The Key Ingredients For Choosing a Forex Brokers Revealed
06/12/2008 - Finance
There are many many forex brokers out there in the market and there are a few important considerations you must take into account before you choose any broker.
Some are better than others for a variety of reasons, and I'm going to give you the scoop on a few 'key ingredients' that your forex broker must offer you.
1- Your forex broker should offer you a minimum of the main 7 currency to trade with. These are USD, CHF, AUD, CAD, GBP, EUR and JPY. If you want to trade with some of the smaller currencies such as the New Zealand dollar you should check before hand to make sure your broker can offer that service.
2 â€" Most good online forex brokers will offer you a suite of free tools to allow you to effectively analyse currency prices in real time, identify trends and plan possible entry and exit points. These should include charting tool as well as technical analysis tools. The majority of online forex brokers will offer you a range of free tools, with optional upgrades to more advanced services.
3 â€" This is quite a biggie â€" the cost per transaction. Forex brokers are paid through the bid-ask spread, thus you shouldn't encounter any hidden charges or fees in order to trade. However as mentioned above you may get charged extra to use advanced tools or reporting services that your trading platform may offer. Thus to reduce fees you want smaller spreads, and pips spreads do vary (often significantly) from broker to broker (as do currency pairings). So make sure you spend some time find the broker that is most appropriate for your skill level and budget.
4 â€" Will they execute your orders immediately. Due to the ever changing nature of the forex markets you need to have your trade orders executed as soon as you place them. You don't want any delay in waiting for your orders to be placed, otherwise the prices may drop and cause you to lose money or eat into your profits. Thus it is imperative that you choose a forex broker who will be able to execute a trade order at the price you see on your computer, in real time. The occasional delay may happen, but if this happens more than on a few occasions, start shopping around for a new broker.
5 â€" As an individual trader and small investor, you want to find a broker who will let you trade with a small minimum account balance. Most forex brokers that operate online will let you open a small or 'mini' account with as little as $100-200.
6 â€" Excellent customer service. When you do business with any company you should expect nothing but excellent customer service and this is no different when working with forex brokers. A good broker will answer your questions quickly and help you when you need assistance. They should have readily available and easy to find contact information, so that you can call them on the phone at any time. They should be knowledgeable and well trained so that they understand the concerns that most forex traders will experience.
7 â€" A low margin requirement. You give yourself more leverage by choosing a broker with a low margin requirement. You can leverage margin to generate potentially massive profits, but if you are not careful you can clean yourself out by getting too much margin. As for example if your broker lets you have a 100:1 leverage, you can effectively trade $100,000 with only $1000.
8 â€" A trading platform which is easy to understand and use. Some forex brokers will let you trade through their own online trading platform, while others will need you to download and install their trading software on your PC. It's worth signing up with a few different forex brokers and testing their systems and trading platforms using demo account.
In conclusion, don't just jump straight in a start trading with any old forex broker. Carefully shop around and find a online broker that is right for you and your circumstances. Test out a few different brokers using demo accounts and test their customer service to find one which is suitable.
