With the popularity of the foreign exchange market on the rise, the number of forex brokers is steadily increasing. This is highly beneficial to traders as there is a wider option of brokerages from which to choose. However, before choosing a broker you must take in consideration some important points. If you do not examine these factors there is a chance you will not be receiving value for money.
The filling of orders
When trading you will be required to fill stop loss and take profit orders as part of risk management. In order to be an effective trader you must identify when and how these orders will be filled. As a forex brokerage helps you with this activity, you must determine if these stops are guaranteed in their services. If they are, what are the terms and conditions in the contract? This information should be available on the broker’s website. If not on the website, you should be able to obtain the information through customer support.
The leverage levels offered
Leverage must be used with caution as it increases risk in a trade. Many new retail traders will use leverage as a means of gaining large profits on minimal trading account capital. While leverage can be highly beneficial if a profitable result is experienced, it can lead to detrimental losses if a negative outcome results. In fact, a bad trade with leverage can see even more losses experienced than if leverage had not been used.
The maximum amount of leverage offered to traders will differ from broker to broker. Australian forex brokers are able to offer leverage of 200:1 or higher, where US brokerages have been set at a maximum offer of 50:1. This is generally due to broker regulation by governing regulatory authorities.
The payment structure of Australian forex brokers
The majority of online forex brokers will complete trades without charging a commission for this service. These brokerages will earn their income off the trade spread. A spread is the difference between the bid and ask price on a trade. However, there are some brokerages that choose to offer a per-trade commission. When faced with these two options you must consider which is better for your trading requirements. Many traders will choose a spread-based option, but calculations may reveal that a set commission may be more beneficial.
Forex broker customer support service
As the foreign exchange market operates on a 24 hour trading timeframe, it is important that the forex broker customer support is available on a 24 hour timeframe. This all day and night support is required as you may need your broker to execute an impromptu trade for you. There may be an instance where you require assistance in judgement on an open trade and require broker advise.
It is vital that you are aware of all support service methods of communication to determine whether this brokerage is most suited to your needs. The ideal broker will offer a live chat and telephone option and not an email or fax service.