Choosing A Foreign Exchange Broker
The first step for a foreign exchange trader is to find a forex broker they can build a relationship with. Your broker is a vital part of your trading activities and will become like a partner. In view of this relationship, it is imperative that you find someone you can trust and who will meet your personal trading needs. There are several factors you have to consider prior to choosing a forex broker.
Regulated Foreign Exchange Brokers
Foreign exchange trading is mostly an unregulated market, but in most countries there is a governing body that supervises and regulates this market. If your forex broker is unregulated, they will be able to do as they please and you could lose all your money. Your best option should be to choose a broker who is registered with the Australian Securities and Investments Commission. If you wish, you could opt for a broker outside your area, however you will be better placed if you choose someone within your country. This makes for ease of placing telephone trades and your broker will run updates during the times when the trading session for your country is open.
Leverage increases the amount that you can trade with, without the need for an actual deposit for that amount. It gives you the opportunity to take advantage of high leverage to maximise your profits without having the funds in your account. You must keep in mind that in the same way as you can maximise your profits, you could also maximise your losses by the use of leverage. It is important that you use leverage with care.
Spread is the difference between the asking and the bidding price of a currency pair. If the forex broker offers high spreads, you should move on and find someone else. This is how the broker makes money and finding a broker with low spreads will put more money into your pocket.
Look for a broker who offers different account types. This will indicate that the broker caters to the different needs of different traders. It is easier to trade if you have more freedom.
Ensure that the broker offers a demo account before you sign up. Trading with this type of account is imperative before you start trading with a real account. A demo account gives you the chance to trade in real conditions with virtual money. This makes this account risk free. It is an ideal opportunity to test your strategies and become familiar with the trading platform on offer. You can iron out your weaknesses and build on your strengths with a demo account.
Speed of Execution
The foreign exchange market is an extremely fast-paced environment. You need to have a broker who is able to carry out trades quickly and efficiently. If they do not offer this facility, you could lose money due to the delay in trading.
You should test the trading platform via a demo account before you choose a broker. A suitable platform should offer you access to fundamental and technical analysis, automated trading, graphs, charts and should be secure with enhanced security levels.
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