There are some basic notices that you should consider when you want choosing online forex brokers. There are a lot of scams involving forex investments on the Internet, and since it is easy to find a forex broker online than offline, all the reason you ought to be more careful. It’s advisable that you investigate and learn about the forex broker with whom you are planning to open an account. Don’t let yourself to be sucked into a scam.
1- Spread Amount
The spread is the difference between the ask price (the price you buy at) and the bid price (the price you sell at) quoted in a decimal value called pips (or basis points). Most currency pairs are quoted to the fourth decimal place. For example, if the EUR/USD rate is 1.2105/7, the spread, or difference, between the bid and ask price is 2 points or pips (1.2107 - 1.2105 = 0.0002). It is important to pay close attention to spreads because they are the true cost of trading (and the way the broker makes a profit).
Spread will be your main payment to the broker for using its services. Don't overpay for anything - try to find a broker which offers low spreads. For example, trading with a Forex broker with 5 pips spread on EUR/USD currency pair is unacceptable, while the average spread for this pair on most brokers is 2 pips. If you find a broker that offers spreads below average, don't forget to read its Terms Of Service to see if there are any hidden commissions in it.
As a trader, your sole interest is buying low and selling high. But wider spreads mean buying higher and having to sell lower, making it more difficult to realize a profit. A half-pip lower spread doesn't sound like much, but it can easily mean the difference between a profitable trading strategy and an unprofitable one.
Some of them their spread depends to the position of market. When market is quiet the spread is small and when market is busy the spread is high. I prefer forex brokers that have fixed spread, because over the long term fixed can be safer.
2- Execution
- How fast is the broker's order execution?
- Do they offer automatic execution?
- How much can you trade before having to request a quote?
- Do they trade against their clients?
3- Leverage
Leverage is expressed as a ratio between the total capital that is available to be traded and your actual capital. While some brokers offers 1:50 trade margins others offer 1:200 and it varies with different brokerage firm. For example, when you have a ratio of 100:1, your forex broker will lend you $100 for every $1 of actual capital you have. Higher trade margin will give you a better chance to win big when the opportunity comes along. It’s also important when you have very little capital invested in forex. Before choosing an online forex broker check what is their leverage. Many brokerages offer a flexible margin that allows you to choose the leverage that's right for you.
4- Account Types
Notice the forex broker you choose has mini account or not. Mini account is designed for those new to online Forex trading and those with limited investment capital. There is a smaller deposit required to start trade of just $300 or less.
5- Trading Platform
Good trading software will show live prices that you can actually trade at, not just indicative quotes. It will offer Limit and Stop orders, and ideally will let you attach these to your entry order. One-Cancels-Other orders are another useful feature - they mean you can set up your trade and then leave the software to get on with it. Trading via a Forex broker with some lousy platform is a real pain for any trader. Check if the broker's platform is good enough (through the demo trading) before registering a real account. MetaTrader 4 platform is offered by many Forex brokers and it's one of the best of the available platforms for the on-line trading.
6- Dealing tools and value-added services
Different Forex brokers will offer different trading tips and tools. When selecting Forex broker, check what kind of trading tools and analysis data they are offering. Not all brokers offer the same set of tools and data thus careful consideration is necessary. A good Forex brokerage firm should offers real-time charts, technical analysis tools, real-time trade alerts, and website support. If you are new to Forex trading, you also look for broker that offers demo account before opening up a real account.Find out online forex broker that offers the best resources and information to help you make the smartest trading decisions. Be weary of any company that refuses to share information or trial versions before opening up an account. You will want to try out their system before you choose to invest money in it.
7- Support
Forex is a 24 hour market, so your online forex broker should offer 24 hour support. You should also check if you can close positions over the phone - essential in case your PC or internet connection crash at a critical moment. You could contact to their Internet help desks to see how quickly they respond to enquiries.
8- Get Referrals
Ask around and read forex forums to find out which forex brokers other people use and why they selected a specific broker.
9- Terms of Service.
The first thing at which trader needs to look before joining a broker is its Terms of Service. They should be free from anything that would put trader's money in danger and should give him freedom to manage his account without any serious obstacles. Don't forget to check Terms Of Service to know if the broker forbids your trading style - e.g. scalping, news trading, etc.
10- Payment methods.
Most of the traders deposit and withdraw their trading funds via wire transfer. But there are plenty of other methods of payment that can be used to trade Forex; PayPal and WebMoney are among them. If you prefer electronic payment systems choose a Forex broker that accepts them.
11- Minimum deposit.
Trading with small amounts of money won't make you rich, but it's a good way to check your broker's real account handling before trading big, so the minimum deposit amount for the Forex broker shouldn't be too high. Some of them accept deposits only from $10,000 and higher - that's not a very good practice, since many traders would prefer to start trading with just hundreds of dollars before depositing such a higher amount.
