The more we live the more we find out that we are dependent on many things
besides our wits. Smartness will only get us so far, but unless we make
use of systems set up for our convenience we are apt to fail. This is so
with the Forex market. The way how the market works means we have to work
through a broker or a market maker to get our trades started and
completed. You can find Forex brokers in every part of the world just as
you will find currencies traded in almost every corner of the globe.
However, you should consider a few points when you go out shopping for the
right broker to help you with your trades.
1. Qualifications. Probably
the most important thing of all is ensuring the Forex broker you use has
the correct qualifications. Therefore, choose a broker registered with the
Commodity Futures Trading Commission (CFTC) as a Futures Commission
Merchant (FCM). This means that you have legal protection against any
abusive trading practices and scams that may arise.
2. Is the broker regulated? This means that when you sign up to use
their services you will have protection and insurance against any internal
fraud. Also, your funds will remain separate from the broker's operating
funds.
3. What business model does the broker use? Some brokers are market
makers while others are ECN brokers, providing a dealing desks for many
traders.
4. Look at the types of spreads they offer. The spread is the
difference between the bid and ask prices of the currencies you trade.
Brokers do not make a commission on your trade, instead they take the
spread as compensation. Your broker may also offer fixed or variable
spreads, and they can be different for large accounts and mini-accounts.
5. Slippage. Can they provide you with details of just what slippage
they would expect to occur during normal and fast moving markets?
6. Margin requirements. What is their margin requirement. That is, what
percentage of the investment in your trades do they expect you to pay to
open a trade. You also want to know about their margin calls, and the time
you need to respond to such calls.
7. What is their Rollover Policy? Do they have any minimum margin
requirements which they use to earn interest on any overnight positions?
Plus, do they have any other requirements or conditions about you earning
interest on any rollovers.
Once you have done your research and have selected one or more Forex
brokers, then it is time to set up your trading account. When your funds
clear you can begin trading. Remember to read carefully the trading
instructions to know how the broker can help you manage your trades. If
you overlook some relevant details, you can lose money on your first
trade. So take the time to read the details and ask the brokers or their
support staff any questions you may have before you open your first trade.
