Forex trading is more popular than ever. This has resulted in an ever growing list of brokers trying to get you to trade with them. So how do you choose which broker to work with? There are several important factors to consider when selecting a Forex broker.
Nearly all forex brokers present live prices on their trading platform, but how do you know if your trades will get executed at the prices that are presented? Probably the best way to determine this is to open a demonstration account on a several brokers’ websites and try them out for yourself. This will not only allow you to see the broker’s speed of trade execution, but will also give you the opportunity to get a feel for the trading platform. Some sites offer forex alerts and other tools of varying levels of complexity and use to allow you to personalize their site.
As you are likely aware, unlike stock markets, the forex market is not traded through one a central exchange. The spread may differ depending upon which brokerage that you select. It is certainly worth checking out several brokers before you open an account. Many forex brokers publish prices on their websites so you can compare spreads. Some brokers offer live quotes, others offer delayed quotes. Quote speed is important, but equally as important, if not more, is whether the spreads are fixed or variable. A fixed spread is, well, fixed. They are always are the same, regardless as to what time of day it is. However, some brokers use a variable spreads. You might think that these are worthwhile, but these variable spreads can get fairly wide. The market must move a greater distance in your favor before you start to make a profit. Fixed spreads, on the other hand, tend to trade slightly wider than the variable spreads when at their narrowest, but over the long term, fixed spreads can be safer.
High-quality trading software shows forex alerts and real-time prices that can be traded. The trading platform should offer both limit and stop orders. Other useful features to look for include the One-Cancels-Other option. This feature allows you to set your trades up in advance, and have the software handle things for you, automatically. Probably the most important aspect of any trading platform is completely subjective. How does the platform feel to you? Is it intuitive? Does it feel natural and easy to use? Trading platforms aren’t one-size-fits-all. Test drive several of them.
Technical and Trading Support
The foreign exchange is open nearly 24 hours every day. As such, your broker should offer round-the-clock support. You may not be trading in the middle of the night, but it’s nice to know that if you are, your broker is there for you, right when you need them. This is also helpful if you are traveling to distant lands and need access at odd hours. Besides Internet access, it would be ideal to have trading access by phone, in case you don’t have Internet access for some reason when it’s most critical.
Like stockbrokers, forex brokers are regulated. However, they all have varied financial backing. In a market crisis, you want to be confident that your broker is adequately funded, with enough reserves to cope with the difficult times. You also want to be confident that the broker will still be in business when you decide to withdraw your cash. Do as much research as you can. Question several potential brokers. If they are evasive when asked about their financial backing, move on to the next one.
Selecting a forex broker is an important decision. Investigate several. Make sure they offer demo accounts to make sure you like the way their website works before sending opening an account.