the background research on brokers.
But once you’ve done that, it’s time to test out the brokers that you’ve selected. Follow these 3 simple steps to test your top picks.
Step 1: Send a Test Deposit
Once you’ve decided on a broker that you want to test out, never send all of your risk capital in the beginning.
Send a little more than the minimum.
This is essentially a broker stop loss. If the broker does not perform well or if you find out things about the broker that you do not like, worst case scenario, you have the ability to walk away from that broker without losing too much money.
The amount that you send is entirely up to you. But as an example, let’s say that the broker’s account minimum is $100. You might consider sending $300 in the beginning.
Remember that you aren’t trying to build your account yet. You’re simply testing out the broker with real money. Some brokers can treat you very differently when you have a live account versus a demo account.
Step 2: Execute Some Trades
Now execute a few small trades. It’s best to do a few shorter-term trades, just to test the system.
Be sure to test stop losses, pending entries, take profits and any other order type that the broker offers.
There are a few things to look for here:
- Do you get the price you see on the screen, or is there slippage?
- How wide are the spreads?
- Are your stop losses honored, or do they get triggered early (remember to factor in the spread and rollover)?
- Is it easy to execute a trade, or is the trade entry/exit process clunky?
- What kind of order types do they allow?
- Is the trading software reliable?
These questions will be answered very quickly after you take a few trades. Some trading platforms also perform differently when you do live trading versus demo trading.
You’ll never find out these things by only doing online research or trading a demo account.
So take some time to observe how their live system works and that will give you confidence to continue with them.
Step 3: Test a Withdrawal
If you’re happy with how the broker executes trades, now it’s time to test the most important step in this process.
Getting yo’ money back!
First, find out the broker’s procedure for withdrawing money. It’s usually published on their website.
So if you deposited $300 in your account, see if you can get $100 out. The withdrawal fee might be expensive, relative to this small amount of money, but it’s worthwhile to see how the entire process works.
If there are any withdrawal policies that weren’t published on the website, you’ll learn about them here.
Then actually go through the process and see how easy or hard it is. If you have any questions, be sure to contact the broker’s support desk.
Final Thoughts on Testing a Forex Broker
After doing these three simple steps, you’ll find out very quickly if you want to deal with that broker or not.
If everything checks out, then it’s all system go!
Now you’ll have the confidence to send in all of your risk capital.
One final reminder: It’s a good idea not to send all of your money to one broker, if you have a significant amount of money.
But now that you understand this testing process, it’s easy to test multiple brokers that you might want to use at the same time.