What is a Forex Broker?
If you would like to get into investing in foreign exchange then you will need a forex broker, a broker will allow you to execute the trades that you will need to make in order to trade. The first place to start would be to google the top forex brokers, as the market has matured there’s a plethora of forex broker reviews that allow you to get a good feeling for the different companies available. This will heavily assist in finding your perfect forex brokerage.
How to Choose your Forex Broker
In seeking a forex broker you will need to ensure that the broker is registered with the appropriate authority in your country. Such as the Financial conduct authority (FCA) in the UK or the National Futures association (NFA) in the US. Countries such as Australia also have the Australian Securities and Investments Commission (ASIC). Once you have ensured they’re registered, and have checked their reviews you will be probably be left with a shortlist.
For many it will depend upon how much they have to invest, a lot of the bigger forex broker’s will require larger deposits, while some will also start lower. The big names such as IG and FxPro work to a minimum of $100 USD. Though the actual bets can be placed at significantly lower levels.
After minimum deposits, the average forex broker will have similar account features. Though things to look out for are;
The spread is the difference between what the broker sells and buys pairs at, so for instance, if they offer at 1.2000 and you buy that pair at 1.1500 the spread would be 500 pips, this is a horrendous spread! If this is offered then find another broker! But you get the point. Many forex brokers will try and be tight on spreads in order to get business. So compare between them. The spread is where brokers make their money.
Speed of execution
This is also important as the market can be very volatile, fast executions of orders are imperative to maintain the price you want.
It’s the most important part because this is the place you will play the actual game. A platform which is easy to use and understand is the best trading platform. That’s why it may be pertinent to try a few different providers before you commit to one in the long term.
Order closing options
This can be vital to prevent losses or to maximise profits. Options include stop and trailing stop. Being able to stop at a defined price can ensure that you can control your losses in case of a sudden drop in the price of an open order. A trailing stop is a little more dynamic, for instance, if your position has risen by 20 pips you can set a trailing stop at a loss of 30 pips so if your order went from +20 pips to -10 pips your order would close and would limit your overall loss -10. It also works in positive, if you increased by 100 pips but had a 30 pip trailing stop then the order would close when it dropped to +70 pips.
The other things to bear in mind are that you may want to trade on the move, so a dedicated mobile app will also be of benefit to you. Again the advice would be to try a few out. Most of the world’s leading brokers offer comprehensive mobile apps, and also many have the option of a demo account so that you can try the platform for yourself and become familiar with it.
By seeking out reviews you can also get a feeling for a forex broker. But please bear in mind that some companies pay people to leave positive reviews of their products, so try and stick to sources with a good authority such as Investopedia.