Tips To Choose The Best Cryptocurrency Brokers

If you plan on trading cryptocurrencies such as Bitcoin or Ripple XRP, you're going to need a broker. For most, this means selecting a forex broker that makes cryptocurrencies available to clients within their trading platform. Such a setup allows traders to trade not only options such as Bitcoin and Ethereum, but also many other major and minor currency pairs. 

There are most definitely certain characteristics which make for a trusted broker, and we'll be examining those here, whether you plan on spending your crypto in online casinos or just hold it as an investment. 

But first, keep in mind that cryptocurrency valuation is very volatile and currently experiencing challenges from several countries. Other companies and countries on the other hand are looking to launch their own alternative to Bitcoin. There is a future here for sure but it could be an extremely profitable or very bumpy ride for some investors. Don't invest more than you can stand to lose

1. Have a Good Reputation 

Reputation is vitally important with regards to broker selection. At the base level, you will want to consider the reputation of a broker, along with the services that they offer. Thorough research will take some time, but the payout will be the ability to partner with a reliable broker that offers the services you need. Most choose to complete this research online and that is perfectly fine, but do be sure to check the credibility of review providers. Online forums can be an excellent source of information, as they often offer the honest opinions of other traders. 

2. Competitive Spreads 

Most brokers earn money off the differential between their quoted asking price, the price the client buys into the market at, and also from the bid and sell price. This is commonly known as the spread. Spreads can and will vary from broker to broker, so it is wise to select a broker that offers the best overall spreads. Currency and cryptocurrency trading will be both more effective and more profitable when excellent spreads are offered. Many brokers post their spreads on their website, while others will offer a free demo account which will allow you to view spreads at any given time. 

3. Regulation Is Key 

It's important to note that some brokers are regulated and some are not. In some cases, a broker is not regulated simply because there is no regulatory body in place within the country they are located in. In others, there are regulations in place, but they are not strict. The United States tends to have the staunchest regulations in place for forex brokers, but do pay close attention to regulations as they continue to evolve with regards to cryptocurrencies. Other locations with strict rules in place for brokers include Australia, Hong Kong, and the United Kingdom. You can view a number of options for cryptocurrency brokers online. 

4. Leverage Requirements 

Each trading account does have a minimum equity requirement in place. The amount will be based upon your total investment amount, along with the amount you plan to invest into each position. The equity amount is equal to the amount that is needed in order to execute a trade. While most brokers are not in the business of offering trade advice, some will recommend that you do not invest more than 5% of your total balance into any one trade. Feel free to speak with a broker before creating an account if you have questions regarding their equity requirements. Leverage is a very important topic when it comes to broker selection. Leverage provides each trader with the opportunity to increase their potential profits. Leverage is essentially your borrowing potential. With borrowed funds, a trader can increase their total trade investment with the hopes of exiting the trade with as much profit as possible. Obviously, a trade must be careful when using leverage, but can opt to select a broker that offers the minimum and maximum leverage levels that they desire. 

5. Effective Trading Tools 

When trading cryptocurrencies within a forex-style platform, you are likely to be provided with a number of tools which can render the technical and fundamental analysis process easier. Many brokers offer the popular MetaTrader platform, which comes with many analysis tools built in. If nothing else, it is advisable to select a broker which offers real-time market data, charting tools for technical analysis, and access to news reports and ongoing financial announcements such as GDP, inflation, and unemployment numbers. 

6. Know How To Spot Scams 

Do scams truly exist? Yes, there are a few brokers who have proven themselves to be less than ethical. In some instances, scam brokers have entered into trades which take the opposing position on trades taken by their clients, which can cause most traders to lose money. In such an instance, the scam broker would collect on the spread as well as the losing trade. Whenever a trade is contained solely to a broker's internal trading program, the broker can manipulate the market as they wish. This is one area in which regulations do work to prevent a broker from controlling trade outcomes. 

7. Withdrawal Considerations 

Most cryptocurrency Forex trading is conducted through dedicated exchanges. If you are new to trading, note that forex trading does different from a traditional cryptocurrency exchange in that it is non-executable and you complete the trade in pairs. It will not be possible to withdraw the cryptocurrency directly (although the broker may offer cryptocurrencies as a payment option for withdrawal). The same as with all trade-able pairs, there will be factors to consider, such as the spread, allowed contract size, margin, swap fees (if applicable), and more. 

Crypto Conclusion 

While there are plenty of ways to examine a broker, the best method may be to examine their business reputation, find out what services they offer, and if these two things check out, take the time to create a demo account. Demo accounts give traders a good feel for what they can expect when trading live. If the broker passes that test, feel free to deposit a small amount and then test the withdrawal process to see how quickly your funds arrive. It should not take long to confirm that a broker is or is not a solid and reputable option for trading cryptocurrencies.

I hope you enjoyed this article about tips for choosing the best cryptocurrency brokers and grow your profits

Interested in more articles about frugal finances?

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