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Selecting the Right Forex Broker

1) Is the broker I want to use regulated? This is the first question you should be asking yourself and there should be no doubt that they are. All regulated brokers are required to submit financial reports to regulatory authorities. Failing to do so can cause authorities to fine brokers or even end their membership. These rules force Forex brokers to keep financial reports.

Each broker is regulated by local regulatory authorities. For instance, if a broker is based in the United States, they're regulated by the National Futures Association (NFA) and the Commodity Futures Trading Commission (CFTC). Swiss brokers, however, are regulated by the Swiss Federal Department of Finance (FDF). Using a regulated broker also protects investors because they're able to dispute resolutions.

2) What are the trading conditions like? This question refers to the trading conditions and special features of the trading platform with a Forex broker. Some of the most important factors include:

-Spread - The smaller the spread on currency pairs, the more favorable the conditions are for both traders and investors.

-Platform Execution - This term refers to how quickly and consistently the trades are executed. Many brokers promise fast, transparent executions during normal market conditions.

- Fractional Trading - Some brokers may allow investors and traders to trade on a fractional basis. For example, rather than allowing you to trade full lots of "100,000 units," they let you trade "163,345 units," which is helpful when you're making trades that risk a certain percentage of the balance on each trade.

-Safety of Funds - It's important to make sure that your trading funds are placed in a segregated account or, at the very least, insured for safety.

4 Tips For Choosing a Reputable Forex Broker

Finding a Forex broker is a tough process to navigate through and for most people, the necessity of outside assistance is needed. Trying to trade in the Forex market without a broker could lead to devastating results for the normal trader. Similarly, hiring the wrong Forex broker can lead to the same result as trying to muddle through it alone. It is highly important that you be diligent in researching any prospective brokerage firms to handle your financial portfolio.

A good Forex broker will supply you with clients that were successful and can attest to the specific broker's qualifications and success history. Put yourself in that position, would you testify to someone's strengths if they did a poor job for you? Client history testimony should be present in any prospective Forex broker and plentiful to indicate a solid background with trading. You can tentatively assess a lot from a Forex broker with a list of clients that will speak up for the brokerage firm or individual broker. It should be noted that all word of mouth testimony should be taken with a grain of salt and dissected to collect the pertinent information. Testimony should be used in your research to find a Forex broker but should not be the deciding factor.

Another good morsel to test the reliability of any potential Forex broker is the amount of information, literature and lessons that they are willing to give to you. Most Forex brokers are of a high reputation and a solid background however, there are many out there that don't have a good history or no history and it is wise to steer clear of these brokers. You are trying to find a trusted financial advisor and settling for second best, just won't do. The more a potential Forex broker is willing to do for you in the area of helping you understand the Forex trading system, the better quality trader they will be for you.

A good avenue to travel down when seeking a good Forex broker is to ask your acquaintances about Forex brokers and how they met. This can not only give you prospective referrals to great Forex brokers but will also equip you with ideas and resources that you may not have located. If you get a referral from friends, be sure to still research that specific broker and his qualifications before committing to any formal agreement.

The other factor in finding a good Forex broker is the margin of return that is offered. A Forex trading margin used to influence your money and many Forex brokers offer different margins. Finding a Forex broker, who gives a margin of ten to one isn't a very good find so it's worth the time to reinvest in research. Remember that this industry is all about customer service and catering to the clients so if your prospective Forex broker doesn't return your calls within a reasonable time frame it would be advisable to keep searching.

Forex Broker Guide

Introduction

The following is a list of questions you may like to consider before opening an account. You can use this checklist to narrow down your selection of companies that fit your requirements.

1. Word of Mouth

What do other traders say about the broker?
What is their customer service like?

2. Customer Protection

Is the broker regulated?
What regulatory organisation are they registered with and what protections does it afford you?
Are client funds insured against fraud?
Are client funds insured against bankruptcy?

3. Execution

What business model do they operate? i.e. Are they a Market Maker, ECN or no-dealing desk broker?
How fast is their order execution?
Are orders manually or automatically executed?
What is the maximum trade size before you have to request a quote?
Are all clients trades offset?

4. Spread

How tight is the spread?
Is it fixed or variable?

5. Slippage

How much slippage can be expected in normal and fast moving markets?

6. Margin

What is the margin requirement? e.g. 0.25% margin = max 400:1 leverage), 0.5% margin = max 200:1 leverage, 1% margin = max 100:1 leverage, 2% margin = max 50:1 leverage, etc.
Does the margin requirement change for different currency pairs or days of the week?
At what point will the broker issue a margin call?
Is it the same for standard and mini accounts?

7. Commissions

Do they charge commissions? (Most market makers' commissions are built into the spread)

8. Rollover Policy

Is there a minimum margin requirement in order to earn rollover interest?
What are the swap rates like for going long or short in a particular currency pair?
Are there any other conditions for earning rollover interest?

9. Trading Platform

How intuitive and functional is it to use?
Are there many disconnections during trading hours?
How reliable is it during fast moving markets and news announcements?
How many different currency pairs can you trade?
Do they offer an Application Programming Interface (API) to allow you to automate your trading system?
Does it offer any other special features? (e.g. One click dealing, trading from the chart, trailing stops, mobile trading etc.)

10. Trading Account

What is the minimum balance required to open an account?
What is the minimum trade size?
Can you adjust the standard lot size traded?
Can you earn interest on the unused margin balance in your account?