Which Forex Broker Should I Choose?

A good forex broker should be honest, provide lower spread, fast execution, reliable system, and good customer services.

You might ask if I register for a trading account with one of the Forex brokers/dealers, how safe are my funds deposited with them?


This is important - only open a trading account with a financially secured and trusted Forex Broker.

The Forex broker must be registered with the Commodity Futures Trading Commission (CFTC) as a Futures Commission Merchant (FCM) and is a member of the National Futures Association (NFA).

You need to conduct some extensive research to find a broker that can be trusted to manage your trading funds.

Forex is an industry where your brokerage relationship is critical to your trading success.



Some of the questions you will want answered:
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As you start your search for the best fit Forex broker for you, and note that on each forex broker's website they present you with a thorough understanding of what you are embarking upon and risk associated with Forex trading.

I have compiled a list of questions you should search out allbeit not fully complete but as a guideline to more indepth information.

Using a search engine like Google, Yahoo Ask,com etc. will afford you the opportunity to become fully enlightened and prepared to start your Forex journey.

So let's begin.


Is there any risk?

Yes. Trading in any market or investments there is risk and that risk means you could very well lose your entire account if you don't educate yourself first.

This is why there are disclaimers informing you that trading is risky and you should never ever trade with money you cannot afford to lose such rent or mortgage payment money or money you would pay your bills with.

You must have set aside something that is called risk capital. That way you only stand to lose capital earmarked as such that will not have a major impact on your life if you should lose it.



How much money does it take to open a real money trading account?

If you're a new student of forex, you should first practice with a free practice account, often called "demo trading," using "pretend" money.

Mormally you may start out with a micro account $500 and up, a mini account $2500-$5000.00 and up, and standard account $10,000 and up.

Here's why - for begining Forex traders you want to first start off trading what is called a demo account.

A Demo account is a free pratice trading account that you use just to get the look and feel of the real account.

You use it to learn how to familiarize yourself with all the platform's features, dealing windows, chart type, look and feel and yes put on some practice trades and never have to worry about losing your risk capital.

Practice, practice, practice is what you use a demo account for. Hone your skills so that when you have become good at the charting platforms operation, and you have every question you need answered and you have confidence in your own trading ability after aquiring those skills to trade, then and only then you open a Live trading account to start trading.


What is margin?

The amount of money or collateral deposited by you to your broker.

What's margin call?

A margin call is a request from your forex broker to you to restore the margin deposits (Add money to your account)to initial levels. If the forex trader fails to do so, your account holdings may be liquidated.



Can I try first for FREE?

Yes and I covered this topic earlier and explained why. Please see: (How much money does it take to open a real money trading account?)


Do you offer automated trading?

Finding out whether your perspective Forex broker offers automated trading is important on the front end because let's say for example you choose a Metatrader platform which is pretty popular and widely used to trade Forex with then you know going in you have that important feature available to you.

With the advent of trading robots or scripts designed specifically to run on the Metatrader charting platform you may find having the automated feature a real plus later on.

Will customer service, execution, pricing remain the same?

You can find this information out by visiting the site of the broker you are researching and even contacting them for further information.


How can I lower my transaction costs?

And here again the broker's website will answer this question in detail.


What is my current commission's rate by using you? Does it differ from the commission rate I would receive by trading directly at a clearing firm?


Commissions rates are very competitive and you will want to pay close attention to bid ask spreads or rates.


How much will I receive for a rebate each month?

Another competitve issue is rebates or having your broker pay you based on the amount of trades you put on in let say a given month, they will pay you back a certain amount.
Sweet.


What's the difference between a demo and live trading account?

Well a Demo account is for practice trading and a real account is for Live (Your risk capital at stake) trading.



What is a Stop Loss order?

A Stop Loss order is exactly what it says - It is an order you can setup when you place your trade that will limit your losses if you get the direction of your trade wrong it will - Stop your Losses.


Do you have offices in other countries?

Having a global presence I feel is key when selecting a Forex broker.

Let's say for example you are a US citizen, you will want to have a Forex broker that is operating within the USA and that are subject to the laws and regulations within the US so that if something shady happens you will have some recourse and law enforcements or even legal cause to get your money back. Those firms that have a Global presence is an important key.


Do you have guaranteed fills?

This subject varies and is better suited to ask the broker you are researching this question for more details.



What leverage do you provide?

Leverage is also an important topic you should ask beacuse they come in all sorts of flavors if you will.
1:1, 100:1, 200:1 and even 400:1. The broker would better serve you answering this because of the various nature.
I would only say that 1:1 or 100:1 might be best. Again research this.


What is the maximum amount I can trade online?

This depends if you are a Professional Market Making banking institution or a Private trader. Ask the borker for more information on this one.



Does the platform allow hedging?

Currency trading and investing in FOREX involve significant risk and may not be suitable for everyone. Spreads listed are ‘Targeted Spreads’.

During volatile market conditions and around important news announcements, spreads may increase for some or all pairs. Spreads may also increase overnight with low liquidity.

The Hedging rules have changed a bit especially for some dealers and you will want to educate yourself about this one further by asking your perspective broker to explain their Hedging rules to you.



When does forex trading occur?


Forex is a true global 24-hour marketplace. The trading day begins in Sydney, and moves around the globe as each financial center comes to life. Tokyo follows, then London, and finally New York. Investors can respond in real time to any fluctuations caused by current economic, social and political events

This essentially is a round the clock 24hr market.


How do I place my order?

Most brokers have video tutorials or a reference section that they post on their sites that explains in detail how to use their platform and place or execute trades.



Do I need a special computer to trade FOREX?

As long as you have a computer that runs either Windows or Mac and is compatible with the platform software then you are good to go.


Are there any monthly or annual account fees?

I 'am not aware of any broker that requires a monthly or yearly fee but it would be worth it to you to ask.


Where can I find additional help?

The internet and web is a vast knowledge bank and if you have the time you could research very well to gather information and a list of potential Brokers that fits your style and temperment. Just remember if it sounds to good to be true it probably is.

And make certain you deal with a reputable Broker that has a world wide presence and handles a trememdous amount of capital. Having a Broker with a US based operation is also an important key if you are a US citizen. Every country has there own laws to protect their citizens.

Well alright we have covered a great deal of ground in this article and in the next edition we will zoom in a little further and take a look at what you should know about technical analysis.

Happy trading to you until next time,

(c) Manny Mullins