Working with a Forex Broker
A broker is someone who works on your behalf to handle any type of financial exchanged. A Forex broker is a company who helps people to trade in Forex. He brokers (or acts as the go between) the deal. He trades in the currency market for the trader, acting on the trader’s instructions.
With untold numbers of Forex brokers available, how do you choose which Forex broker you should work with? Choosing a Forex broker shouldn’t be done the same way you choose a plumber out of the phone book.
You want to make a wise choice since you’re basically trusting your financial investment into the Forex broker’s hands. If he’s not capable of handling Forex wisely, or worse, if he’s capable but not on the up and up, you stand to lose everything you invest. You want a Forex broker with experience, one who will help you make the best possible moves in the currency market.
Most brokers that you will want to consider are “execution only” brokers. This means that they will do whatever you tell them. They won’t give you advice on whether your trade is a good idea or bad. Some charge commissions, but that is becoming increasing rare. Most make their money on the “spread” which is the difference between the price that he buys and sells the currency. This is one of the key things to look for; a narrow spread.
Check out where the brokers is registered. Is it in a country that has high ethical standards? Is he regulated by a recognised trade body or government regulator? I always look for a broker who is obliged to keep client money in a separate account. This means that if the broker goes bust your money is still safe. It may also be insured against pilfering.
Check with your friends who use the services of a Forex broker. Who do they recommend you work with? Is there a Forex broker they know of that you should avoid? Even though you trust your friends to have your best interest at heart, you don’t know if the Forex broker has a solid track record. Check out websites like babypips.com or forexpeacearmy.com. There are loads of reviews.
The great thing is that it is a buyers’ market. Feel free to download as many demo accounts as you like. Many will be the same MT4 platform. Many companies will call you. That can be good. Check out whether the person is just trying to get you to lodge money in your account or whether he/she is trying to help. Tell them you are new and ask for advice. Ask if they offer any training.