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Choosing A Forex Broker
With currency trading becoming ever more popular, the number
of brokers is growing at a rapid rate. What should one look at
when deciding which broker to open an account with? These are the
important points to consider.
Spread
Because currencies, unlike futures and stocks, are not traded
through a central exchange, the spread can be different depending
on the broker you use, so it's well worth checking a few out
before you open an account. Most forex brokers publish live or
delayed prices on their websites so you can compare spreads, but
check if the spread is fixed or variable. A fixed spread means
exactly that - it will always be the same no matter what time of
day or night it is. Some brokers use a variable spread, which
might appear to be nice and small when the market is quiet, but
when things get busy they can widen the spread which means the
market must move more in your favor before you start to make a
profit. Fixed spreads are generally slightly wider than the
variable spreads are when at their narrowest, but over the long
term fixed can be safer.
Execution
Some brokers will show live prices on their trading platform,
but will they honor them when it comes to pushing the Buy or Sell
button? The best way to find out is to open a demo account and
give them a test drive. This will also give you the opportunity
to see what the speed of execution is like - when you want to
buy, you want to buy now, not sit around waiting for ten minutes
whilst your order is confirmed!
Trading Platform
Good trading software will show live prices that you can
actually trade at, not just indicative quotes. It will offer
Limit and Stop orders, and ideally will let you attach these to
your entry order. One-Cancels-Other orders are another useful
feature - they mean you can set up your trade and then leave the
software to get on with it. And the most important feature of all
- can you actually understand the platform? Having all the bells
and whistles is of no use if you can't use them, so again, get a
demo account and give it a go.
Support
Forex is a 24 hour market, so your broker should offer 24 hour
support. You might not be trading at 3am, but that could be what
time it is in your brokers head office on the other side of the
planet, so make sure there will be somebody there to pick up the
phone if things go wrong. You should also check if you can close
positions over the phone - essential in case your PC or internet
connection crash at a critical moment.
Backing
Finally, before opening an account do a little homework and
find out about the company. Forex brokers are regulated, but that
doesn't mean they all have equal backing. If the market
collapses, you want to know that they've got the reserves to cope
with it and will still be around when you decide to withdraw your
cash. If a broker is elusive when it comes to questions about
their parentage and financial backing, then steer clear.
In Conclusion
Choosing a forex broker isn't difficult, but don't rush the
decision. Check out a few, and always get a demo account first to
make sure you're happy with the way everything works before
sending off your opening balance.
About The Author
Geoff Turnbull is a full time day trader, and a contributor to
http://www.forexheaven.com
 MORE RESOURCES updated Sat. December / 14 / 2024
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