| We have had people ask us how to choose a | | | | Forex market is labeled as an "unregulated" |
| Forex broker for online forex trading. Here we will | | | | market. However, the better brokers will typically |
| discuss in detail what we think you should know | | | | be registered as a Futures Commission Merchant |
| about choosing a forex broker. | | | | (FMC) as well as being regulated by the |
| Low Spreads or Transaction Fees | | | | Commodity Futures Trading Commission (CFTC) |
| Online Forex Trading Transaction costs are | | | | and a member of the National Futures Association |
| calculated in pips. The lower the better. Generally, | | | | (NFA). |
| spreads are currently between 2-5 pips on | | | | Forex Brokers Trading Tools and Research |
| average. Be careful of forex brokers advertising 0 | | | | Better brokers have trading tools available for |
| pip spreads. They are likely charging fees in some | | | | their account holders to aid them in their forex |
| other way. | | | | trading. Also, most brokers will have some form |
| Leverage Options and Margin Requirements | | | | of research available or displayed directly on their |
| Leverage can be a good thing, or a bad thing, | | | | trading site. |
| depending on how you use it. Better brokers will | | | | Online Forex Trading Platform |
| have different leverage options, meaning a | | | | Most, if not all, Forex brokers allow trading over |
| selection of leverage ratios. Perhaps a 400:1 | | | | the Internet. The backbone of any online forex |
| leverage ratio is too high for you. Do they have a | | | | trading platform is their software system and as |
| 200:1, or 100:1 option? You need a forex broker | | | | such is very important. |
| that can offer the leverage values you want. | | | | Forex Brokers Available Currency Pairs |
| Most online forex brokers pay interest on a | | | | Make sure that the prospective broker offers, at |
| trader's margin account. Keep in mind that most | | | | minimum, the seven major currencies (AUD, CAD, |
| forex brokers do not allow you to accrue interest | | | | CHF, EUR, GBP, JPY, and USD). |
| unless your margin requirement is at least 2% | | | | Minimum Trading Size Requirement |
| (50:1). | | | | The size of one lot may differ between forex |
| Forex Brokers Customer Service | | | | brokers, spanning from 1,000 to 100,000 units. If |
| Almost nothing is as valuable as good customer | | | | you are only starting an account with a couple |
| service, especially with online forex trading. Even if | | | | hundred dollars, you'll want to find a forex broker |
| you don't use it, you should have access to some | | | | that allows mini lot trades. |
| minimum service requirements. Does the Forex | | | | Rollover Charges, Interest, or Swap Fees |
| broker have 24-hour support? Can you contact | | | | Rollover refers to the process of closing open |
| them by phone? Email? Chat? When you talk to | | | | positions for today's value date and opening the |
| them, do the people seem knowledgeable? A | | | | same position for the next day's value date at a |
| word of caution... service might be better before | | | | price reflecting the difference in interest rates |
| you open and fund a real money account. If you | | | | between the two currencies. This is also known |
| find that to be the case, withdraw your money | | | | as Interest or Swap Fees. |
| and move on to a new forex broker. | | | | Forex Broker Trading Hours |
| Quality of the Forex Broker | | | | Online forex trading occurs 24 hours a day |
| You want to make sure you have a quality | | | | between Sunday evening and Friday evening, so |
| broker. Forex brokers are not required to be | | | | you will want to select a forex broker that will let |
| registered or regulated with any agency, since the | | | | you trade during all market hours. |