Most traders use a Forex broker to handle their transactions. What is a broker? Strictly speaking, an agent is a person or company that buys and sells orders according to the decisions of investors. Agents make money by charging a commission or fee for their services.
A Forex broker must be associated with a large financial institution like a bank to provide funds for margin trading. United States, a broker must be registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) as protection against fraud and abusive trade practices.
Before trading Forex you need to set up an account with a broker. You may feel overwhelmed by the number of agents offering their services online. Deciding on a broker requires a little research on your part, but the time spent will give an overview of the services available and fees charged by different agents.
The best advertising is word of mouth, and is as valid in the foreign exchange market, like any other business. Talk to friends and colleagues to see who they face and find they have complaints or difficulties in dealing with a particular agent.
You can try selecting a few online brokers and contact their Internet help desk to see how quickly they respond to requests and whether or not to answer questions to your satisfaction. Note, however, that the pre-sale service can be better than after sales service. This may be true for any online business, not just currency traders.
Customer satisfaction and safety are just part of history. You want an agent who executes orders quickly and with minimal slippage. All online brokers that offer automatic execution and establish clear policies regarding slippage. They should be able to tell how much slippage can be expected in normal markets and rapid movement.
So you want to know the costs involved. What is propagation? Gap is fixed or variable, depending on the type of account? Mini accounts subject to wider spreads? Are there other costs? Smaller margins means more profits for the trader, but there may be a compromise between the distribution and service. Look at the whole picture before deciding to go with a particular broker.
Margin accounts are the lifeblood of Forex Trading, so make sure you understand with regard to the margin corridor before opening an account. You need to know the margin requirements and how to calculate the margin. Will a change in the margins according to the currency? Is this the same every day of the week? Some brokers may offer different margins for mini and standard accounts.
Software trading is very important for the forex trader online. Having an idea of what options are available to try a demo account to a few online brokers. Above all, you're looking for reliability and ability to perform well in fast moving markets. The software should offer automatic trading and may have special features like trailing stops and trading cards. Some features may not be available at an extra cost, so make sure you understand what your needs are and how commercial brokerage to provide them.
