Before you begin trading in the FOREX markets you will need to set up an account with what is called a Forex Broker. Once you start your search for the perfect broker, you could feel overwhelmed by the number of them who extend their services online. Deciding on a broker requires a little bit of research on your part, but the time spent will give you a much better idea of the services that are accessible and the fees charged by several of this brokers.
Properly speaking, a forex broker is an individual or a company that buys and sells the orders placed by the trader according to his decisions. This way brokers earn money by billing a commission or a fee for their services.
All serious brokers need to be connected with a large financial organization such as a bank in order to provide the amount of funds necessary for margin trading. In the United States a broker must be registered as a Futures Commission Merchant (FCM) and also with the Commodity Futures Trading Commission (CFTC). These credentials will ensure you have peace of mind, knowing that you have security against any case of fraud and abusive trade exercises.
What you’ll always want will be to find a broker who carries out orders quickly and with minimum slippage. All reputable online brokers will extend automatic execution of orders and will let you know their policies regarding slippage. An effective broker should be able to tell you how much slippage can be expected in both normal and volatile markets.
Margin accounts are the foundation of Forex trading, so you better be sure you clearly understand the broker s margin terms before setting up your trading account. You also need to acknowledge the margin requirements and how margin is calculated. It may be the case that margin change according to the currency traded; or maybe the margin is the same every day of the week or perhaps not; so you have to check and get all this information pretty clear.
Additionally some brokers could offer different margins depending on what kind of account you are trading, i.e. a mini or standard account.
One more thing that you should consider is that the trading station software available to you from your broker is really important for your success as an online forex trader. You should get a feel for the options that are available by examining a demo account at a few of the available online brokers. Always keep in mind that above all, you are looking for reliability and the ability to execute well in fast moving markets.
Good trading software should offer automatic trading and could give particular features such as trailing stops and trading from the chart, which is a great plus. Some features could only be available at an excess cost, so be sure you realize what your trading needs are and how much the broker charges to allow them. If you close those extras are necessary for your trading style and formulas it would be a good investment to get them in your arsenal.
Lastly, one more thing you should consider when preferring an online forex broker should be to find out whether trader’s funds are covered or not and what’s the extent of that insurance.
A broker is any person or firm that charges a fee in exchange for executing trades for a trader. A Forex broker does not charge a commission for placing a buy or a sell order the way a real estate broker would charge a percentage fee of the entire price of a sale. A Forex broker is paid according to the spread or the difference between the traders’s bid for a currency, and the vendors’ asking price for that currency. Usually this spread is less than 0.1 or ten pips. (Pips are the smallest movement a currency can make on the Forex. Pips are commonly called mentioned to as points.) The lower the spread, the less a trader pays a Forex broker for a trade.
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