Choosing The Right Forex Broker

Choosing the right forex broker will take some time and a little patience. I will try to make the process easier by listing the features and differences that can be found among the different forex brokers.

• Regulated. The first search criterion is to look for a regulated forex broker. Regulated brokers are required to keep transparent the transactions they are involved in. These transactions must be documented and submitted to the proper authorities. If the broker does not follow these rules he or she can be fined and or have his membership terminated. While forex brokers can be located anywhere in the world, most countries have some kind of regulation standards required of members. In the United States, for example, forex brokers are regulated by the National Futures Association (NFA) and the Commodity Futures Trading Commission (CFTC). Swiss-based brokers are regulated by the FDF, the Swiss Federal Department of Finance. In the United Kingdom, forex brokers are regulated by the Financial Services Authority. A good forex broker will not hide from whom they are regulated. It may require a few mouse-clicks to get to the information, but it is important to look for it. It is the first protection for the investing public from brokers with fraudulent or abusive trading practices.
• PIP spreads. Forex brokers rarely charge a commission per trade. Instead, there is a built-in spread between the currency pair. The tighter the spread, the better for you. Further, not all pip spreads are created equal; pips can be variable or fixed. If fixed, the pip spread will be the same. Of course, if variable, the pip spread will fluctuate, depending upon a few factors. The spread between the euro/dollar is usually low, since it is a popular pair. On the flip side, the spread between GBP/NZD (British pound/New Zealand dollar) will be larger. The time of day and how many markets are open can also influence the pip spread. At 5 pm Eastern time, for example, New York and London are closed but Sydney is open, so there is really only one market trading forex, meaning the pip spreads will usually not be as tight.
• Software. Charts and trading platforms offered by forex brokers can make your trading decisions easier. A lot of forex brokers will give you access to free charts for quick analysis. Some trading platforms offered by brokers will immerse you in a total trading environment. These types of software will offer live charts, graphs, news, and the ability to make trades quickly without going to another window. Depending on the size of your account, you may not have access to this trading or charting software. If being able to program the software is important to you, keep an eye out for brokers who offer this as standard with their software package. You may also want to have a broker who offers web-based trading. This means you can use an Apple Macintosh computer or trade from your office without having to install the software.
• Training. In order to get new clients, many forex brokers have an education or trading training section. Not all training offered is the same, however. Some brokers have minimal education centers that do not go beyond simply some obvious definitions, while others have extensive training programs. These forex brokers may offer online seminars frequently, or books, print and download, for their clients. Some of these training aids can be had for free or a small fee. If you are new to forex or trading, it is probably a good idea to look for a broker who offers training and education that suits your level of trading experience.
• Fees. When searching for a forex broker, you need to look at the fees that are charged. Fees can be minor or major, depending upon the broker. Some brokers will charge for wire transfers, and some will charge for sending you a paper statement. It all depends on the broker. Ask for a list of fees.
• Practice makes perfect. Almost all forex brokers allow you to try their trading platforms before you decide whether to open an account with them. Usually, these practice accounts can be open for one month and you can evaluate how the platform works for you. All of these practice accounts will mimic a real account but without the use of real funds.
• Funding options. Forex brokers are allowing customers to fund their accounts in more ways than the traditional bank check. Wireless bank transfers, credit and debit cards, as well as PayPal can all be used to fund your account. While these funding options may seem minor, they can be a great resource if you want to send money quickly.
• What can you trade? A lot of forex brokers are now allowing customers to trade gold and oil in addition to the traditional currency pairs. Some forex brokers will allow you to trade a lot of different currency pairs. The more pairs you can choose from, the better your chances to make money. Keep in mind, however, forex pairs also are affected by supply and demand. Some pairs will have large spreads because the number of trades made are significantly fewer than the trades on the more popular pairs. Many forex brokers are also allowing clients more order options. This is a feature that more advanced traders will usually look for.

Forex is a leveraged market that can go up quickly and go down just as fast. There is a temptation to move any available cash you have in your equity account to the forex account. This will make it very difficult to keep the account balanced. The biggest reason to go with a dedicated forex broker is that they may have features geared to forex trading, something your current broker may not offer.

These are just the tip of the features iceberg that you will find when choosing your forex broker. While there are other features that you will come across when searching for the right forex broker, the criteria offered here contain the most important ones to keep in mind. You have to choose the options you want the most when comparing brokers. Use any samples that may be offered and download the different trading platforms to check them out. The differences may be subtle, but you will get an idea of which platform runs the best on your computer. Not only that, calling different brokers and asking questions can also be helpful.

Last but not least, word of mouth from other traders can also help make the decision process easier for you.