To begin trading in foreign currencies, you must choose a currency trading broker. There are several things to consider to make sure you get the right broker for your specific needs. Some charge a commission while others make their money on the spread between the bid and asking price. The commissions and spreads that brokers charge can be quite different. Make sure you compare several brokers costs and determine what you get for the fees.
To compare the costs that different brokers charge there are some things that you need to be familiar with. As mentioned earlier many brokers make their money on the spread between the bid and ask price. The bid is what they will pay you for currency you own, the asking price is what they will charge you to buy the currency. The difference between the bid and ask price is expressed in pips. Pips stands for price interest point. For example, EUR/USD price may be 1.3200/1.3202. The cost to the trader for purchasing the contract is 2 pips. On a unit of 100,000 this would be a cost of $20.00. Look for a broker who has a smaller spread as this will add to your profits.
One of the best ways to find a currency trading broker is to get a recommendation from a friend or someone you trust, who has used the broker and been satisfied. Be careful of low trading cost advertising. This may be only for a short time and then the rates will go up. Also it is important that your broker can service your account quickly and accurately. You need to have complete trust in the broker you trade with.
Make sure your currency trading broker is regulated by a reputable agency. Make sure they have not had any problems with the agency. There are so many brokers out there, you need to do your homework before opening an account so that you don’t find out later you are being scammed. With a little effort you can find a broker that will be best for you.
Look for a broker that wants you to make money. If they care about your success then you can both make money. Be sure that you are not involved with a broker that is trading against you. You want to chose one that simply matches up trades from buyers and sellers and is not biased to one side or the other.
In addition to getting recommendations about brokers, you can use the online service ‘best online forex brokers’ to help you select the one you will use. To make the list a broker must be listed in the top 25 by popularity ratings. The firms on the list are also regulated by at least one government agency and have a clean record.
Market-makers are one type of currency trading broker. They will take the opposite position that you take. This obviously will put you at a disadvantage. It is best to choose a broker in the ECN.(Electronic Communication Network). These are the brokers that simply match trades from buyers and sellers.
In conclusion, selecting a currency trading broker can have a major impact on your trading results. Spending the time to research the marketplace will be time well spent.