Finding An Online Forex Broker
By Ultimate Trading
There Are A Few Important Points You Must Know About Online Forex Broker Before Committing
Its not always easy to know what to look for in an online forex
broker in any market, much less a market as complex as the forex.
But, if you want to trade in forex you need an
forex broker. While it might be tempting to simply ask the
brokers what they can do for you, you cant always depend on them to
give you a straight answer. So instead, Ive put together a few
things to consider when choosing your online forex broker.
You will want an online forex broker that has low spreads. The
spread, which is calculated in pips, is the difference between the
price at which a currency can be bought and the price at which it
can be sold at any specific point in time. Since online forex broker
don't charge a commission, this difference is how they make money.
Low spreads will save you money.
Along with this, you should be looking for an online forex broker
attached to a reputable institution. Unlike equity brokers, forex
brokers are usually attached to large banks or lending institutions.
The online forex broker should also be registered with the Futures
Commission Merchant (FCM) as well as regulated by the Commodity
Futures Trading Commission (CFTC).
Once youve narrowed your choices down to brokers that wont cost
you too much, and that are reputable, consider the trading tools
that they are offering you. Online forex broker have many different
trading platforms for their clients, just like brokers in other
markets. These often show real-time charts, technical analysis
tools, real-time news and data, and may even offer support for the
various trading systems.
Before you commit to any one online forex broker, request free
trials of their tools. Brokers generally provide technical as well
as fundamental commentaries, economic calendars, and other research
to help you make good trades. Shop around until you find an online
forex broker who will give you everything that you need to succeed.
The next item that you will need to evaluate carefully is the number
of leverage options your potential online forex broker has. Leverage
is a necessity in forex trading because the price deviations in the
currencies are set at fractions of a cent. Leverage is expressed as
a ratio between the total capital that is available to be traded and
your actual capital. For example, when you have a ratio of 100:1,
your online forex broker will lend you $100 for every $1 of actual
capital you have. Many brokerage firms will offer you as much as
250:1. If you have low levels of capital you will need a brokerage
with high levels of leverage to make reasonable profits.
If capital is not a problem, any
forex broker that has a wide variety of leverage options would
be a good choice for you. A variety of options will let you vary the
amount of risk you choose to take. For example, less leverage (and
therefore less risk) may be preferable if you are dealing with
highly volatile (exotic) currency pairs.
Along with different levels of leverage, look for brokers that offer
different types of accounts. Many online forex brokers will offer
you two or more types. The smallest account is known as a mini
account and it requires you to trade with a minimum of around $300.
The mini account also generally offers a high amount of leverage.
The standard account allows you to trade at a variety of different
leverages, but it requires minimum initial capital of $2,000. And
finally, there are premium accounts, which often require significant
amounts of capital. They also generally have different levels of
leverage available to the traders who use them, and often offer
additional tools and services. You will need to make sure that the
online forex broker you choose has the right leverage, tools, and
services for the amount of capital that you are able to work with.
An online forex broker that meets all of these needs should be a
good online forex broker for you, but you still need to be certain
that they are honest. Dishonest brokers can be prone to prematurely
buying or selling near preset points (commonly referred to as
sniping and hunting) or may indulge in other habits that will cost
Obviously, no broker admits to doing things like these, but there
are ways to know if they have. The best ways to find out more about
your potential online forex broker is to talk to fellow traders.
There is no actual list or organization that reports dishonest
activity, but a visit to online discussion forums, or a simple
conversation will often reveal who is an honest online forex broker.
You should also watch to see if an online forex broker has strict
margin rules. Since you are trading with borrowed money, your online
forex broker has a say in how much risk you are able to take. You
agree to this when you sign a margin agreement for your account.
This means your online forex broker can buy or sell at his
discretion, to cover the brokerage firms interests, which could have
repercussions for you.
Say you have a margin account, and your position takes a headlong
nosedive before it begins to rebound to all-time highs. Even if you
have enough cash to cover it, some brokers will liquidate your
position on a margin call at that low point. This action on their
part can cost you dearly. You can only find out whether the firm is
prone to this kind of activity by talking to other traders. Being
informed on all aspects of an
forex broker before you make the decision to trade with them
will allow you to start trading the forex market with confidence.
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