Choosing/Selecting a Broker - How to Choose and Select a Good Broker

All traders use a broker to handle their transactions. Trader makes a decision on which transaction to make, then places an order with a broker who then executes the trade order for them and earns money by charging a commission or a fee referred to as "the spread" for their services.

Currency brokers are associated with large financial institutions like banks so as to provide the funds and liquidity necessary for margin trading. The banks are referred to as liquidity providers. The banks are also the ones that provide the inter bank exchange rate to the brokers. Currency exchange is traded through a network of banks known as the "inter bank network". Brokers gain access to this inter bank network through banks, and then provide this access to retail currency traders.

A good broker should be signed up with a well known regulatory authority such as CFTC, NFA, CYSEC, FCA, ASIC & FSP, these regulatory authorities serve as a protective measure against fraud and abusive trade practices.

Before you begin you need to set up an account. You may feel overwhelmed by the number of corporations that offer these services online.

Deciding on a good broker requires a bit of research on your part, but the time spent researching will give you insight into the services provided and fees charged.

The best recommendation is word of mouth advice, & this is just as valid in forex as it's for any other type of business.

You also want to find a broker who executes orders quickly with minimum slippage & should offer automatic/instant execution & have clear policies in regard to slippage.

Next you want to find out the fees involved i.e. Spread. If spread charged is fixed or variable. Are there other charges like commissions per lot transacted?

The industry standard for EURUSD which is the most popular/liked currency is about 2 pips.

Margin trading is what FOREX is about, so be sure you understand the margin trading terms requirements before setting up an account. You need to know the margin requirements and how the margin is calculated.

Does the margin change in accordance to the currency traded? Is it the same every day of the week or does it vary? Some brokers may also offer different margin requirements for mini and standard accounts. Some may also change their margin requirements during the weekend. Do not select those which change their margin requirements during the weekends as this may mean your open trade positions are more likely to be close out during the weekend because of the changing trading margin requirement over the weekend. Always select the one that has fixed margin requirement at all times.

The software is also very crucial to a forex trader. You can get a feel of the trading platform options that are available by trying out demos from a couple of corporations online. Above all, you're searching for reliability & the ability to execute transactions on fast moving markets.

To make sure that you get fast execution from your broker make sure that you trade with the big Forex companies that have enough liquidity required to execute orders quickly. The big companies have multiple liquidity providers and these multiple liquidity providers are meant to ensure that the company which you choose can execute as many trade transactions as possible at any one given time in a very fast and efficient manner, that way your orders don't get re-quoted.

Factors to Consider When Comparing

Before comparing brokers we recommend that you do not open a account with a US based company, regulation by the CFTC & NFA imposes excessive and over-bearing regulations that have been imposed on America based companies. These include reduced leverage levels, no hedging rule and the FIFO (first in first out) rule that affects the way you trade. The FIFO rule specifies the first position you open must be the first one you close, and keeping track of your orders especially if you open many of them may be difficult for you.

The following are the aspects you should consider:

Regulation

Regulation is a crucial and important factor to take into consideration when comparing, regulation is carried out by financial regulation authorities like FSA, NFA, CySEC and others. You should always open an choose a company that's regulated.

Deposit and Withdrawal

When it comes to depositing and withdrawing money from your account, you should consider the following:

What is the minimum deposit required?

How much time does it take to withdraw money?

Is there any deposit or withdraw fee?

It's also important that you as a trader find out what payment method or money transfer methods are available for use with for example Wire Transfer, Credit Card, Debit Card, Pay Pal & others that are suitable for you.

Minimum Deposit Requirements

How much money do you as a trader need to deposit so that to open a trading account? - The minimum for most is $100 dollars but for some its less. This is crucial to take into consideration when comparing 2 or more.

Software Platform

The platform provided can be used for comparison and one-can select the best type of platform. Most popular software is the MT4.

MT4 is the best platform with powerful technical tools and charts that's why most if not all brokers offer the MT4. If you are a newbie select one that offers you MetaTrader 4 that way if you decide to move to another one you'll still find the MetaTrader 4 platform software that way you don't have to re-learn a new software every time you decide to try a new broker.

Charting is very important & you need a powerful currency charting software with good charts and indicators so that to make the right decisions. The best choice is a one that offers good quality charting software like the MT4.

Order Execution

Consider if execution, is instantaneous, is it that of an STP. Best model is STP model, with high liquidity to guarantee order execution.

Leverage and margin in Forex Trading

Should give you the option/choice to choose leverage 1:50, 1:100 1:200 or 1:500 for the risk takers with an appetite for risk. However, anything above 1:200 is too high 1:100 is the optimum ideal leverage.

Account Types

Should offer micro, mini and standard accounts for a forex trader to choose the one which they want.

Customer Support

Should provide customer and technical support during the market hours, either via E-Mail, phone or online chat.

Before choosing a company to open an account with you might want to check the customer support and professionalism an compare and analyze this between different one.

Factors to Consider for Comparison

The fact is that genuine and regulated firms come with a guarantee of at-least being genuine.

The company you choose should be suitable for all types of traders whether it's scalping, day, swing or position trading. Most will not accept scalping: these are not recommended even for non-scalpers. Those that don't allow scalping might be because they do not have enough financial liquidity to guarantee order execution of your orders. This is bad even for others traders because your orders might not be filled at the correct point and you might get re-quotes.

A good online broker will be suitable for traders of all levels of expertise. Beginner Traders should find the conditions to be quite flexible and the platform easy to use, while professional investors should benefit from high liquidity & instant execution of orders.

The factors and aspects below should be used when comparing, visit their web site look at the information provided and use your thinking to make a choice if they're is best for you.

MT4 software
Up to 1:200 leverage
Deposit and Withdraw through Liberty Reserve, WebMoney, Money Bookers, PayPal, bank wire, credit card, debit card and other payment options
Minimum deposit $100 dollars
Bonuses on deposits
In addition to currencies, other financial trading instruments such oil, gold and silver and stock indices
Instant execution of orders, no requotes
STP
Professional customer support
Well regulated by a financial authority

Recommended online broker is one that will ensure you trade better by offering you the best tools & support for currency analysis.

Forex means the exchanging of one currency for another in the currency exchange market. With an average daily turnover of US $7.2 trillion, the currency market is the largest market in the world. With main objective to earn substantial profits, new investors are jumping in to the market everyday.

Investors, who take time to know the basic knowledge and info, definitely earn high returns on their investment than those who do not.

However there are times, when investors fail to do anything right in the market because of lack of enough information & awareness regarding forex trading. Thus, it's recommended to choose and select one before investing in the market. A good broker can improve an traders result by providing the best execution of transactions, there are many companies out there that one can choose from but not all are good. The one thing to look out for is to choose one that is regulated.

While choosing, ensure that they are the best for you. It isn't a tiresome task to find a company having a long list of customers. But it's not enough for you. You as a trader should look for a one that is regulated. Also look at their terms and conditions this will help you know about their workings.

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