Whilst forex trading may once have been solely a professional industry that required for someone to spend years building up their experience before they traded is now open to, in essence, the entire public.
To ensure that your forex trading time is as smooth as possible, it is important that you choose a reputable and suitable forex broker and asking these 6 questions should help to make sure that broker you choose is as suited to your needs as possible.
1. Are they regulated? Whilst it is not a necessity for a forex broker to be officially registered or regulated with any authority, should you decide to use one that is regulated by the Financial Services Authority (FSA) in the UK, then you stand a much greater chance of receiving your money back should the broker turn out not to be as truthful as a company as they first seemed.
2. What is their trading platform like? Whilst the industry standard for online forex trading is the Metatrader platform, not every forex broker uses it and therefore it is important that the platform that they do use is suitable for your needs (which can vary depending on your how in depth you want to take your trading).
3. Do they have micro accounts? There is no set amount of money that is required before trading can take place, but it is generally seen that anything over 1,000 pounds is a good, basic amount for beginners. However, this amount of money is not available to everyone and therefore to combat this, some forex brokers provide the option for beginners to open micro accounts, which allow for the same trading principles of a standard account to take place, but on a smaller scale.
4. What is their customer service like? It may not seem an important question at first, but you will soon realize how important it is when you are about to buy and sell a currency at 1.00am in the morning and the platform has gone down, seemingly crashing completely. Does the forex broker have a 24-hour customer service helpline? Do they offer e-mail support? How about live internet chat help?
5. What currencies do they offer? A large number of forex brokers will offer a wide range of different currencies for you to trade with, ranging from the most prominent to the most obscure. For a beginner especially, it is important that the forex broker offers at least the 7 primary currency types, according to the Bank for International Settlements, which are the Australian dollar, Canadian dollar, Swiss Franc, Euro, Great British Pound, Japanese Yen, and US dollar
6. How much do they charge per transaction? The way that transaction costs are calculated is by a term called pips and the greater the number of pips that the forex broker requires per transaction, the smaller the actual amount of money you make on the trade.
For example, as a general rule of thumb, for the trading of the Euro and US Dollar currencies, the number of pips is very often 3, although 4 and 2 are both possible to find. Therefore, if 4 pips were apparent on these currencies, you would make less money, but if you found a broker that only required 2 pips, you would stand to make more money per trade.