This article covers the basics about your choice of forex brokers.
To enable you to trade, you need to open an account with a forex broker. There are many forex brokers out there, but you should do a careful assessment of the brokerage before you open an account.
What do you Need?
The services you will be offered will vary from broker to broker. Some forex brokers offer more extras than others and it is in your best interest to determine this before you open a live trading account. Most brokers offer you a trading platform to do your trades. The platforms normally offer you charts, market news and other required trading tools.
The best way to test the services of your forex broker is to open a demo account. This will give you the opportunity to work with the trading platform offered and decide if it suits your personal style and strategy. Before you open a live trading account with a forex broker, you should ensure that you are being offered suitable software, the best spread and suitable leverage.
Size of Brokerage
Most online forex brokers are linked to a large bank or financial institution. This is due to the large capital required to provide leverage to their clients. The fact that they are linked to a large bank is often in your favour as you will be offered tighter spreads. This is one of the main advantages of opening an account with a large brokerage.
It is advisable to open an account with a brokerage that is registered with the local regulatory body. If you intend registering with a brokerage outside of your home country, you should make sure that it is registered with at least two of the major regulatory bodies. This information should be readily available on the broker’s website.
Forex brokers offer at least two types of accounts. There are brokers who have a wider choice of account types. The smallest account is a mini account. Some brokers offer a micro account especially for beginner traders. The mini account requires a fairly low initial investment, but you will need high leverage ratios in order to make a decent profit since your trading account will have such a low balance.
The more popular account is the standard account. With this account, you will be offered various leverage ratios. The investment capital required for this type of account is generally higher than the mini.
Some of the forex brokers offer a premium account. This account requires a higher initial investment amount, however you receive various levels of leverage, along with additional tools and services.
The currency spread is how brokers earn an income. This is the difference between the bid and the ask prices. The spread offered by different brokers varies greatly.
Forex Brokers Account Margin
You should be aware of the rules that apply to margin. If you opt to use leverage, your broker will have a say in the amount of risk you are allowed to take. This means your broker can choose to close your trade if it feels that you are at risk of a loss. This may not always be beneficial to you, hence you should confirm the rules that apply.