So to put it into layman’s language Forex Trading is; in terms of financial markets, the forex market, or foreign exchange market is the world’s most active. As a company, we’re dedicated to providing our customers with the best educational resources, tools, platforms, and accounts to help them trade forex.
There are dozens of online forex brokers vying for your business if you are a foreign exchange trader. Internet advertisements from forex brokers can be found on nearly every financial news site you visit. There are five things to keep in mind when deciding on a broker to work with.
Compliance with the law
When looking for a forex broker, reputation is the most important factor. The National Futures Association (NFA), a self-regulatory organization for the futures industry, is a sign of a reputable forex broker in the United States. An application for registration with the Commodity Futures Trading Commission (CFTC) will also be submitted.
NFA members and CFTC-regulated brokers don’t always have flashy websites. The “About Us” section of a broker’s website will typically include the NFA member number. Each country outside of the United States has its own regulatory body. Accounts should only be opened with regulated brokers due to concerns about the safety of deposits and the broker’s honesty.
Features of an Account
Forex brokers offer a variety of account types. Leverage and margin, commissions and spread, initial deposit requirements, and the ease of deposits and withdrawals are the four factors to consider when comparing broker features, in that order.
Using Leverage and Leaving Room for Error
Depending on the broker, FX traders can use leverage available in their margin account. Using 50:1 leverage, a $1,000 trader can hold a $50,000 position with an account size of $1,000. Leverage can be as high as 200:1. When a trader is in a profitable position, leverage is beneficial because it increases the trader’s profit potential. Because losses can be magnified, leverage can quickly devastate a trader’s account. Be cautious when using leverage.
Spreads and Commissions
A commission-taking broker may charge a commission-taking broker a percentage of the spread, the difference between the bid and ask price of a currency pair. Many brokers use Wider spreads that charge no commission to make their money. If you don’t know how your broker makes money, you should shop around.
For example, the spread could be fixed at three pips (a pip is the smallest unit of price change in forex) or variable depending on market volatility. More difficult it is to profit from a widespread. More frequently traded currency pairs, such as the EUR/USD and GBP/USD, have lower spreads.
Deposits at the start
To start trading forex, you only need a small sum of money, usually no more than $50. One of the reasons forex trading is appealing to new traders and investors is because the buying power is far greater than the minimum deposit when using leverage. Standard, mini, and micro-accounts require a different starting deposit and are all fairly common among brokers.
Deposits and withdrawals are simple.
Each forex broker has a different policy for account withdrawals and deposits. Depending on the broker, account holders may be able to fund their accounts via credit card, ACH payment, PayPal, wire transfer, bank check, or personal or business check. Checks and wire transfers are the most common methods of withdrawal. The broker may charge a fee for both services.
Currency Pairs Available
Many currencies are available for trading, but only a few receive the most attention and thus have the most liquidity. Several other major currency pairs, such as the EUR/USD, GBP/USD, and USD/JPY. The most important factor in choosing a forex broker is whether or not they offer the currency pairs that interest you as a trader.
Because forex trading can take place at any time or night, a broker’s customer service department should be open 24/7. Ensure that you can get a real person on the phone when you call. With a simple phone call to a brokerage firm, you can get an idea of the type of customer service and average wait times they provide.
It is the investor’s gateway to the market. Trading platforms and software should have the technical and fundamental analysis tools that traders require, and they should be able to enter and exit trades easily.
An essential feature of a trading platform is the presence of obvious buy and sell buttons and an emergency close button that instantly closes all open positions. On the other hand, a shoddy user interface could result in costly order entry errors.
Options such as order types, automated trading, and strategy builders are also important considerations. Before opening and funding an account, most brokers offer free demo accounts so that traders can test out the trading platform.
It all comes down to this:
The more confident you are in your forex broker, the more time and attention you can devote to analysis and strategy development. An investor’s chances of success in the forex market can be increased by conducting a little research before signing up with a broker.