The Best Forex Broker

Once the decision is made to start trading foreign exchange, the next step is to select a broker. So what does a broker do? Basically, a forex broker buys and sells orders on the traders behalf. Although many tout themselves as offering “commission free trades,” brokers earn money by charging a commission or a fee for their services – it’s just called “the spread,” in foreign exchange trading.

Choosing the best foreign exchange broker for your needs will mean some research on your part, but its is worth taking a little time choosing - you really need to decide a, whether the broker you choose is honest, b, the fees you will be charged and c, which broker is likely to suit your trading style and philosophy. Are you a smash and grab merchant or in for the long haul?

The Forex market is an “unregulated” market, which is unlikely to change in the near future. But there are agencies where brokers can register themselves and certain government bodies in the USA are making an effort to educate the public about foreign exchange trading. In the United States a broker can register as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) and join the NFA. The CFTC and NFA were created in order to protect the public against fraud, scams and abusive trade practices.

• The broker is not your friend – he’s not necessarily your enemy, but it makes no difference to him how much money you make or lose, only how many trades you make and extended positions you keep open. Win, lose or draw, the broker gets paid.
• Do they have 24 hour customer support? The FX market is a 24 hours a day market – your broker needs to be too.
• How good is their customer service? Try them out before deciding, but bear in mind, their sales service may well be better than their after sales service. If possible, get a personal recommendation. By personal, I mean from someone you know personally - not the nice gentleman who posts the YouTube videos that demonstrate how easy it is to make a fortune forex trading.
• How comfortable are you with their trading platform? Many brokers offer a demo account facility that will allow you to test their platform. This is a crucial point – you must feel that you fully understand their operating software and are comfortable using it. Bear in mind using a demo account with no money in is not the same as trading for real. Which trading platform you prefer will depend on a number of factors.
• What level of commission do they charge? i.e how much is their spread?

These are minimum requirements for choosing an online broker. Any online foreign exchange broker must be able to offer the following basic services:

• Real-time currency exchange rate quotes
• An account summary showing your current account balance with realized and unrealized profit and loss, margin available, and any margin locked in open positions
• Charting and technical analysis available to active traders
• Instant execution of orders
• 24 hour trading and customer service

Of course, as you begin researching, you will discover that almost all online brokers offer these basic services, so it is probably more useful to list things that should be avoided. One indicator of a reputable broker, is that they have a high minimum deposit requirement. This is not to keep poor people from trading. You cannot make money with a small deposit - they are doing you a favor and accepting "mini or micro" accounts will give them a bad reputation.

Forex brokers who make claims such as:

• Your money is safe
• Guaranteed returns
• Returns of 30 - 50 %

Brokers encouraging "mini accounts," i.e. an account opened with a few hundred dollars. If you only have a few hundred dollars to invest, buy some WalMart shares. if you want to risk it, play blackjack instead - at least you'll get a free drink.

Brokers encouraging you to use high leverages of 100:1 or more.

Brokers who use a lot of "industry jargon," to convince you to open an account with them. Just remember - the broker gets paid regardless of your succeess or failure.

This brokerage - babypips.com has some advice, and I quote, taken from their, "What to look for in an online Forex broker/dealer section, which is here.

What to look for in an online Forex broker/dealer:

"1. Low Spreads.

In Forex trading the ‘spread’ is the difference between the buy and sell price of any given currency pair. Lower spreads save you money.

2. Low minimum account openings.

For those that are new to Forex trading and for those that don’t have millions of dollars in risk capital to trade, being able to open a micro trading account with only $250 (we recommend at least $1,000) is a great feature for new traders.

3. Instant automatic execution of your orders.

This is very important when choosing a Forex broker. Don’t settle with a firm that re-quotes you when you click on a price or a firm that allows for price ‘slippage’. This is very important when trading for small profits. You want what we call a WYSIWYG (pronounced wiz-ee-wig) broker! This means you want instant execution of your orders and the price you see and "click" is the price that you should get...WYSIWYG = What You See Is What You Get!

4. Free charting and technical analysis

Choose a broker that gives you access to the best charting and technical analysis available to active traders. Look for a broker that provides free professional charting services and allows traders to trade directly on the charts.

5. Leverage

Leverage can either make you super rich or super broke. Most likely, it will be the latter. As an inexperienced trader, you don't want too much leverage. A good rule of thumb is to not use more than 100:1 leverage for Standard (100k) accounts and 200:1 for Mini (10k) accounts."

This is lifted from their "school." It looks good, in fact the entire website looks good and they are nearly saying all the right things, but if you look closely at the text, they make two deliberately misleading statements, which I have highlighted in Bold.

Every thing sounds good, looks good and is well marketed on the internet. Look for forex training and you will more than likely find these guys. BUT - You cannot make money investing in a mini account and the second statement is all true, except for one part - 200:1 is an extremely high leverage. I guarantee you will lose money doing this, or your money back.

They are implying that you, the common man, are just as entitled to trade FX as the banks and that you shouldn't let the fact that you only have a $1,000 to play with stop you. Damn right you should. You wouldn't find the big financial institutions using a 200:1 leverage and on the odd occasion they do, this is what can happen.

Small amounts of money invested in foreign exchange trading must be highly leveraged in order to take advantage of small shifts in currency pairs. A slight move against your position and the money is lost. Avoid brokers who recommend this.