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.