Choosing the Right Online Forex Trading Broker - November 7, 2007
Before you start to trade forex, you need to first have an account with an authorized online forex trading broker. The broker can be an individual or company that buys and sells currencies on the trader’s behalf. They charge a commission for their services. Today, there are dozens of brokers who are offering their services online. It can be overwhelming at first but once you know some basics about how to choose the right forex trading broker, you should be ready to start forex trading in no time.
With so many choices of online forex trading broker, there is always a need to do some research. There are several aspects you are encouraged to look at.
1. Services Available
See what services are available at each online forex trading broker. It is quite typical of a broker to offer a trading platform either online or using a windows-based application. Either way, you can trade the major currency pairs like EUR/USD, USD/JPY at all brokers. There are some forex trading platforms that provide the latest updates about economic news, market trends and forecasts.
2. Fees & Other Trading Account Specifics
Compare the fees of different online forex trading brokers. They tend to vary in the fees, Bid/Ask spread, leverage, margin and minimum deposit. Here’s a tip for you. Bid/Ask spread does matter if you are trading on small price movements.
People have differing opinions about the leverage ratio offered. Having a high leverage can also mean that the potential for profits are higher with the same amount of investment. Likewise, the same goes for the potential losses. But at the end of the day, it really boils down to your risk appetite. Some allow you to start with $250 USD while others require at least a $100,000 forex trading account. We will look at this in greater detail in the next post.
3. User-Friendly Forex Trading Interface
When you first take a look at the forex trading platform’s interface, you could be shocked and overwhelmed by all the figures, charts and movements.
Personally, I have seen and used quite a decent number of forex trading platforms. When trading forex, the last thing you want to worry about is figuring out the confusing charts and price movements of various currency pairs. When planning your buy/sell orders, you need to be able to see the past price movements clearly as well as read the charts easily. I would not mention names here but some interfaces are really a turn-off. Either they are too cluttered and suitable only to the eyes of a robot and a very experienced forex trader.
Easy Forex has a pretty impressive forex trading interface that is user-friendly. It is quite simple to navigate around and make your market and limit orders while having full view of what is happening to the currency pair price movements.
4. Registration and Regulation
The Forex market is an interesting market in that it is an unregulated market. Regulation is reactive in nature. Only in the case of misdeeds will something be done. In US, a broker has to be registered as a Futures Commission Merchant with the Commodity Futures Trading Commission (CFTC) and member for National Futures Association (NFA) before it is considered an authorized broker. These two bodies were set up to protect the investing community from investment fraud, market manipulation and other illegal or unethical trading practices.
You can always verify the membership status of a broker with CFTC and NFA before opening an account with them. Call NFA at (800) 621-3570 or simply go to their broker information section of NFA’s website at http://www.nfa.futures.org/basicnet.
Always seek to find those with clean records with the regulating bodies and strong financials. Non-regulated firms are best left alone! The NFA are making concerted efforts to educate investors about retail forex trading so if you are a retail trader, get a hold of their brochure “Trading in the Retail Off-Exchange Foreign Currency Market”.
5. Customer Service Support
Since the Forex market is active round the clock, you have to make sure that your broker provides round the clock customer service support. The customer support staff handling their customers must be knowledgeable. This is one big difference between different brokers.
What you can do is to contact the customer support of a few brokers and then find out how fast they respond to your queries. At the same time, make sure that their replies are to your standards. After-sales service is always key to choosing a good broker.
Easy Forex does well in these areas we have looked at. This is why many users are using their forex trading platforms and hold accounts there. Did you know that they have an international presence as well?
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