Choosing A Forex Broker

With currency trading becoming ever more popular, the number of
brokers is growing at a rapid rate. What should one look at when
deciding which broker to open an account with? These are the important
points to consider.

Spread

Because currencies, unlike
futures and stocks, are not traded through a central exchange, the
spread can be different depending on the broker you use, so it's well
worth checking a few out before you open an account. Most forex brokers
publish live or delayed prices on their websites so you can compare
spreads, but check if the spread is fixed or variable. A fixed spread
means exactly that - it will always be the same no matter what time of
day or night it is. Some brokers use a variable spread, which might
appear to be nice and small when the market is quiet, but when things
get busy they can widen the spread which means the market must move
more in your favor before you start to make a profit. Fixed spreads are
generally slightly wider than the variable spreads are when at their
narrowest, but over the long term fixed can be safer.

Execution

Some
brokers will show live prices on their trading platform, but will they
honor them when it comes to pushing the Buy or Sell button? The best
way to find out is to open a demo account and give them a test drive.
This will also give you the opportunity to see what the speed of
execution is like - when you want to buy, you want to buy now, not sit
around waiting for ten minutes whilst your order is confirmed!

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. And
the most important feature of all - can you actually understand the
platform? Having all the bells and whistles is of no use if you can't
use them, so again, get a demo account and give it a go.

Support

Forex
is a 24 hour market, so your broker should offer 24 hour support. You
might not be trading at 3am, but that could be what time it is in your
brokers head office on the other side of the planet, so make sure there
will be somebody there to pick up the phone if things go wrong. 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.

Backing

Finally,
before opening an account do a little homework and find out about the
company. Forex brokers are regulated, but that doesn't mean they all
have equal backing. If the market collapses, you want to know that
they've got the reserves to cope with it and will still be around when
you decide to withdraw your cash. If a broker is elusive when it comes
to questions about their parentage and financial backing, then steer
clear.

In Conclusion

Choosing a forex broker isn't
difficult, but don't rush the decision. Check out a few, and always get
a demo account first to make sure you're happy with the way everything
works before sending off your opening balance.

About The Author

Geoff Turnbull is a full time day trader, and a contributor to
http://www.forexheaven.com