How to Choose a Forex Broker
It should be understood that there are many important concepts to grasp before venturing into trading with real money. If you do not do this but go ahead and trade, you will regret that decision. You have to be conversant with the main critical qualities a forex broker has. This will guide you in selecting the best forex brokers. This is how you will know how to choose which one to open an account with.
You have to think of criteria like forex margin, forex leverage, ECN forex and forex spread. You should begin with look at the margin offered by the forex broker. If you have a 2% leverage that means you can leverage your money 50 times. It appears to be the current maximum one can access.
This declared maximum has not gone down well with forex brokers coalitions, with many of them plotting to trade in foreign markets, so a to overcome that limitation. You need to read through the review sites to find more information regarding this matter so as to find the best places to trade. You need to be especially keen when it concerns the safety of your money. You need to see what rules have been put in place to ensure you do not lose any of our money if a broker declares bankruptcy.
You need to know then if the brokers are market makers or use ECN. There is a huge impact from this information. A forex broker who runs a dealing desk can trade against your positions. ECN brokers are the ones you may have to choose. But keep in mind that ECN brokers may turn out to be too costly when they charge a commission per each trade. You are now forced to balance your options, between the market makers and ECN.
You need to know more about the forex spread. If they have a low spread, you are in luck, since they do not charge a huge commission. ECN forex brokers usually give very low spreads, because their platforms can tap into a huge pool of liquidity providers. You also have to determine whether the spreads are fixed or variable. Those who have variable spreads normally experience wider fluctuations whenever there are major economic news releases. Spillage is another thing to think about, where your order is filled at a price that is not what you were expecting. You need to have an idea of the kind of spillage that might occur.
These make up the search criteria for a forex broker. You also need to access a demo and micro account for you to practice on. Those who are new to forex trading need to use these accounts first. Thereafter, they can access normal accounts.