One essential ingredient that you must have when starting on line
foreign currency exchange trading is an account with a Forex trading
broker. The currency trading broker is your connection into the markets
and they will provide the essential cover that allows you to trade with
margins.
The question is how do you select the best Forex brokers.
There are at least 7 criteria points to be considered when you are
deciding where best to shop for a Forex currency trading broker.
1. Dependable
This
works on multiple levels. You need a broker that you can rely upon to
be trustworthy and who will not all of a sudden vanish like a puff of
smoke from the internet taking with them all of your hard earned money.
The FX market is surprisingly devoid of regulations so there are a vast
number of Forex brokers to choose from and as is like with many things
in life some Forex trading brokers are more honest than others.
The
first step is to check up on the reliability of the currency trading
broker and to confirm your online Forex broker is regulated. In the USA
this means that you want a Forex trading broker that carries a current
registration with the Commodity Futures Trading Commission (CFTC) and
also the National Futures Association (NFA).
Check for a Forex
currency trading broker with an unblemished record regarding any
complaints logged against them on the National Futures Association
website. Other countries have their own regulatory bodies for example
the Financial Services Authority in the UK performs the same function.
Another
consideration is whether the online Forex broker's trading platform is
reliable. The Forex trading platform is the financial software that will
connect you to the FX markets whenever you want to trade. If the online
Forex trading platform is often offline then this will cause you some
major problems. For example you could miss out on either opening or
closing a trade at the optimum time.
It would be best to check a
number of online Forex trading forums for feedback from individual users
regarding the amount of downtime that they have experienced. Remember
it is like with all online forums do not listen to the loudest voice as
they may have a vested interest either way in recommending or not
recommending who in their opinion are the best Forex brokers
2. Services Provided by the Best Forex Brokers
The
Forex markets trade for a full 24 hours each day that's from Sunday
evening through to Friday afternoon Eastern Standard Time. Check that
your Forex broker's trading platform is reachable available during all
of these times, The best Forex brokers trading platforms will be
available and they will also offer around the clock customer support on
Forex trading days.
Check that they cover at the seven main
currencies that are USD, JPY, CAD, AUD, CHF, EUR and GBP certainly the
best Forex brokers will.
The best Forex brokers will offer you a
minimum of the following essential tools, which are instant execution of
your Forex trade at the price displayed, technical analysis charts and
financial trading charts. Most will also offer a training program to
teach the basics of using the tools.
3. Forex Broker Costs
Online
Forex brokers do not make commission charges to their customers so the
way they make their income is from the difference in the Forex trading
spread. The Forex spread is the differences between the buying and
selling prices on any of the currency pairs. The Forex trading spread is
usually any spread between 1 pip and even sometimes less to around 3
pips; this will depend upon the online Forex brokers terms of service
and the currency pair being traded.
The piece of the pie taken by
the spread can make all the difference between achieving a profit or
making a loss in your Forex trading account. This will affect both the
immediate term and also the longer term so you will need to scrutinize
closely at what level the spread will be computed. If you can decide
which pairs you are likely to trade most frequently the spread on those
pairs will be more important to you than on others. For example I prefer
the USD/GBP trading pair, which is known as cable.
Beware of
special short term marketing maneuvers like special offers of lower
Forex trading spreads that may not last long once you have committed
your funds.
Consideration need to be given on how much is the
minimum amount of capital you can invest in order to open a Forex
trading account. Good advice given to new traders is to start out small,
which means looking for a Forex broker who will let you open an account
with a minimum of $250 or hopefully less.
4. Margins, which are also known as Deposits
Margins
are a variable that change from Forex broker to Forex broker. A lower
margin requirement means giving you a higher leverage, and higher
leverage can give you the ability to create greater profits, or losses
from a fund of the same size. Margins allow you to magnify the
opportunity to make more money
5. Size of the Trade also known as Lot Size
Trade
size varies from one broker to another. Generally 100,000 trading units
of currency is considered a standard lot, 10,000 of trading units is a
mini lot, and 1,000 trading units is a micro lot. Some brokers do offer
fractions of a lot too, which give you more power to set your own lot
size. This could be perceived as a bonus or just an added complication
depending on your point of view.
There are other matters to be
considered which include the interest paid on the Forex margin account,
the rollover charges when trades continue over to the next trading day
and any other FX trading policies that the broker may have which could
affect your Forex trading account commerciality. These are the main
points that you should be looking out for when choosing the best Forex
trading broker.
6. Customer Service
This is very important
especially when you have just started out using a Forex trading
platform. Like with all new things there will inevitably be teething
troubles and you will want to be able to speak or email someone and get
an instant response. The best Forex brokers will provide this service.
7. Forex Exit Strategy
There
will be a time when you want to realize some of the profits that you
have made and be able to withdraw your money quickly and easily. Make
sure that you are able to get your money within a couple of days as some
online Forex brokers insist on a 14 day delay which is totally
unnecessary
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