If you are new to Forex trading, it is easy to get caught up in the claims that you can make a fortune overnight by trading currency. As financially lucrative as the market can be, Forex is a complicated market and only with proper training can you become a successful trader. However, just as important as proper training is working with a suitable Forex broker and these 7 tips should act as a good starting point for all beginners to Forex trading and brokers.
1. A good broker will offer a demo account where you can trade in real time without using real money. This is essential for beginners to get the experience of how Forex trading works, without risking any investment. You should only switch to a live account when you are making profitable trades on the demo account and you have enough experience and confidence to invest your own hard-earned money.
2. For good value, look for low spreads. The spread is the difference between the buying price and the selling price of currency and this is where brokers make their money, as opposed to charging a commission. Thus, low spreads mean less money for the broker and more money for you.
3. Look for a broker that offers leverage, which is the ability to trade using the brokers money. For example, if the leverage ratio is 100:1, then having 100 pounds allows you to effectively trade with 1,000 pounds. If you have a successful trade, you can make a very respectable profit whilst only risking a small amount of money. Beware, though, just like without leverage, a small loss can wipe out your investment.
4. Most Forex brokers offer web-based or client-based software trading platforms and it is important to choose which is the most suitable for you. A web-based platform is hosted on your broker’s website, so you can log in from any computer with internet access. A client-based platform, however, is software that you download to your computer, meaning that you only have access from the computer on which the software is installed. Whichever you choose, you will want to have access to real-time currency exchange rates, as well as full details of your account balance whenever you wish.
5. A good broker offers great technical support, which is extremely important for traders of all abilities. If you need help or if there are software problems, you want to be able to speak to someone fast to resolve the issue. Since the Forex market is open 24 hours a day, 5.5 days a week, make sure that you choose a broker who offers 24-hour support.
6. There will be rollover fees for held positions and these fees can vary from broker to broker. Check the fees along with the terms and conditions before committing yourself to any broker to ensure that you choose the one with the lowest fees possible.
7. Forex brokers in the United Kingdom are regulated by the Financial Services Authority (FSA). Apart from its usual supervisory duties, the FSA requires that client deposits be segregated from the funds and accounts of the brokerage firm. In other words, in case of bankruptcy due to fraud or mismanagement, the customer’s funds are safe. If you come across a broker that for some reason does not adhere to this regulation, stay clear of them, as whilst they may appear to be a quality company, you will have little to no backup should something go awry.