How Choosing the Right Forex Trading Broker can Double Your Profits
The number of traders who have entered the forex market in the last 12 months is staggering. Many have been attracted by the ability to make positive returns while the stock markets plummet. Others are attracted by a market which is open 24 hours a day. Either way, thousands of traders each day are signing up for an account with a forex trading broker. In this article we will examine factors which traders need to take into account when choosing a forex trading broker.
Over the recent 12 months, there have been several unregulated forex trading brokers who have been shut down by the regulators for trying to defraud clients of their funds. One of the most important things to check with your forex trading broker is that they are regulated by the appropriate authorities. So, if you are in the UK, the relevant organsation is the Financial Services Authority, and in the US, it is the National Futures Association, alongside the Securities and Exchange Commission.
A key consideration in choosing your forex trading broker is how much commission they will charge you to make a trade, or how wide the 'spread' is between the bid price and the ask price. Typically, the spread on major currency pairs will be between 2 and 4 pips. Spreads on currencies such as USD/CHF and EUR/GBP will be around three or four pips. Currency dealers with spreads wider than five pips for these currency pairs are best avoided.
Traders from stocks and options who move into forex trading will have a new concept to deal with, called leverage. Each forex trading broker will offer varying levels of leverage. Leverage can drastically increase your forex profits, however it can also magnify your losses. For example, if a broker offers 100 times leverage, this means that if you have a balance of $1000, you can trade with a notional $100,000.
Similarly, if you have a $10,000 balance in your currency trading account, and your forex trading broker offers leverage of four hundred, then you can trade with a notional amount of $4,000,000. The risk of using a lot of leverage means that if your trade is an unprofitable one, then you could get wiped out very quickly, and end up broke.
In the currency market, currency prices move very quickly, in miliseconds, so it is crucial that your forex trading broker can ensure that your trades are executed just as fast, and at the price that you require. So for good measure, before you open a realtime forex account, you should trade with a demo account, and test how good the execution prices are, and whether they reflect the true prices in the currency market.
Another consideration to bear in mind is that you will need a forex trading broker who will provide you with a suitable charting and analysis programme with the trading account. Most brokers today offer MetaTrader charting with their platform, and this is a very useful addon for a forex trader. This enables the trader to take a trade directly off the charts, and ensures that the trader gets the best possible trade position. - 23212
Over the recent 12 months, there have been several unregulated forex trading brokers who have been shut down by the regulators for trying to defraud clients of their funds. One of the most important things to check with your forex trading broker is that they are regulated by the appropriate authorities. So, if you are in the UK, the relevant organsation is the Financial Services Authority, and in the US, it is the National Futures Association, alongside the Securities and Exchange Commission.
A key consideration in choosing your forex trading broker is how much commission they will charge you to make a trade, or how wide the 'spread' is between the bid price and the ask price. Typically, the spread on major currency pairs will be between 2 and 4 pips. Spreads on currencies such as USD/CHF and EUR/GBP will be around three or four pips. Currency dealers with spreads wider than five pips for these currency pairs are best avoided.
Traders from stocks and options who move into forex trading will have a new concept to deal with, called leverage. Each forex trading broker will offer varying levels of leverage. Leverage can drastically increase your forex profits, however it can also magnify your losses. For example, if a broker offers 100 times leverage, this means that if you have a balance of $1000, you can trade with a notional $100,000.
Similarly, if you have a $10,000 balance in your currency trading account, and your forex trading broker offers leverage of four hundred, then you can trade with a notional amount of $4,000,000. The risk of using a lot of leverage means that if your trade is an unprofitable one, then you could get wiped out very quickly, and end up broke.
In the currency market, currency prices move very quickly, in miliseconds, so it is crucial that your forex trading broker can ensure that your trades are executed just as fast, and at the price that you require. So for good measure, before you open a realtime forex account, you should trade with a demo account, and test how good the execution prices are, and whether they reflect the true prices in the currency market.
Another consideration to bear in mind is that you will need a forex trading broker who will provide you with a suitable charting and analysis programme with the trading account. Most brokers today offer MetaTrader charting with their platform, and this is a very useful addon for a forex trader. This enables the trader to take a trade directly off the charts, and ensures that the trader gets the best possible trade position. - 23212
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For more information about foreign exchange dealing and choosing a reputable forex trading broker go to Forex Village, a leading forex trading information web portal.
posted by X - Men @ 3:32 AM
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