How to Choose the Right Forex Broker? (Part I)
Almost 90% of the investors enter currency markets as short term speculators. Most of the investors look for quick capital gains in forex. Many start forex day trading as a speculative venture. If you have made the positive decision to start forex trading, your first step should be choosing the right forex broker. This is very important. The right choice of a forex broker will greatly influence your success as a forex trader.
Forex trading is hot right now. It is being called the Recession Proof Business of 21st Century. The market is overcrowded with companies and banks offering online forex brokerage services. Internet has opened the forex markets to individual retail traders and small investors. It will not be easy for you to make the right choice of a forex broker. You need a certain set of criteria. These criteria will mostly depend on your preferences, interests and means as an individual trader and will depend on your trading tactics and strategies.
You may ask, what is the best way to choose the right broker? You should compose a list of questions to ask the forex broker before making a final decision. The following are some of the suggested questions that you should ask. You should ask these questions before making a final decision.
What is the amount of the interday and overnight margin? What is the corresponding leverage? Many online forex brokers offer margin between 2-5%. They provide leverage ranging from 20:1 to 100:1. Higher margin requirement means lower investment efficiency for you. Margin is the amount the broker sets aside as guarantee against your trading losses.
However, beware of lower margin. It means that most of the time the forex broker will be against you as a trader and will do everything possible to prevent you from winning. You will face many trading problems with such a broker. It will become difficult for you to work under such conditions.
What is the minimum contract size? Now days, the standard contract size is $100,000. This contract size is quite affordable and allows for reasonably effective money management with limited capital. This contract size also allows small individual investors to participate in currency speculation.
What are the requirements of minimum deposit demanded by the broker? It is common that many new traders dont have sufficient funds to open an account. The investment and financial means of trader differ. I think $10,000 is the required minimum amount corresponding to the forex market conditions. In my opinion, the optimal minimum amount is $10,000 with 2% margin requirement.
What are the terms of setting and executing stop and limit orders by the forex broker? The ideal condition should be the execution of the stop and limit orders at the fixed price. This should be regardless of the market conditions, its speed and its direction. Some forex brokers provide this type of execution. Other brokers reserve the right to fulfill an order with slippage under unsteady market conditions mostly defined by the broker themselves.
The value of slippage depends on the current state of the market. It can fluctuate from a few pips to tens of pips. Although it is practically impossible to arbitrate the price received from the broker during the transaction. The slippage creates favorable conditions for the abuse of the trader by the broker. - 23159
Forex trading is hot right now. It is being called the Recession Proof Business of 21st Century. The market is overcrowded with companies and banks offering online forex brokerage services. Internet has opened the forex markets to individual retail traders and small investors. It will not be easy for you to make the right choice of a forex broker. You need a certain set of criteria. These criteria will mostly depend on your preferences, interests and means as an individual trader and will depend on your trading tactics and strategies.
You may ask, what is the best way to choose the right broker? You should compose a list of questions to ask the forex broker before making a final decision. The following are some of the suggested questions that you should ask. You should ask these questions before making a final decision.
What is the amount of the interday and overnight margin? What is the corresponding leverage? Many online forex brokers offer margin between 2-5%. They provide leverage ranging from 20:1 to 100:1. Higher margin requirement means lower investment efficiency for you. Margin is the amount the broker sets aside as guarantee against your trading losses.
However, beware of lower margin. It means that most of the time the forex broker will be against you as a trader and will do everything possible to prevent you from winning. You will face many trading problems with such a broker. It will become difficult for you to work under such conditions.
What is the minimum contract size? Now days, the standard contract size is $100,000. This contract size is quite affordable and allows for reasonably effective money management with limited capital. This contract size also allows small individual investors to participate in currency speculation.
What are the requirements of minimum deposit demanded by the broker? It is common that many new traders dont have sufficient funds to open an account. The investment and financial means of trader differ. I think $10,000 is the required minimum amount corresponding to the forex market conditions. In my opinion, the optimal minimum amount is $10,000 with 2% margin requirement.
What are the terms of setting and executing stop and limit orders by the forex broker? The ideal condition should be the execution of the stop and limit orders at the fixed price. This should be regardless of the market conditions, its speed and its direction. Some forex brokers provide this type of execution. Other brokers reserve the right to fulfill an order with slippage under unsteady market conditions mostly defined by the broker themselves.
The value of slippage depends on the current state of the market. It can fluctuate from a few pips to tens of pips. Although it is practically impossible to arbitrate the price received from the broker during the transaction. The slippage creates favorable conditions for the abuse of the trader by the broker. - 23159
About the Author:
Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading and swing trading stocks and currencies. Learn Forex Nitty Gritty. Develop your own Forex Trading System.
posted by X - Men @ 12:51 AM
1 Comments
1 Comments:
There are plenty of decent brokers. You should start by asking yourself a few questions and then use your answers to narrow down the broker.
1) How large of an account. If you plan on trading more than 100k you will want to use a broker with better liquidity. The larger your account the more important “broker financial stability” will be because if that broker goes out of business you risk losing some or all of your money held there.
2) What trading strategy are you planning on using? If plan to scalp you will need to choose a broker who does not restrict scalping or place minimum time limits on positions. If you plan on trading a carry trade system you will need to research the brokers swap(rollover) rate and find the most competitive broker.
3) What currency pairs do you expect to trade? Depending on a brokers liquidity sources the broker may have better or worse spreads on different pairs. (MB for instance usually always beats Dukascopy’s GBP pair spreads but Dukascopy usually has much better CHF pair spreads).
4) ECN/STP vs. Market Maker. I won’t get into much detail here because I don’t have that much time or room…. but both broker types have their advantages and disadvantages. You will want to decide which type of broker fits your situation best.
5) Fixed spread vs. Variable spread. Do you mainly stick to high-volume market times for your trading or do you get signals around the clock. A fixed spread broker may be better if you trade asia or off market times while a variable could save you money if you stick to London and early New York.
6) Metatrader or other platform. Metatrader is the most common but there are plenty of others. Open a few demo accounts with different brokers to get a feel for the different platforms. Choose the one that fits your style best.http://www.forexea.co.cc/N-forex-broker.html
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