How To Choose Your Broker | ForexGen Tips

So you've finally made
the decision to trade the forex market and want to open an account with a broker, but where do you start? If you don't already know the forex market is still largely unregulated although new guidelines laid down by the National Futures Association in the US about capitalization, finally came into effect on 21st December 2007. They are an attempt to force out brokers with insufficient funds and to offer traders better protection.



With so many different choices out there, how does a Forex "newbie" choose a broker? Chances are most new traders have no idea on where to start - and that's RIGHT ! We're here to help! We have put together a simple three step process to help you find a broker that YOU think will best suit YOUR needs. You might be thinking now, "Three steps? That's it?"


First Step :- Do the market research and ask yourself

1- Is this broker registered with any regulating authorities? Check to see if your broker of choice is registered with the National Futures Association (NFA) or Commodity Futures Trading Commission (CFTC) if they're based in the US. If the broker is based in the United Kingdom, check with the Financial Service Authority (FSA). If the broker isn't registered with any of these or any other recognized regulating firm, then you may want to think twice before signing up with them.

2- Dealing Desk or Non-Dealing Desk broker? Does the broker offer fixed or non-fixed spreads? How wide are the spreads? These questions are more significant to those traders who like to take quick profits on a few pips. Large and/or variable spreads can cut into the profits of this type of trading strategy.

3-How much or how little leverage will a broker give you? before deciding on how much leverage would be suitable for your trading style. The phrase, "Less is More," can save every newbie.

4- Does this broker credit or debit daily rollover interest? Some brokers either do both, deduct interest, or neither. This information is important to traders who hold positions overnight.

Second Step :- Compare brokers

Let's not beat around the bush, now you need to compare the brokers you hade already choosed.

Third Step :- Open Demo Account

Pick at least two brokers that fits most of your criteria and open up demo accounts. Trade in different market environments. Learn all the different features of each trading platform. If you have questions, don't be afraid to ask. Many brokers have excellent customer service support and would be happy to answer your questions.
Most demo trading platforms are very similar to their live counterparts, but not exactly the same. There may be a difference in speed of execution, slippage, and platform reliability (most of the time live accounts are more reliable than demo accounts). When you do have your strategy down and you are ready to move to a live account, start off small, test the waters, and see if this particular broker will suit your trading needs.