A lot of people are desperate to open an account with a forex broker as soon as they have learnt all about forex trading. However this is not a decision that you should rush into. Even if you only plan to trade with very small stakes, you should still spend a significant amount of time choosing the right forex broker.
The wrong choice of forex broker could end up costing you money. The reason for this is because for a start there are lots of brokers out there that are not fully regulated. Therefore what this means is that if you deposit money into your account, you may not necessarily see this money again, regardless of whether you generate any profits or not. This is not a common occurrence but can happen if you go with an unregulated company, particularly one that's located in an offshore location.
Regarding actually trading forex, another problem you may face concerns spreads. In an ideal world you want to choose a broker that offers spreads of no more than 2 or 3 pips on the major currencies and certainly no more than 4. If you are more of a long-term trader then these larger spreads won't affect you too much, but if you are a short-term trader you will find that these large spreads can really hinder your progress.
For instance let me demonstrate this point by comparing 2 different brokers. Company A has spreads of 2 points and Company B has spreads of 4 points for a particular pair. Now if you were to have 5 winning trades of 10 points each (before accounting for the spreads) in a given day, you would have made 40 points profit trading with Company A and just 30 points with Company B.
So it's fairly obvious that this is a significant difference, and in the long run these larger spreads can have a devastating impact on your overall profits.
Finally another consequence of choosing the wrong broker is that you may quickly realize to your cost that they do not offer some of the features that you need to be a successful trader. For instance you may start trading with a particular broker only to find that they offer only the most basic charting facilities or that they are very unstable whenever the markets are highly volatile, for example.
So the point is that you should really take your time researching the various different forex brokers before you commit yourself to one in particular. If you don't you may find yourself wanting to switch to another broker and having to start all over again.
Click here for a full list of forex brokers and to read a complete review of Zecco Forex.
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