Choosing A Forex Broker

With currency trading becoming ever more popular, the number of brokers is growing at a rapid rate. What should one look at when deciding which broker to open an account with? These are the important points to consider.

Spread

Because currencies, unlike futures and stocks, are not traded through a central exchange, the spread can be different depending on the broker you use, so it's well worth checking a few out before you open an account. Most forex brokers publish live or delayed prices on their websites so you can compare spreads, but check if the spread is fixed or variable. A fixed spread means exactly that - it will always be the same no matter what time of day or night it is. Some brokers use a variable spread, which might appear to be nice and small when the market is quiet, but when things get busy they can widen the spread which means the market must move more in your favor before you start to make a profit. Fixed spreads are generally slightly wider than the variable spreads are when at their narrowest, but over the long term fixed can be safer.

Execution

Some brokers will show live prices on their trading platform, but will they honor them when it comes to pushing the Buy or Sell button? The best way to find out is to open a demo account and give them a test drive. This will also give you the opportunity to see what the speed of execution is like - when you want to buy, you want to buy now, not sit around waiting for ten minutes whilst your order is confirmed!

Trading Platform

Good trading software will show live prices that you can actually trade at, not just indicative quotes. It will offer Limit and Stop orders, and ideally will let you attach these to your entry order. One-Cancels-Other orders are another useful feature - they mean you can set up your trade and then leave the software to get on with it. And the most important feature of all - can you actually understand the platform? Having all the bells and whistles is of no use if you can't use them, so again, get a demo account and give it a go.

Support

Forex is a 24 hour market, so your broker should offer 24 hour support. You might not be trading at 3am, but that could be what time it is in your brokers head office on the other side of the planet, so make sure there will be somebody there to pick up the phone if things go wrong. You should also check if you can close positions over the phone - essential in case your PC or internet connection crash at a critical moment.

Backing

Finally, before opening an account do a little homework and find out about the company. Forex brokers are regulated, but that doesn't mean they all have equal backing. If the market collapses, you want to know that they've got the reserves to cope with it and will still be around when you decide to withdraw your cash. If a broker is elusive when it comes to questions about their parentage and financial backing, then steer clear.

In Conclusion

Choosing a forex broker isn't difficult, but don't rush the decision. Check out a few, and always get a demo account first to make sure you're happy with the way everything works before sending off your opening balance.

About The Author

Geoff Turnbull is a full time day trader, and a contributor to http://www.forexheaven.com

---

Factors Influencing a Currency Pair Exchange Rate

IntroductionThe exchange rate refers to the value of the US... Read More

Forex Brokers - Helping to Maximize Your Success

A Forex broker is a broker dealing in foreign exchange,... Read More

What are Your Options Regarding Forex Options Brokers?

Forex option brokers can generally be divided into two separate... Read More

Creativity in Trading

"Is it important to be creative in your trading?"I'm not... Read More

How to Trade Currency

We all know when you go on a trip to... Read More

Reality of Online Forex Trading

Foreign exchange trading is the trading of currencies. Most currencies... Read More

The Yin and the Yang of Markets

I am reading a fantastic book on trading, first published... Read More

The Secret of Reduced Margin Spreads

One of the best kept secrets in trading is that... Read More

Choosing A Forex Broker

With currency trading becoming ever more popular, the number of... Read More

Day Trading Success- The Key Is Survival

Most new traders tend to focus just about all their... Read More

Trade Exit - How To Cut Losses And Let Profits Run

Cut your losses short and let your profits run. This... Read More

Why Forex Traders Plan To Fail Before They Even Place Their First Trade & How You Can Know It & ...

Have you heard the wise saying that a trader who... Read More

Momentum Trading: A Practical Day Trading Strategy to Get Profits from Hot Stocks

Momentum day trading can be extremely profitable when done correctly...Day... Read More

The Basics of Forex

Foreign exchange market is also known as Forex or FX... Read More

How To Handle A String Of Losses

Everybody hates to lose and unfortunately no one is blessed... Read More

Forex Profits

The Forex Market-What, When and Why?Forex, FX and the Forex... Read More

A Look at Online Forex Brokers

An online forex broker is a firm that facilitates retail... Read More

The Major Players in the Foreign Currency Exchange Market - FOREX

Since the US dollar is the centerpiece of the market,... Read More

Be a Smarter FOREX Currency Trader: Three Basic Principles

Below I will describe three basic principles that may come... Read More

Advantages of Trading FOREX Over Stocks and Commodities

There are many advantages to Trading FOREX as your main... Read More

The Seven Most Traded Currencies in FOREX.

Currencies are traded in dollar amounts called "lots". One lot... Read More

The Nature of the Trading Business

Consider the following: As a trader you are in a... Read More

Risk and Stock Trading Fees: The Two Barriers To Overcome If You Want A Successful Trading Career.

You know the old joke:"How do you make a million... Read More

Day Trading the Index Futures - How to Judge Good Entries

QUESTION: If the SP futures fall through support and go... Read More

Financial Crises, Global Capital Flows and the International Financial Architecture

The recent upheavals in the world financial markets were quelled... Read More

Facts of Day Trading

Are you thinking of entering the fast-paced world of day... Read More

Sending Signals for Trading in Forex

Forex signals are sent by a forex firm to their... Read More

Why Demo Account Performance Is Often Better Than Real Account Performance

Over the past several years, the popularity of online currency... Read More

Ways to Acquire Discipline in Trading

One way to acquire discipline in trading..."Hey Joe! When you... Read More

Getting a Forex Trading Education

Many Americans are interested in getting involved in forex trading.... Read More

Forex Broker Involvement Optional

To trade on the forex market, the largest financial market... Read More

The Meaning of FOREX Price Charts and How to Use Them

There is one very important factor that you should consider... Read More

How Do Other Countries Devalue Their Currencies?

Countries devalue their currencies only when they have no other... Read More