Selecting a broker for your foreign exchange (forex) currency trading is important. You will need to research a broker that is right for your current circumstances based on how much you have to start trading with, and what markets you plan to trade.
Choosing a broker that is not right for you and your forex trading business can cause problems. These problems can make a significant difference to your forex trading business. Some of these differences can even put you out of business completely.
Here we cover four important issues you will need to work through.
Number one is to check and see just if and where your broker is authorised and regulated by a higher authority. This is important because a reputable broker will be acting under the auspices of an independent body. That body in turn is usually set up and organised by the government where your broker is operating from.
Obviously a broker that is authorised by a government will offer you some a degree of protection from mismanagement of your broker account.
Number two is to find out whether your broker operates their own dealing desk. This is important because if your broker does use a dealing desk they may be operating their own mini marketplace for their clients.
This is important to know because they are then able to manipulate the prices they offer to their customers rather than offer prices that come direct from the marketplace.
This in turn can affect your profits as their prices may be less favourable to you than more accurate prices from another broker not running a dealing desk.
Number three is to do with gearing. This is how much the broker allows you to 'lever' your capital in your account with them. Leverage simply means how much cash you have to deposit into your account with the broker to support the size of the trade you want them to place into the currency market.
You need to fully understand the ramifications of leverage before you make a single trade. failure to properly grasp the subject of leverage can be a very painful experience.
Number four you need to fully know the basis the broker offers you for the size of each trade you want to make. Forex trades in the main marketplace are based on the size of one Lot. One Standard Lot is worked as 100,000 units of currency.
This equates to a big sum for most individual traders starting out. You need to locate a broker that will accommodate your cash equity available for trading to make sure they can allow you to actually place trades with them that they can execute for you.
By the way, do you want the formula for building a full time income through trading the foreign exchange - forex - currency market? If so, listen in to my next webinar here-- http://www.wealthcubed.com
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