These are the things you have to look for when searching for a broker:
1. Low Spreads.
Low spreads mean more saving for you. This is the difference between the buy and sell prices of currencies.
2. Low minimum account openings.
If you do not have enough capital to trade at the Forex market, you should be able to open a micro trading account that has a minimum deposit of $250. Ideally however, your trading account should have at least $1,000.
3. Instant automatic execution of your orders.
Automatic order execution is very important when choosing a broker. Never deal with a broker that makes a re-quote if you click on a price. Avoid also a firm that allows price slippage. If you are trading for small profits, then this is very important. Find a broker that is capable of instantly executing your order at the price displayed on the platform.
4. Free charting and technical analysis
You need to find a broker that can provide charting and technical analysis tools. It is also best if your broker can provide free professional charting service. You should also be allowed to trade directly on the chart.
5. Leverage
By using leverage, you can become super rich or dirt poor in a matter of seconds. As a new trader, you need to limit your leverage. As much as possible, keep your leverage in 100:1 ratio for standard account and 200:1 for mini accounts.
Saturday, December 18, 2010
Considering Other Policies
Read the fine print of the broker’s policies before you open an account. This will enable you to understand the nuances imposed by brokers on their traders.
It is very important to find a good Forex broker. You need to take extra efforts in order to do this. Always take advantage of demo accounts and choose wisely from several Forex brokers.
It is very important to find a good Forex broker. You need to take extra efforts in order to do this. Always take advantage of demo accounts and choose wisely from several Forex brokers.
Important Points of Broker Policies
You have to carefully read the policies of your broker before you sign up for a real money account. The following should be considered:
• Available Currency Pairs
The broker should be able to allow you to trade seven currencies: AUD, CAD, CHF, EUR, GBP, JPY, and USD.
• Transaction Costs
Pips are used to calculate transaction costs. Look for lower pip transaction costs. This means more profit for you. If you compare the pip transaction costs of several brokers, you will notice that they offer different fees. If you can find the lowest transaction costs then that would be better for you.
• Margin Requirement
If the broker offers lower margin requirements, this means higher leverage for you. You will have considerably bigger opportunities to make larger profits and losses. Margin requirements usually start from .25 percent. If your trades are good, lower margin would be best. But if you are wrong on the trade, then this spells bad news. Carefully study margins and remember you can win big or lose big with them.
• Minimum Trading Size Requirement
Lot sizes differ from broker to broker. Lot sizes start from 1,000 to 10,000 or 100,000. Standard lots are usually pegged at 100,000. The mini lot is usually set at 10,000. For micro accounts, you can get a micro lot for 1,000. There are brokers that will allow you to create your own lot. This is called odd lot.
• Rollover Charges
Rollover fees are calculated based on the difference between the interest rates of two countries represented in the currency pair. Rollover charges will be greater if the interest rates difference is higher. If you trade GBP/USD and the interest differential for the British Pound is higher, you will have to pay big rollover charges for holding GBP. In similar manner, if the interest differential for holding Swiss Francs on the USD/CHF trade is smaller, then your overnight rollover charges will be cheaper also.
• Margin Account Interest Rate
Your margin account interest will be paid by the most brokers. The interest rates normally fluctuate based on the current rates of countries. If you take a long vacation, your account will accrue interest. Take note however that most brokers do not allow this unless you have a margin account of 2 percent or 50:1.
• Trading Hours
All Forex brokers synchronize their trading hours with the global operation of the Forex Market. This will on 5:00 PM EST Sunday to 4 PM EST Friday.
• Available Currency Pairs
The broker should be able to allow you to trade seven currencies: AUD, CAD, CHF, EUR, GBP, JPY, and USD.
• Transaction Costs
Pips are used to calculate transaction costs. Look for lower pip transaction costs. This means more profit for you. If you compare the pip transaction costs of several brokers, you will notice that they offer different fees. If you can find the lowest transaction costs then that would be better for you.
• Margin Requirement
If the broker offers lower margin requirements, this means higher leverage for you. You will have considerably bigger opportunities to make larger profits and losses. Margin requirements usually start from .25 percent. If your trades are good, lower margin would be best. But if you are wrong on the trade, then this spells bad news. Carefully study margins and remember you can win big or lose big with them.
• Minimum Trading Size Requirement
Lot sizes differ from broker to broker. Lot sizes start from 1,000 to 10,000 or 100,000. Standard lots are usually pegged at 100,000. The mini lot is usually set at 10,000. For micro accounts, you can get a micro lot for 1,000. There are brokers that will allow you to create your own lot. This is called odd lot.
• Rollover Charges
Rollover fees are calculated based on the difference between the interest rates of two countries represented in the currency pair. Rollover charges will be greater if the interest rates difference is higher. If you trade GBP/USD and the interest differential for the British Pound is higher, you will have to pay big rollover charges for holding GBP. In similar manner, if the interest differential for holding Swiss Francs on the USD/CHF trade is smaller, then your overnight rollover charges will be cheaper also.
• Margin Account Interest Rate
Your margin account interest will be paid by the most brokers. The interest rates normally fluctuate based on the current rates of countries. If you take a long vacation, your account will accrue interest. Take note however that most brokers do not allow this unless you have a margin account of 2 percent or 50:1.
• Trading Hours
All Forex brokers synchronize their trading hours with the global operation of the Forex Market. This will on 5:00 PM EST Sunday to 4 PM EST Friday.
Choosing Forex Accounts
You can get a small Forex account called Mini Account. There is also a smaller account dubbed as the Micro Account which you can fund for as low as 1 hundred dollars. These small accounts are best for gaining experience at the Forex and testing your trading skills.
Determine the Platform’s Capabilities
Any respectable Forex broker should be able to provide you with real time quotes. The broker should also allow you to instantly enter and exit on a position. These capabilities should be the minimum requirements of Forex software. You can upgrade your software but this is usually offered with a recurring monthly fee.
Trading platforms of most Forex brokers have integrated charting capabilities as well as different technical analysis tools. You need to understand each platform’s capabilities to determine if it is good.
Trading platforms of most Forex brokers have integrated charting capabilities as well as different technical analysis tools. You need to understand each platform’s capabilities to determine if it is good.
The need for a high speed Internet connection
The Forex market is very fluid. It runs fast and spews out information rapidly. You will need to capture the information so you can decide wisely. That is why you need to have fast Internet connection.
If you do not have a fast connection, then it would better not to trade at Forex. A dial-up connection will not work at the Forex market. You must have a fast computer with fast Internet connection to be able to trade solidly at the market. This is very important.
If you do not have a fast connection, then it would better not to trade at Forex. A dial-up connection will not work at the Forex market. You must have a fast computer with fast Internet connection to be able to trade solidly at the market. This is very important.
The screen layout of the platform should include the following:
• Capability to display real-time quotes of currency exchange rate.
• Account summaries with indicators on available balance, profit and loss figures, locked margins, available margins, and open positions.
There are two types of platforms: web-based platforms usually programmed in Java and a client platform that can be installed locally. It is up to you what type of platform to choose.
• The broker’s web site hosts the web based platform. You will not install anything to your computer. You can also use the platform and go to your account from any computer connected to the Internet.
• A client platform should be installed in your computer. You can only use the platform from your computer unless you have several clients installed on different computers.
The downloadable client software is faster but will rely on the systems requirements of your computer. Most platforms are compatible only on Windows operating system.
If you are a Mac user, you cannot use the client software. You will be forced to use the web based platform of the broker. The web based platform will run on any computer because you will only use your Internet browser to access your account.
For most brokers, they prefer Java or web based platform because they think it would be safer. This platform will be less vulnerable to hacks and virus attacks unlike the client trading software.
However, you still have to open a demo account in order to test the different platforms of the broker before you deposit money in your real account.
• Account summaries with indicators on available balance, profit and loss figures, locked margins, available margins, and open positions.
There are two types of platforms: web-based platforms usually programmed in Java and a client platform that can be installed locally. It is up to you what type of platform to choose.
• The broker’s web site hosts the web based platform. You will not install anything to your computer. You can also use the platform and go to your account from any computer connected to the Internet.
• A client platform should be installed in your computer. You can only use the platform from your computer unless you have several clients installed on different computers.
The downloadable client software is faster but will rely on the systems requirements of your computer. Most platforms are compatible only on Windows operating system.
If you are a Mac user, you cannot use the client software. You will be forced to use the web based platform of the broker. The web based platform will run on any computer because you will only use your Internet browser to access your account.
For most brokers, they prefer Java or web based platform because they think it would be safer. This platform will be less vulnerable to hacks and virus attacks unlike the client trading software.
However, you still have to open a demo account in order to test the different platforms of the broker before you deposit money in your real account.
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