Which Forex Broker is right for you?
In the past it was pretty easy to decide which Forex broker was the best for you as there were not many around. Since the rise of internet use in recent years, Forex trading has experienced tremendous growth and so too has the number of Forex brokers. The sheer number of Forex brokers out there can be pretty overwhelming, but with a bit of research you should be able to choose the Forex broker that is right for you.
So what does a Forex broker do? A Forex broker is a person or group of people that process trades for investors and traders. A forex broker does not charge any commission per trade like stock brokers do. Instead Forex brokers make their money by taking the difference between the bid and ask prices of a currency. This difference is referred to as the spread.
On average the spread charged by a Forex broker is usually around 2-4 pips for the major currencies. Be aware that brokers that charge more than the average as this could have a huge impact on your profit. You should also be careful of a Forex broker that charges less than the average, they may be making their money by cutting down on the quality of the service, this could end up costing more than you expect.
One of the most important factors you should consider is whether or not the Forex broker is regulated. Ensure that your U.S. based Forex broker is registered with the Commodity Futures Trading Commission (CFTC) and is a member of the National Futures Association (NFA).
A good place to research basic details on a Forex broker is the NFA’s website at http://nfa.futures.org/basicnet. Ensure that your prospective Forex broker has a clean record and has solid company financials.
Good customer service is not something you should compromise on when selecting a Forex broker. The Forex market is open 24/7, that means that you could be placing trades at any time of the day or night. It is therefore important that your Forex broker is accessible at any time and can respond to your question quickly. There are several review sites and forums where traders discuss Forex brokers, these are a good starting point to find out what current users have to say about a Forex broker. Another good way to find out about the customer service of a Forex broker is to call them at various times of the day and night to see what response you get.
Another important factor you should consider is the Forex brokers platform. Most brokers offer a choice of a web-based platform or a downloadable application. The web-based platforms advantage is that you can connect from any computer in the world that has internet access, however the response time is often slower than a downloadable application. A downloadable application is often faster but it can only by run from a computer it’s installed on. There is a large variety in features offered on the platform by each Forex broker so it’s a good idea to open a currency demo trading account at a few different brokers to see which is the right for you.
Some other things you might like to consider to choose the right forex broker for you are: the minimum account opening deposit, the possibility of opening a mini account, professional reports and advice and what education services are offered.
