Forex Trading Brokers – Selecting One That Benefits You
An essential part of trading forex is opening an account with a good broker. You need access to the markets to be able to trade, and the software provided by the top brokers will allow you to have this access. These brokers will also allow you to trade larger sums of money than you have in your account, using margin trading. Depending on the brokers’ software, you may be able to use a trading robot, like the Forex Megadroid robot on your account.
There are a few very important points to look at when deciding on a broker, let‘s take a look at them:
1. Reliability
Not all brokers are trustworthy, and finding one that is isn‘t that simple. Because the forex markets spans the entire globe, there is no universal regulatory body, so some brokers are unregulated. Find out where a broker is located and what local associations they are members of. In the US brokers are regulated by the Commodity Futures Trading Commission (CTFC) and/or the National Futures Association (NFA). Other countries have other associations.
Go to online forums and search for the name of a broker, to see if people have had problems with them. It is always best to find several different opinions, as just one person may have reasons to be biased. That person may have personal or financial reasons for praising or criticizing a broker.
2. Services provided
Forex is a 24 hour market, five days a week. You will want your broker’s trading software to be live online all of this time (most are). Having constant customer support available during this time would be positive too.
Check that they cover all of the major currency pairs, that is USD against EUR, JPY, GBP, CHF, CAD, AUD. The should also allow some currency pairs that do not involve the USD, such as GBP/EUR.
Check that the broker not only offers charts, but offers ones that you will find useful. You should also make sure that they execute orders immediately, and that you will get the price displayed at the time.
3. Charges
Forex trading brokers generally do not charge a fee or commission. Instead they make money from the spread, which is the difference between the bid and ask prices of a currency pair. A typical spread will be between 1 and 3 pips, although it is not unusual for the spread to be bigger during certain times. The size of the spread can make a big difference to whether you make profits in the long term.
4. Minimum account and lot size
Brokers usually have a minimum investment for your account. Brokers that only have standard accounts may require $10,000 or more to be deposited. Mini forex trading accounts have a much lower minimum account balance, often$250-$1,000. These are better for almost all beginners.
5. Leverage
Leverage is the factor that determines how much you can control with the money that is in your account. It is possible to control up 100 times the money you deposited, the rest your broker will guarantee for you. There are brokers that will allow control over even greater amounts, but be careful because this does increase the risk factor.
Whether a broker will allow you to trade with a robot such as the Forex Megadroid download is another point you may want to consider. However, the above 5 points are the main factors to take into account when selecting a forex trading broker.