An account with a forex trading broker is something that you must have when you are beginning currency trading. You need access to the markets to be able to trade, and the software provided by the top brokers will allow you to have this access. They will also give you leverage so that you can trade on margins and control much larger sums that you have yourself. Depending on the brokers’ software, you may be able to use a trading robot, like the Forex Megadroid robot on your account.
There are a few very important points to look at when deciding on a broker, let‘s take a look at them:
1. Reliability
Not all brokers are trustworthy, and finding one that is isn‘t that simple. Because the forex markets spans the entire globe, there is no universal regulatory body, so some brokers are unregulated. Find out where a broker is located and what local associations they are members of. American brokers should be registered with the Commodity Futures Trading Commission (CTFC) and/or the National Futures Association (NFA). Other countries have other associations.
Go to online forums and search for the name of a broker, to see if people have had problems with them. It is always best to find several different opinions, as just one person may have reasons to be biased. That person may have personal or financial reasons for praising or criticizing a broker.
2. Services provided
Forex is a 24 hour market, five days a week. You will want your broker’s trading software to be live online all of this time (most are). Having constant customer support available during this time would be positive too.
Make sure your broker allows trading on the big currency pairs, that is USD against EUR, JPY, GBP, CHF, CAD, AUD. The should also allow some currency pairs that do not involve the USD, such as GBP/EUR.
All brokers will offer charts and technical analysis. Check that these meet your needs. You will also want to check whether they offer instant execution of orders at the displayed price without slippage.
3. Charges
You will find that most brokers do not charge a commission fee for trading. Instead they make money from the spread, which is the difference between the bid and ask prices of a currency pair. Spread is usually in the range of 1-3 pips, depending on the broker and the currency pair, but it can vary at times of volatility. The size of the spread can make a big difference to whether you make profits in the long term.
4. Minimum account and lot size
Brokers usually have a minimum investment for your account. Some brokers only offer standard accounts where the minimum investment could be $10,000 or more. Other brokers offer mini accounts which can require as little as $250 to open, which is obviously the better choice for a new trader.
5. Leverage
Leverage is the factor that determines how much you can control with the money that is in your account. It is possible to control up 100 times the money you deposited, the rest your broker will guarantee for you. Some brokers offer even higher leverage but be aware that the higher the leverage, the more you are risking on each trade.
Whether a broker will allow you to trade with a robot such as the Forex Megadroid download is another point you may want to consider. However, the above 5 points are the main factors to take into account when selecting a forex trading broker.
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