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If you want to trade in the forex market, you need to
find a broker who can work for you. A broker is someone who executes trades
according to what you want; he or she earns a commission on each trade.
However, there are a lot of brokers, so they're competing for your business
and it can be hard to figure out which is best for you. Following are some
tips to help you find the right one.
Focus on the following:
Transaction costs.
Brokers are paid by the bid/ask spread in forex trading. You should have no
hidden fees or charges. However, you might incur additional charges if you
want to access certain reports or optional services.
The smaller spread, the better. Pip spreads vary by broker and may also vary
by currency pairs, so do some homework and find the best competitive rates.
Currency pairs available.
Every broker you look at should at least have the following seven currencies
in play: USD, JPY, GPB, EUR, CHF, CAD, and AUD. If you plan to trade New
Zealand dollars or Danish krones, as well as other less popular currencies,
your broker should be able to do so.
Immediate orders' execution.
Because currency prices are constantly fluctuating, any delay in executing
orders could cut profits or add to your losses. Of course, a delay may also
help you, but for the best control, you should look for a broker that
consistently executes your trades at the price you see on your screen.
Although an occasional delay is probably unavoidable, if it happens
frequently, you should avoid that broker or find yourself a new one.
Free tools available.
To best analyze currency prices, plan entry and exit points, and spot
trends, you need to be able to access charts and technical analysis tools.
Most brokers offer basic services free of charge and offer an expanded
choice of tools for an additional fee.
Minimum account balance.
If you are a small investor, you'll need a broker that won't require a large
balance to open an account. Most brokers today will let you open a small
account with as little as $300.
Margin requirement.
The lower your margin requirement, the more leverage you have. If a broker
allows you to use 100:1 leverage, this means that can trade $100,000 in
currency for just $1000. You can use the margin to rack up big profits.
However, don't use this tool to excess, or you could find yourself in debt
very quickly.
Excellent customer service.
Traders often don't think to look for this when they choose a broker. Later
on, they regret it when they need help. If a broker's services are high
quality, he or she should respond quickly to any questions you may have. You
should have knowledgeable representatives available 24 hours a day by phone
or e-mail.
Trading platform is user-friendly.
Some brokers require that you download a trading program to your computer in
order to make trades. Others let you make trades directly over the Internet.
Try out a few brokers you think you like by signing up for a free
demonstration account. You can trade with play money while you test out
their software; in this way, you'll see which one works best for you before
you risk any of your hard-earned cash on something that might not be best
for you.
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