How to Choose Your Forex Broker – 4 Key Factors to Consider While Evaluating Brokers
By Ian Drew
How to Choose Your Forex Broker – 4 Key Factors to Consider While Evaluating Brokers
By [http://ezinearticles.com/?expert=Ian_Drew]Ian Drew
Just like any other market, in Forex market too you need a forex broker to carry out your deals. You will be closely interacting with your broker to perform your transactions. Hence it is important that you spend some time and effort in choosing a broker best suited for your needs. Here are a few things to keep in mind while selecting your broker
1. Spread
In Forex, spread is calculated in terms of Pips. Pips refer to the difference between the rate at which a currency can be bought and the price at which it can be sold at any given point of time. Unlike stockbrokers, Forex brokers do not charge a commission. They make money on this spread. Spread will vary from broker to broker and lower spreads mean greater savings for you.
2. Reputation
Forex trading is a risky business. Before you invest your hard earned money in the market you must ensure that your broker is reputed. The importance of your broker having the backing of a reputed institution cannot be overemphasized. Forex brokers are normally tied to large banks or lending institutions due to large amount of capital required or the leverage that they need to provide. Another requirement which you should crosscheck is - whether your broker is registered with the Futures Commission Merchant (FCM) and regulated by the Commodity Futures Trading Commission (CFTC). All this information along with the financial position of the forex broker will be available on their website or in the site of the parent company.
3. Tools and support
Similar to other market brokers, Forex brokers too offer number of trading platforms to their customers. These include real-time charts, real time news and data, fundamental commentaries and economic calendars. Before you begin trading it would be worthwhile to test the various platforms offered. The more variety of such services a broker offers the better it is for you.
4. Range of Leverage Options
Leverage is expressed as a ratio between total capital available and actual capital is the amount your broker will lend you for trading purposes. To quote an example a ratio of 250:1 implies that your broker will lend you $250 for every $ 1 of actual capital. If you have limited capital, choose a broker who offers a high leverage. If capital is not a constraint choose one with a wide variety of leverage options, as it will enable you to vary the amount of risk you take. For example, high leverage (and therefore greater risk) may be preferred for less volatile currency pairs.
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