When you start trading Forex, you automatically become a part of this huge trillion-dollar trading environment. Biggest market in the world, Forex gives us opportunities to gain fortune or experience devastating losses.
If your Forex career is just to begin, there are plenty of things to consider: personal goals, your funds capability, trading strategy, etc. Since there is no marketplace for the FX trading, you must get yourself a broker to conduct the activity for you.
And yet, it’s even more! Both your trading success and broker’s assistance are quite tied up. So here are some important criteria to think of when choosing a FX broker:
No secret that the number of online Forex brokers is growing fast. So be attentive and double-check a brokerage before you put your signature elsewhere. As online Forex brokers are not alone-standers, they are commonly backed up by some large bank or lending institution. This is of course the result of high leverage offered. Mostly brokers are ready to please you with 100:1 leverage, which does mean “tons” of money for you to trade. That is why you should check a broker’s back up to find out how strong the foundations are.
Know your broker before signing contract and “period.” The legitimacy of a brokerage can be verified through the registration with certain regulatory bodies. For instance, USA brokers must register with national Futures Association (NFA) or Commodity Futures Trading Commission (CFTC). And there is FSA (Financial Service Authorities) for which controls the United Kingdom brokers. Anyway, the broker’s location does not really matter, except the registration with the correspondent bodies. Look through a broker’s website carefully or study forums to avoid fraud.
3. Competitive spreads
As your potential broker is legitimate and has funds secured, now you need to find out how good the offer is. Forex brokers earn their “snatch” in the spread, which is the difference in pips between buy and sell price of a currency. Here, we can speak about the difference in commissions if we mention stock market brokers. As a trader you should look for the one with smaller spreads, which is “willing” to give you maximum profit.
4. Resources and Emotionless Trading
Nowadays, an average Forex broker can offer you a wide range of services. The trading itself is basically done through a broker’s trading platform – you must test and evaluate it before choosing a Forex broker. The platform must compete with the market standard and include real time charts, live news and market data updated, integrated technical analysis tools, etc. Also the trading platform helps you to leave your emotions out by setting Stop Loss and Take Profit points. Sticking to them does much of successful trades. No emotions make your trading cold and calculated. So check of your broker has the features needed.
5. Leverage Flexibility
This is one of the biggest FX market advantages. Leverage makes a $100,000 transaction possible with only $500 balance in your account. Don’t get too excited! The higher leverage means greater risk. If your capital is limited, higher leverage offers you more opportunities. And if money is not a problem, the saying “Less is more” about leverage is the right one. So check if your broker can please your trading needs.
6. Account Types
Your trading needs define the necessary account type. You must be sure that your broker offers the accounts you need.
7. Margin Rules Democracy
Since Forex market, leverage allows us to trade with some structure’s money, we don’t actually have total control over our transactions. This means that your broker determines the risks you are taking with brokerage funds when you are making a new deal. If a brokerage has tough margin rules, some of your positions may be sharply declined. A margin call is the worst here: a broker can liquidate your account before the position gets a chance to make you profits. As a result, you get huge losses. So check whether your broker has strict margin rules.
It is about customer service and support. Are they accessible enough? No matter the problem you have (technical or general); there must be someone to assist you in the best way. If there is none, you better say, “No, thanks!” to this broker as sometimes low quality customer support can cost you thousands of dollars or more. Examine this feature before signing for a broker.
9. Demo Account
Last, but not least. And probably it is the first in order of importance. Before diving into the ocean deep, it’s better to have some training on the shore. Open a demo account to check your abilities. Of course, one might say demos do not indicate the success until you trade real money. It may be true as natural pressures could cause different results. However, trading with a demo account will help to test your strategy and yourself as a beginning trader. Not the best option ever, but it’s worth starting with.
Now you know what to demand from your potential broker. Please, also mind that rushing into the global market could lead to a fail. Be consistent with checking your online Forex broker against the above-mentioned criteria, choose a trading strategy, and master the technical and fundamental analysis to get prepared to play the real money.
This article was written by Alexander Collins from Forexeasystems. He believes that automated Forex is a future of Forex market and propose all Forex traders to try his sophisticated Forex EA. Use Google and search “Forexeasystems Fx Pulse” to download free freebie that shows actual news on chart and has built-in trend detector.
- Landmarks in the Forex History (fastswings.blogspot.com)
- Why Use MetaTrader as a Forex Platform? (forextradingsystemcentral.com)