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Brokers And Forex Market
As in the stock market, commodities market, etc., brokers in the FX market are numerous. You need the right broker if you hope to succeed in the FX market. This article gives you insight on how to choose the right broker given your FX platform preferences and your FX trading needs. Here are things to look for in an FX broker and reasons why these considerations are important:
Trading cost is an important factor in selecting a currency broker. Currency brokers profit from your trading via what is called the spread even though they do not charge commission. The spread is the difference between the purchase price of a currency and what it can be sold for at a given point in time and it is calculated in pips. You save money when the spread is low because the lower the spread the less you pay to the broker. Unsurprisingly, spreads vary in the currency market just as much as stock broker commissions in the equity market.
Consider reliability in choosing a broker. You want a currency broker who is associated with a respected institution. Unlike equity market brokers, most currency brokers work for large banks or other lending institutions. Be sure your currency broker is registered with the Future Commissions Merchant (FCM) and that they are regulated by the U.S. Commodity Futures Trading Commission (CFTC).
Forex brokers offer many different trading platforms for their clients - just like brokers in other markets. These trading platforms often feature real-time charts, technical analysis tools, real-time news and data, and even support for trading systems. Before committing to any broker, be sure to request free trials to test different trading platforms.
Leverage is an important consideration. Leverage is the amount a broker will lend you for trading purposes is important when you have limited capital. Leverage is measured as the ratio between total capital needed for a transaction and the actual amount you have on hand (the higher this ratio the greater the leverage). Because price deviations are small (fractions of a cent), large volumes of capital are needed in currency trading. You should select a broker who makes capital readily available for margin trading.
Flexibility in service offerings is important. The amount of capital in your account determines what tools are appropriate to your needs and the amount of leverage you require. For example, the smallest account is called a mini account. With this type of account you must trade with a certain minimum value. And these accounts offer a high amount of leverage.
What to look for in forex brokers , your broker has to say in how much risk you take. As such, your broker can buy or sell at its discretion, which can be a bad thing for you. Let's say you have a margin account, and your position takes a dive before rebounding to all-time highs. Well, even if you have enough cash to cover, some brokers will liquidate your position on a margin call at that low.
The currency market is the largest market in the world and many people are entering this market every day. Before you begin trading, find the right broker and a strategy that is right for you. Remember to consider cost, reliability, platforms, leverage, flexibility, and risk in selecting a broker. Setup a demonstration account and experiment with play money before committing real capital.
To find out more about what other forex traders think about various forex products and services, go to Forex Reviewer Central.