Choosing a broker is the subject of this week's trading tip. Let's cover some of the things you should watch for when selecting a broker for your Forex trading...
A search in Google for "forex broker" will return about 1,160,000 results, so where do you start? Well, there are some specific qualities you should watch for...
Check Their Credentials
Although Forex is largely unregulated, most of the larger brokerage firms have voluntarily registered with various regulatory agencies.
There is risk associated with depositing your money into someone else's bank account, so check to see if your proposed broker is a member of the NFA or the CFTC. This will, at least, allow you to check for complaints filed against them.
Use caution with offshore brokers. If your proposed broker is operating from a small third-world island, you might be in for some trouble.
Try Out Their Platform
Most brokers offer Demo accounts so you can test drive their trading platform. Take full advantage of this to determine whether or not they have the features (mini lots, indicators, charts, etc.) you require to trade properly.
Make sure the platform is easy to use and has the ability to be customized to suit your taste.
Don't Sweat the Spread
Many new traders put too much emphasis on the bid/ask price spread. The reality is a pip or two will have little impact on your success.
What's much more critical is the dealer's ability to execute trades in a timely manner. The last thing you want to have happen is your order not being filled when prices are surging against you.
Make Your Own Chart
You may want to make up your own chart to compare the strengths and weaknesses of the brokers you are considering. Charting the differences will allow you quickly compare the factors that are important to you. This side-by-side snapshot will usually guide you in the correct direction.
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