Broker detailed choice factors

All the brokers seem to sound so good when you read their sales pages, but how do you know which ones are worth your money? By following the acticle of How to choose a Forex Broker in the "For Beginners" page, we are going to drill down each main factors here. Before going through all the factors, you need keep the following questions in your mind. These include:


  • What is your spread?

  • What are your credentials?

  • What tools are available to help you learn more?

  • What is your leverage?

  • What product you would like to trade?

  • What the broker reputation like?

  • What trading platform it is?


Ok, lets have a look the each factor that we need to pay attention on.

Initial Deposit

You should look for a forex broker that has a low initial deposit. It is not a matter of the amount you should start trading with, but if a broker wants many thousands just for you to open an account, it is questionable. The ideal initial deposit requirements should be $300 to $500 or less.

Max Fund

This factor determines the maximum amount that you can trade with this broker. Normally this limit is quite large and you can discuss it with some brokers. For most of traders, we do not need to lots of attention on it.

Payment Type

Most of brokers are supporting varies way of payment, such as Visa, Master, PayPal. Do read the small condition for each payment way because the commission change and arrival time may different. You need to find the most suitable way to yourself.

Commission fee

By granting services in the Forex market, the broker earns only a so-called spread, which is the difference between purchase price and sale price of currency. Do not confuse the Forex market with an equity market. An equity market is where each transaction commission fee is kept from you. An overwhelming majority of brokers in the forex market earns only a spread. Therefore, if the bank or dealing center at which any additional commission is provided, it will get to you and safely pass to search other variants. It is very important to remember that any commission fee will negatively affect a status of your bill. Additionally, do not forget that everywhere there is a commission for carrying a position in a day. This is known as a swap. However, a swap can be not only negative, but also positive. The status of your deposit depends on the commission fee.

Customer Service

Forex trading hours vary depending on what currencies you are most interested in trading. With that in mind, it is important to find a broker with 24 hour customer service. The forex markets can be wild at times. If you had a question about order execution or a closed order, you should be able to get your question answered no matter what time it is.

A good test of a forex brokers customer service ability is to contact the support desk and ask some questions by phone. Keep notes on how responsive they are to your questions and what attitude they have about answering them. Remember, you are trusting these people with your money. You need to feel absolutely comfortable that all your needs will be addressed.

online Education / Learning

If you are not a very experienced trader, then the online education material will be very important to you. Most of brokers provide the simple online learning function, but only some of them do provide very detailed and useful material for users. There are also a few brokers provide personal coach and video training to their registered customers on their website.

Trading platform

A professional and easy to use trading platform is a must. You would not want to be struggling with the features of the trading platform while trying to make a trade. Any reputable forex broker will offer the ability to trade on a demo account. The demo software operates the same way as the live trading platform. This will give you a chance to fully test out the trading platform without the pressure of using real money.

Products

Find a broker that offers the currency pairs that you are most interested in trading, or at least a good variety to choose from. Currency pairs tend to have different breathing patterns and you want to have a good menu of selections. Most of brokers are also provide some other products, such as energy, commodity.

Reputation

Always check the reputation of a forex broker. One way is to do a google search with the name of the broker plus the word complaints. Check around and get opinions from traders on forex message boards. Spend a fair amount of time doing your research. This is an important relationship. You will want to be absolutely comfortable with the broker that you decide on.

The important thing to remember is that you will have to do some homework here. It is imperative that you are not lazy about it. Dont be sucked in by a glossy sales page with extraordinary claims. Investigate! Use a demo account. Take some time to shop around. In the end, you will be happy that you did.

Regulation

The forex market is an unregulated market meaning there is no central exchange. However, forex brokers themselves are regulated. In the US they should be registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission(CTFC) and a member of the National Futures Association(NFA). You can verify a brokers status with the NFA on the NFA web site. If you do not find the broker you are interested in listed with the NFA, look for another broker that is listed and has a clean record.

Leverage

Leverage is necessary in forex because the price deviations (the sources of profit) are merely fractions of a cent. Leverage expressed as a ratio between total capital available to actual capital, is the amount of money a broker will lend you for trading. For example, a ratio of 100:1 means your broker would lend you $100 for every $1 of actual capital. Many brokerages offer as much as 250:1. Remember, lower leverage means lower risk of a margin call, but also lower bang for your buck (and vice-versa). Note: Your broker offers high leverage if you have limited capital. If capital is not a problem, then work with any broker with a wide variety of leverage options. A variety of options lets you vary the amount of risk. The optimum quantity of the enclosed means the beginning trader has between $2,000 and $10000.

Account types

Many brokers offer two or more types of accounts. The smallest account is known as a mini account and requires you to trade with a minimum of, say, $250, offering a high amount of leverage (which you need in order to make money with so little starting capital). The standard account lets you trade at a variety of different leverages, but it requires a minimum initial capital of $2000. Finally, premium accounts, which often require significant amounts of capital, let you use different amounts of leverage and often offer additional tools and services.

Note: Make sure the broker you choose has the right leverage, tools, and services relative to your sum of capital.

Spread

A spread is the basic earnings of the broker. There are two versions of brokers: one with the fixed spread and the other one with the floating spread. The fixed spread is characterized by a constant difference between a forex rate of purchase and sale without dependence on a market situation. Many dealing centers limit themselves by practicing a rule of the floating spread. This rule states that the steady spread is saved in the quiet market. However, practically every day there is some moments of sharp fluctuation of the prices in which a spreads enlargement on 50 (!) pips not only creates inconveniences, but it can appear rather pernicious for the deposit. Nonetheless, the floating spread has advantages. For example, in the quiet market the floating spread can decrease by one or two pips. Whereas the fixed spread remains the same in any situation.

Low spreads are the difference between the price at which a currency can be purchased and the price at which it can be sold at any given point in time. This difference is how forex brokers make money because they do not charge a commission. In comparing brokers, you will find that the difference in spreads in forex is as great as the difference in commissions in the stock arena. Note: Lower spreads save you money!

Article Source: www.findyourfx.com

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