Choosing a reliable forex broker is one of the first steps you should take when you start trading. As in any intermediary market individual trades happen with the mostly with the help of currency brokers. So before you start online trading you should open a forex account. Talking simply the broker is the link connecting you with market, i.e. the medium containing buyers and sellers. This broker list and some comparison criteria below should help you before opening a forex account.
The last thing you would like to experience is to lose your deposit due to being scammed by the broker you trade your account with. So generally here are the main guidelines recommended to pay attention to:
Generally it is recommended to open a live account with the forex broker that is the regulated by the financial and controlling bodies of the contry it is based in. For example, the regulatory body is NFA and CFTC for U.S. based ones, FSA for UK brokers, FDF for the swiss. However it is not recommended to choose the U.S-based retail brokers regulated by NFA and CFTC because they as they are excessively over-regulated, have reduced leverage unlike all other international spot forex dealers and other unfavourable rules such as no-hedging. As a result your trading conditions will be rather bad in comparison to swiss or UK-based brokers often having the same brand, for example, Forex.com UK, FXCM UK, Alpari UK – though they all have U.S. based offices. The difference is in the trading conditions affected by different requirements imposed by the regulatory bodies. There are also offshore brokers that are not regulated and promise the best trading conditions for their clients. The problem is there are many unethical dealers there but some of them operate for long-time and have a good track-record.
You need to know which types of execution and they provide you with any account. Basicly depending on their business-model they can be market-makers (dealing desks), NDD (non-dealing desk) and ECN brokers. In our reviews you will be able to get this information as well as the execution speed and dealing quality.
Does the broker charge commissions for your trading volume or the cost of trading is accounted in spread? Is the spread variable or fixed? Usually if you trade on the spot forex market the dealer will get its profit in the form of spread. You should be looking for the broker offering the low spreads and commissions. The lower – the better. This will help keep your trading costs lower which is especially important for traders using scalping systems. Generally the closer you are to the top-tier of the forex market the lower spreads and faster execution you get. Big ECN brokers providing direct market access through Currenex and other types of ECNs require a bigger account to be able to start but are very beneficial for scalpers. Retail brokers which are mostly all operate as market-makers or dealers are not recommended for scalpers and news trading when the market volatility goes up substancially.
The lower the slippage – the better. In real market conditions slippage is a norm. Just take a note that it should not be big. Just pay attention to how big is your slippage. 1-3 pips can be bearable for some market situationsm just not choose the broker who would create 20-40 pips as if it is a norm. Forex market is unregulated but this should not be an excuse for the company to profit from manipulating slippage.
Almost all forex brokers allow you trade via internet relatively easily. The core of each trading platform is the order-book system. Thus the trading software is very important. You can get get acquainted with the features of any particular forex trading platform by opening a demo account.
Study the the screen of the platform. It should allow you to see the currency rates in real-time, contain the shortcut details of your trading account, show your balance with realized profits and losses, the available margin level and the sum locked by the open positions.
To learn more about different trading platforms read our review.
Depending on your trading experience level different types of the forex account exist that you can choose from. If you are just learning forex trading then the best choice is to start with the broker that offers micro and mini accounts so that you could get the idea how trading real money works and acquire basic trading skills and necessary experience.
Next: Forex Account