One of the first important tasks that a trader will have to undertakes is that of choosing a Forex broker. To the uninitiated, all brokers may on the surface appear the same in terms of the services that that they provide. While this is broadly true, the facilities that they offer and the way in which they conduct their operation can impact on the traders performance.
For this reason selecting a broker is not a task that should be approached likely.
Here we take a look at some of the key considerations when selecting a broker to trade with.
1. Account Types
The first thing that you will need to decide upon is the type of account that you want to open. Most of the best Forex brokers offer a range of account types that are designed to suit different levels of traders. Typical account types that you will find on offer include Micro, Mini, Standard and VIP. Each of these different account types will provide slightly differing features. Common areas of difference include the currency pair spreads which can be seen on Forex charts and the level of leverage that you that will be available.
Accounts offering better trading conditions tend to require a large deposit. This means the larger your account size the better spreads you can deal with. Traders on these accounts are also offered higher leverage. However don’t let this govern your decision when starting out. Most micro accounts are perfectly sufficient for most new traders.
2. Type of Forex Broker
There are two main types of broker that you can get to execute your deals. The most common act as middle men between you and the market. They will effectively ‘broker’ you a deal when you place an order. For this service they will take a small percentage of the spread as a commission for executing the deal.
The alternative is known as ECN (Electronic Communications Network). Deals placed in this way are placed directly from a pool of quoted offers provided by market makers. The competition for the deal tends to results in lower spreads for the trader.
3. Levels Of Service
One of the big benefits of trading on the foreign exchange markets is that you can deal on your account around the clock. This makes it all the more important to find a broker that offers a good level of service which is available when you need it. Essentially you will want 24 hour support and you will want it to be responsive.
Most brokers offer a wide range of mediums to enable you to get in contact with them if something goes wrong. Typical methods of support include online chat, email and even dedicated telephone numbers in some instances. You may also want to check out any educational materials the broker has to offer. These can help you build up your knowledge and consequently increase your productivity as a trader.
4. Regulatory Status
Regulation has now tightened up a lot in the industry but it is still vital that you check the regulatory status of a broker. This will help to add some validity to the operation of the company as well as provide a secure base for your trading. Most will advertise membership of a Regulatory Authority on their website. If in doubt check with the local regulator.
Regulation requires the broker to segregate your funds. This means that they are held separately from the brokers operational capital. In addition they have to submit regular audited reports to the regulator for inspections. Your capital will also be protect by legislation with a level of compensation available should your broker run into financial difficulties.
5. Funding Methods
To get yourself up and running you will need to fund your account with sufficient capital to start trading. Brokers are increasingly offering a wide range of funding methods with which to deposit funds into your account. Cash and Debit card are popular in addition to Bank Wire transfers which offer an almost universal means of deposit
Third party payment processors such as PayPal, Skrill and UKash are also increasingly accepted methods of deposit. Be sure to check processing times and any associated charges that may apply, particular for withdrawals.
Of course you should never underestimate the value of personal recommendation when choosing a Forex broker. Check online to see what other traders views and opinions of the broker are or ask colleagues and friends. Provided that you find a broker that provides you with everything that you need there is no real need to fret.
Selecting a a solid, reliable Forex broker will leave you free to concentrate on the important part of learning to trade successfully on your account.