Forex Brokers: Choosing One That Meets Your Needs
Forex trading companies have proliferated since the explosion in retail foreign exchange trading. There are currently hundreds you can pick from, both in the US and overseas. What criteria should you keep in mind when picking a broker to trade forex ? You can conduct your own forex broker comparison putting their features side-by-side.
First, check out the spreads on the most important currencies – and the ones you’re liable to trade. These spreads need to be competitive. Keep in mind, the spread is the variance between the buying and selling price, the bid and the ask. This is where fx trading companies make their income, not on commissions as stock trading companies charge. On a common pair similar to the EUR/USD you shouldn’t have a spread greater than 2 pips. Some trading companies, in an effort to cut it even closer, are offering fractional pips such as 1.8 – or they’ll say “as low as 1 pip”. Critical to remember: spreads will always expand in times of greater volatility such as therelease of a major news announcement.
Second, look to see if the company uses a dealing desk. There are a few advantages to using a broker that does not use a dealing desk: there is no conflict of interest – trading companies do not trade against their customer; every trader is offered identical access to the interbank market; trading is done secretly – your broker isn't aware of your positions, your stops or your profit targets. Non-dealing-desk trading companies are more often than not thought to be fairer towards their customers.
Third, are your instructions filled speedily and at the levels you specify? If you put a stop loss is it honored? I’ve seen some brokers say, “Your stop didn’t take you out since the market was moving too quickly”… You don’t want this.
Fourth, see if their customer service is satisfactory. When you contact them can you get through to aindividual quickly? Are you on hold without end? Do you have to wade through a bunch of programmed menu choices? Is their staff able to reply to your questions competently?
Fifth, open a demo account and trade. Do you enjoy using the platform? Do they offer the one you would like? Is there good training and education accessible? What other services are offered – market analysis, indicators, trading alerts, forums, live trading rooms.
Lastly, do a general Google search. What is the history of the brokerage? Look into a few forums…almost all will have debate of brokers. How do other traders feel about the one you’re thinking of?
Choosing the best broker can be significant to your trading success. It’s best to shop around and compare what each offers. There are a lot of internet sites that offer side-by-side reviews. Use practice accounts to see how they truly work. You may not find one that meets all your desired standards, but many do a good job of providing reliable service to the foreign currency trader.
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