There are many misconceptions about forex brokers, many people reckon they should be seen as friends, others reckon their just a necessary evil – but their neither. Lets look at selecting a forex broker and what you need to look for in terms of services.
So why do people reckon forex brokers are to be seen as the enemy?
You get a lot of traders who reckon brokers pick stops and these are mostly involved in day trading and the fact is their logic is flawed and their stops are to close.
A broker doesn’t need to pick off stops as these traders lose anyway as the odds are not in favor of day traders.
Others seek advice from their brokers – why?
If brokers could make money trading they wouldn’t be brokers!
Never ever fall for the thought of having a broker help you with your trades, you need to do this yourself and take responsibility for your actions.
3 Essential Points to Consider
You’re only interested in 3 main points.
1. Forget the Words: Commission Free – You Pay!
You pay a broker in the pip spread – this is your cost of doing business.
Make sure you pay no more than 2 – 3 pips on the major currencies and if you shop around, you will find brokers offering these spreads.
2. Security
Don’t trade with small or new brokers. Make sure you broker is stable, been in business for a while and has the facility to offer 24 hour trading and of course support, should you run into technical problems.
3. Trading Platform
This is your gateway to the forex market place and it needs to be reliable and simple to use. Today, most of the huge brokers offer fantastic trading platforms.
You can nearly always test drive them with a forex demo account – so do this until you are comfortable with it.
Other Considerations Are:
4. How quickly you can fund your account?
Do they offer credit card facilities and how quickly can you withdraw.
5. Leverage
Most brokers offer more than enough leverage and you can easily get 100:1 (which is way more than enough for most traders) but you can get up to 400:1. A word of caution – don’t use to much leverage it’s the reason most novice forex traders wipe themselves out.
6. Other Extras
Many brokers will offer you free technical tools, books etc and some are useful some are not but that’s down to individual preference and should not be a major consideration in opening an online forex trading account.
A Fantastic New Service!
All brokers will offer you a forex demo account to test your trading skills but there is a new service that’s fantastic for novice forex traders and it’s called a protected account.
Demo accounts show you the basics – but there is no money on the line.
Protected accounts are different – they allow you to get a feel for trading with real money and limited risk.
In essence they allow you to place down a small deposit and trade as much as you wish in a period of a few weeks – even if you are in debit. At the end of the period:
- You take the profits
- The broker takes the loss
These accounts are a fantastic bridge to real time trading, as they allow you to do lot of trades if you wish to and have limited risk.
So there you have it. Forex brokers are essential when trading, you can’t do without them and their neither friend or foe, just your gateway to the worlds most exciting investment.
Follow the tips above and you will soon find one a forex broker you are pleased to work with.
