In order to trade currencies online, you have to select an online forex broker. This is not an easy task because there are many brokers to choose from. What follows are eight things you will need to take into account when you are going to open an account with a forex broker.
1. Is the broker regulated?
Always choose a forex broker that is doing business in a country where their activities are monitored by a regulatory agency. For example, US forex brokers should be a member of the National Futures Association (NFA) and registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC).
If a broker is not regulated at all, just skip that broker.
2. Trading Platform
Is the broker's trading platform reliable and user-friendly? This is very important because you can't really benefit from crashing or freezing trading platforms, especially when you are a very active currency trader and like to trade key economic news events. My recommendation is to open a demo account with your preferred broker first and to test the trading platform under all market conditions.
If you don't like their trading platform after testing it, just skip that broker.
3. Does the broker fit your needs?
What type of trading accounts do they offer?
What's the minimum deposit to open an account?
How many different currency pairs can you trade?
If the broker doesn't offer the account type(s) and/or currency pairs that fit your needs, than move forward to review the next broker !
3. What are the real costs of trading?
Most forex brokers are only compensated for their services through the spread between the bid/ask prices(spread), however some brokers ask an additional commission fee per trade. For example, a broker offering a one-pip spread with a $12.50 commission per trade is more expensive than a two-pip spread broker.
Do they widen up the spread during news announcements? Very important to know because more spread is more cost and less profit for you!
Always do the test before you fall in love with a broker because of very tight spreads.
4. Order execution
How fast is their order execution, especially during news announcements?
Do they requote you often or not at all?
Any slippage during fast moving market?
If you don't like their order execution, skip that broker .
5. Margin and Leverage Policy
Make sure you read the broker's margin(call) and leverage policy because they can vary depending on the broker.
About leverage: As a general rule, when the broker is offering 50:1 - 100:1 leverage to you, this should be enough to make a killing forex trading.
6. Support
Do they offer 24/7 technical support via phone, live chat or email? If not, skip that broker .
Do they offer sales and customer support and is it helpful?
7. Broker's Rollover Policy
What is the minimum margin requirement to earn on overnight positions? Is it 0.5%, 1% or 2%? This is not very important for both scalpers and daytraders but might be a good questions if you are a swing, position or long term currency trader.
8. Is the broker offering any added-value services?
Most forex brokers offer forex charts and real-time economic news for free to their clients but this shouldn't be the most important thing to consider in your process to find a broker.
I want to open a LIVE account now!
Slow down! Open a demo account first with your preferred broker BEFORE you are going to sent him your money. Test the trading platform and his services for at least 1 month. Then make your final decision!
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