Choosing a foreign exchange broker
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Choosing a foreign exchange broker

Few things the savvy investor should look for ...

 
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The Foreign Exchange is a very specialized form of day trading, and the largest in the world. Choosing a qualified broker who has been specifically trained in FOREX is essential to success. Even so, always check with other traders and trading forums to see if a broker you are interested in has appeared reputable to other FOREX traders. In the meantime, here are a few things the savvy investor should look for in a Foreign Exchange Broker:

Look At The Spreads
FOREX brokers don’t charge commissions, so the amount of the spread ( the difference between the price which currency can be purchased, and the price it is sold), determines the brokerage fees paid by the investor. Look for the lowest spread possible.

Look At the Broker’s Financial Backing
Only choose a broker who is backed by a large band or financial institution, and always be sure he/she is registered with both the Commodity Futures Trading Commission (CFTC), and the Futures Commission Merchants (FCM).

Look At The Options Available
Find a broker who offers a variety of leverage or lending), options. This allows the trader to vary the amount of risk they are taking at any given time.

Look for Services That Fit Your Trading Style and Budget
FOREX brokers generally offer two types of accounts: the min-account that allows you to trade for as little as $250, and the standard account, which usually requires an initial investment of $2,000. Of course high-end investors also have the option of a more elite premium account, which offers the most investment options. Choose a broker that is willing to explain all the pros and cons of each investment account they offer, to help you choose the best investment options for you.

Watch for Sniping and Hunting
Some brokers are know to prematurely buy or sell at a given price point in order to increase profits. These unscrupulous brokers should be avoided. Check with other traders for tips on brokers who may be sniping or hunting.

Ask About Market Tools and Research
Most FOREX traders offer clients a wide range of trading platforms, which may include:

  • real-time charts
  • technical analysis tools
  • economic calendars
  • real-time news
  • technical commentaries

Be sure to find out exactly what kinds markets tools and research options a broker offers before engaging their services.

Ask The Broker About Their Margin Rules
When you trade with borrowed funds, your broker has the right to interfere with your trades in order to protect the brokerage firm’s investment. This can be quite costly to the trader. Be sure you completely understand your broker’s margin rules clearly, and watch for unscrupulous trading practices.

As in any trading practices, finding the right broker can make the difference between big profits, and big losses. Choose carefully to ensure that your investments will grow safely. (don)
 
 
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