Tips On Choosing Your Forex Broker

Every FX traders (Newbie or Experienced) need to open an account with a Forex broker in order to start trading. So what exactly is a broker or brokerage house? To put it simply, a broker is a company that place your buys or sells orders according to your decisions. Brokers earn money by charging a commission or a fee for their services.

When you started to pick up trading or get in touch with trading FX. You may feel overwhelmed and jump the gun at the first brokerage house that was introduced to you. My advise is, don't be lazy and DO YOUR HOMEWORK!!

Deciding on which broker to choose, requires a little bit of research & effort on your part, but i can guarantee you that your time spent will give you the insights of the types of services offer by various brokers.

Is the Forex broker regulated?

When selecting a prospective broker, find out with which regulatory agencies it is registered with. The market is labeled as an "unregulated" market, and it basically is. Regulation is typically reactive, meaning only after you've been bamboozled out of your entire savings will something be done.

In the US, a brokerage house should be registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) and a NFA member. The CFTC and NFA were made to protect the public against fraud, manipulation, and abusive trade practices.

You can do a check with CFTC registration and NFA membership status of a particular broker and check their disciplinary history by checking the NFA's Web site at http://www.nfa.futures.org/basicnet/

Look for those with clean regulatory records and Stay away from non-regulated firms!

In Singapore a brokerage house should be registered with Monetary Authority of Singapore (MAS) holding a Capital Markets Services License. You can also do a check at MAS's Web site http://www.mas.gov.sg/fi_directory/index.html

So guys, do your homework before taking the leap!!

Customer Service

As Forex is a 24-hour market, therefore a brokerage house with 24-hour support is a must! Do a check if they can be contacted by phone, email, chat..etc. Be sure to check the quality of their service before opening an account. You can contact their help desks, by phone, email or chat and see how quickly they respond to your needs. If they don't give you a prompt reply and a satisfactory answer to your questions, you might be wary of opening an account with them. Just be aware that sometimes pre-sales service might be better than post-sales service.

Online Trading Platform

With today's advance technology, most brokers allow you to trade and place your orders over the Internet easily. Get a feel of executing your trades on the trading platform and try out a demo account from a few brokers. Most trading platform should include:

1) Real-time currency exchange rate quotes,

2) Account summary showing your current account balance with realized and unrealized profit and loss, margin available, and any margin locked in open positions.

3) Either Web based (in Java), or a client-based program to be installed on your computer.

A Web based platform is hosted on your broker's web site. and you'll be able to log in from any computer that has an Internet connection.

A client-based platform which you need to install on your computer, will only allow you to trade on your own computer (unless you install the program on every computer you use ).

Usually, a client-based platform runs faster, but most programs are operating system specific. Most brokers offers their trading platform application to run on Microsoft Windows. If you are a Mac user, you won't be able to install the application and will have to use your broker's Web based trading platform.

You must also check if the broker's client-based platform is compatible to your version of Microsoft Windows.

Always open a demo account and test out the broker's platform before opening a real account! If you are not comfortable with the broker's platform, go to the next one!

Bells and Whistles

A Forex broker should offer you real-time quotes and allow you to quickly enter and exit the market. These are minimal requirements of any trading platform. Most brokers now offer integrated charting and technical analysis packages with their trading platforms.

Mini & Micro Accounts

Most US brokers offer "mini-accounts" and even smaller "micro-account" for as little as a couple hundred dollars. In Singapore there are only a couple of brokers offering "mini-accounts"; IG markets, Saxo Banks & CMC Markets.

Broker Policies

1) A prospective broker should at least offer : the seven major currencies (AUD, CAD, CHF, EUR, GBP, JPY, and USD).

2) Rollover charges or Interest charges are determined by the difference between the interest rate of the country of the base currency and the interest rates of the other country. The greater the interest rate differential between the two currencies in the currency pair, the greater the rollover charge will be. Example; when trading EUR/USD, if the EURO dollar has the greater interest differential with the U.S. dollar, then the rollover charge for holding EURO positions would be the most expensive. On the other hand, if the Japanese Yen were to have the smallest interest differential to the U.S. dollar, then overnight charges for USD/JPY would be the least expensive of the currency pairs.

3) Most brokers pay interest on a trader's margin account. The interest rates normally fluctuate with the prevailing national rates. If you decide to take an extended break from trading, the money in your margin account will be accruing interest. Keep in mind that most brokers DO NOT allow you to accrue interest unless your margin requirement is at least 2% (50:1).

4) Nearly all brokers align their hours of operation to coincide with the hours of operation of the global Forex market: 5:00 pm EST Sunday through 4:00 pm EST Friday. Choosing the right broker is an important part of your trading journey. It requires some real effort on your part. Don't just jump in the first one that looks good to you or being introduced to you. Keep looking and trying different demo accounts.
sebastian sim