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Forex Brokers Guide – Forex Founders


How do you start making your selection of a broker?


Safety first


Wherever possible, check with the regulating body for the country concerned to see if a broker is registered with that body, and also if the broker has at any time failed to observe the rules. The United States and the major European countries each have at least one regulating body. For the United States, there are three: the Securities and Exchanges Commission; the Commodities and Futures Trading Commission; and the National Futures Association. If a broker does not appear in the listing of such a regulatory body, you may need to be extra cautious about trading with them.


Because a broker also typically needs a certain minimum capital in order to be registered in this way, this is also an indication of how competitive the broker can be in terms of buying and selling prices. More capital means more available credit for the broker with different banks and a greater range of liquidity providers – therefore, potentially a more competitive spread of buying and selling prices.


You also need to be able to withdraw your profits without problem. In theory, brokers should be able to make it easy and problem-free for you to make withdrawals or deposits. Be wary of any terms and conditions that suggest otherwise.


What do you need to start?


Remember first of all that before you make any move towards dealing with a broker (this includes demo accounts), you should already have your trading plan ready and if possible tested. Brokers won’t help you with this. And they won’t help you if your trades come unstuck because of poor planning.


As part of your trading plan, you should also know how much investment you can reasonably make. In other words, how much you can afford to lose, if for example the market changes unpredictably. This in turn determines if you can trade using the fixed amounts of currency offered by the broker. Some brokers only offer “lots” of currency of $10,000 or more. Although a broker may also offer leverage facilities as a way to make these lots accessible to you, remember that this increases the risk of losing your original investment even if it also multiplies your potential gains.


How much will trading cost you?


If you want to make money from a trade, then the trade has to remain profitable after you have paid the broker’s commission or sold back a currency that you bought previously. To complicate matters, a broker may also charge either a fixed spread or a variable spread. The wider the spread, the more difficult it will be for you to show a profit. If your trading plan is based on a fixed spread, you may need to make a trade-off of a higher, but known spread.


Additionally, if you want to do trades that last for more than a day, a broker may also take into account rollover interest. You will need to know if this is the case, and if you are credited or if you are only debited such interest.


Finally, for those extras such as market information, graphical charting packages and newsfeeds, will the broker charge you more? Or are they all included in the package quoted to you?


With this in mind, a comparison of ratings of brokers on aspects such as the minimum amount of deposit to get started, the type of spread, the leverage available and the minimum contract or lot size will help you to eliminate any unsuitable offers and start to focus on those that best meet your requirements.


How fast and how reliable will trading be for you?


It can be frustrating to use a trading platform that either slows down at critical points or even stops working altogether. If your trading plan stipulates speed as a key factor, then you need a broker with a robust trading platform with adequate performance. Under normal trading conditions (but outside of news releases), your transactions should be done at the price that you see displayed on the screen.