To become successful in forex trading, you will need a good forex broker. Your forex broker is one who will execute all your trades according to your wishes while earning a commission for each trade. There many forex brokers out there competing for your business and it can be quite hard to determine which one is best for you. Here are some key points to look for when choosing a good forex broker.
1. Available Currency Pairs Every forex broker will at least have the seven major currencies (USD, CAD, AUD, EUR, CHF, JPY and GBP). However, if you plan on trading Danish krones or New Zealand dollars, you should make sure that your forex broker is able to do so.
2. Transaction Costs Forex brokers are paid based on the bid ask spread, there should not be any hidden fees or charges to trade. However, additional charges may be required to access certain reports and optional services. Of course, the smaller the spread the better it is for you. Pip spreads vary by broker (and also by currency pairs), so shop around for competitive rates.
3. Free Analysis Tools To facilitate your analysis of spot trends, currency prices and plan entry and exit points, you will require charting and technical analysis tools. Most forex brokers offer basic services free of charge with an expanded arsenal of tools for an added charge.
4. Immediate Execution of Orders Currency prices are constantly fluctuating and any delay in the execution of your orders can lower your profits or increase your losses. Look for a forex broker that can consistently execute your trade at the price you see on your screen. An occasional delay may be understandable, but if it happens frequently find yourself a new forex broker.
5. Superior Customer Service This is something forex traders often overlook when choosing a forex broker and later regret when they require assistance. Any quality forex broker should be able to respond quickly to any question you have. Knowledgeable representatives should be available 24 hours a day by phone and email.
6. Margin Requirement The lower the margin requirement, the more leverage you will have. If a forex broker allows you to use 100:1 leverage, which means you can use $1,000 to trade $100,000 in currency; you can use margin to produce huge profits. However, do not margin yourself too much or you will find yourself cleaned out fast.
7. Minimum Account Balance As a small individual investor you will need a forex broker that does not require a large balance to open a forex trading account. Most forex brokers today will allow you to open a mini account with as little as $300.
8. User-friendly Trading Platform Some forex brokers may require you to download a trading program to your computer in order to make trades. Others may let you make trades directly over the internet. Choose a few forex brokers and sign up for a free demo account. It is highly advisable to trade with play money while you test out their program and decide which one works best for you.
The above key points provide a general guideline to choosing a good forex broker and is an important step towards successful forex trading.
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