If you want to trade in the forex market, you need to find a broker who can work for you. A broker is someone who executes trades according to what you want; he or she earns a commission on each trade.
However, there are a lot of brokers, so they're competing for your business and it can be hard to figure out which is best for you. Following are some tips to help you find the right one.
Focus on the following:
Transaction costs.
Brokers are paid by the bid/ask spread in forex trading. You should have no hidden fees or charges. However, you might incur additional charges if you want to access certain reports or optional services.
The smaller spread, the better. Pip spreads vary by broker and may also vary by currency pairs, so do some homework and find the best competitive rates.
Currency pairs available.
Every broker you look at should at least have the following seven currencies in play: USD, JPY, GPB, EUR, CHF, CAD, and AUD. If you plan to trade New Zealand dollars or Danish krones, as well as other less popular currencies, your broker should be able to do so.
Immediate orders' execution.
Because currency prices are constantly fluctuating, any delay in executing orders could cut profits or add to your losses. Of course, a delay may also help you, but for the best control, you should look for a broker that consistently executes your trades at the price you see on your screen. Although an occasional delay is probably unavoidable, if it happens frequently, you should avoid that broker or find yourself a new one.
Free tools available.
To best analyze currency prices, plan entry and exit points, and spot trends, you need to be able to access charts and technical analysis tools. Most brokers offer basic services free of charge and offer an expanded choice of tools for an additional fee.
Minimum account balance.
If you are a small investor, you'll need a broker that won't require a large balance to open an account. Most brokers today will let you open a small account with as little as $300.
Margin requirement.
The lower your margin requirement, the more leverage you have. If a broker allows you to use 100:1 leverage, this means that can trade $100,000 in currency for just $1000. You can use the margin to rack up big profits. However, don't use this tool to excess, or you could find yourself in debt very quickly.
Excellent customer service.
Traders often don't think to look for this when they choose a broker. Later on, they regret it when they need help. If a broker's services are high quality, he or she should respond quickly to any questions you may have. You should have knowledgeable representatives available 24 hours a day by phone or e-mail.
Trading platform is user-friendly.
Some brokers require that you download a trading program to your computer in order to make trades. Others let you make trades directly over the Internet. Try out a few brokers you think you like by signing up for a free demonstration account. You can trade with play money while you test out their software; in this way, you'll see which one works best for you before you risk any of your hard-earned cash on something that might not be best for you.
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