There are so many online brokers now that choosing between them is like selecting an insurance representative: thereís a lot to look at, but sometimes it just comes down to who you like.
All online brokers within the United States are regulated by the Commodity Futures Trading Commission (CFTC) and National Futures Association (NFA). Other governments, of course, have their own regulating agencies.
If youíre contemplating working with a broker from another country, consult their rules and make certain theyíre on the up-and-up; there are people within the Forex market right now who are somewhat akin to the snake-oil salesmen traveling the frontier during the previous century, and itís very much a case of ìlet the buyer beware.î
Computer security has come a long way in recent years, and any reputable broker offers the highest possible, so that shouldnít be a deciding factor.
Most brokers offer both standard and mini Forex trading accounts. Some even offering ìmicroî accounts (one-tenth of a mini) to ease the novice trader into the feel of winning and losing real money without blowing their budget while theyíre learning. So thereís not much to choose from there, either.
But be careful of hidden charges. The best brokers make their money on trading spreads, and a small overnight renewal fee for trades that continue past a certain time. Some others charge for whatever they can, including the online live feed for up-to-the-second charts and price quotes, or withdrawals and deposits, or a monthly maintenance fee.
Are their spreads competitive? Three to five pips is the average in the U.S.; anything more is highway robbery. Are their spreads fixed or do they fluctuate with the time of day or the amount of money in your account? Are your trades executed at the stated price or is there some slippage?
Knowledge is definitely power in this game. So do they offer training or do they let you sink or swim alone? Does their free training teach you only how to run their software, or do they cover in-depth topics such as fundamental and technical analysis? Do they have a library of online resources you can study, with articles such as this one to teach you how to trade?
Do they offer tools to help you analyze the market? These could include an announcement calendar, with the dates of when different countries publish their economic statistics (unemployment percentages, interest rate hikes or drops, balance of trade data, etc.). Are their charting services accurate to the second or is there a delay which could be fatal in scalping? Can you analyze support and resistance points and calculate Fibonacci retracements easily?
The best online brokers offer advanced trading tools. These include trailing stops, which follow behind a rising or descending price to lock in your profits. Another is hedging, where you can place two entry orders for the same currency pair, one long, the other short, to take advantage of whichever direction the market moves; many brokers will only accept one trade per currency pair, and placing a second trade will cancel the first one.
Finally, this is a small thing, but how convenient is it to fund your account or withdraw profits? Can you link your trading account to your bank or an online payment service such as Paypal? Or must you wait for a check through snail-mail?
Youíll work with a good broker for years. Choose wisely now, and you wonít be sorry later.
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