How To Pick A Good Forex Broker

If you are doing forex trading, then you know the importance of a good forex broker. This is especially true if you are just starting out and do not have a lot of experience. A good forex trader will work with you and provide the information and tips you need to make the best trading.

Even though your forex broker will be offering you tips and advice, they do not make the final decision to buy or sell. You do. Therefore it is important you know what you want and make your own decision. It is ok to ask a lot of newbie forex questions to your broker if you are new to forex trading but make your own mind and accept the results.

As you can see, a good forex broker is important as you will be seeking his/her advice and you certainly want someone who’s the best in the forex business. So how do you go about choosing one? Here are some tips to help you

1. Registered Forex Broker

It is important that your forex broker is a registered member of a financial institution. Ask for his/her credentials. You want the assurance that he/she will be able to act on your decision and access the funds needed.

Check with the NFA (National Futures Association) if you doubt your forex broker is registered.

2. On-call Broker

Your forex broker should remain in contact at all times. Whether it be via cell phone, email, instant messaging etc. Your broker should know forex trading is a 24 hour standby job and fluctuations in trading can happen quite quickly. Therefore it is important you can get hold of your forex broker when you need him/her

3. Experienced Broker

Before you select a forex broker, ask for his/her references. Call those references and ask them about their opinions on the forex trader. By doing this, you can assert whether the forex broker is experienced and whether he/she is able to execute a trade effectively and successfully.

It would be best to contact more than one references to get an accurate feedback on the forex broker.

4. Cost of Broker

Many people when looking for a forex broker are overly concerned about the cost. Usually more experienced forex brokers as well as those with a good track record of successful trades demand a higher price.

My recommendation is to select a few forex brokers that you are comfortable with, have credentials, have a proven good track record. Once you have done that, then you can talk about cost.

Sometimes the price for a forex broker with the above qualifications can be high, however you need to keep in mind, they can help you make more money in the long run and offset the cost.

Where to find a Forex broker dealer

You can find a Forex broker dealer online or offline. The only Forex broker dealers you will find in your own areas will be banks and large companies who offer foreign investing. Most smaller dealers and brokers are not going to offer foreign investing, as they don’t have the best connections to do so. A Forex broker investor can be found online, easier than offline.

To find a Forex broker dealer online you want to use the links on this page to take you to well known brokers or you can also use the links on this page to search the web to find additional broker of Forex trades. Brokers of Forex trading will be interested in telling you all about where you can invest money now, tomorrow and where the hottest investments are. We advise you to investigate and learn about any company where your are planning on working with a broker of foreign exchange before putting your hard earned money out there.

You need to realize there are a number of companies, those who are Forex broker dealers, who are going to involve you in a scam. Don’t be alarmed, because this could also happen with brokers dealing in stocks, and in other hometown investments as well, but you should be aware of it. Forex broker dealers who are involved in scams will ultimately try to push you into making decisions faster and to making your investments without giving you the ample time to learn about where your money is going or what your possible rates of return are. Forex broker dealers who are going to take the time to explain what is going on, and how it will happen are more often honest Forex broker dealers you might want to consider doing business with.

Forex broker dealer is a person who will be your main contact in the firm or in the company; you are going to invest your money through. Most all-stock trades do ‘go through’ a company or a broker so the trade can take place. The same principles of the stock trade in your country will apply to the Forex trading systems, but the Forex broker dealer is going to make the transactions happen on a worldwide system. The worldwide system involves the name Forex, which stands for foreign exchange and trade. The trade of currency and stocks worldwide is going to present you with many more options about where you can invest money and how you can invest money to build your person wealth.

Forex Broker Selection

To make real money on the international forex market, you will need to be in a position to take smart, informed decisions and this will depend on your advisors and your training. While training is discussed else where in this series, in this piece we will talk about the selection of a forex broker, which is also critical to your success as a forex trader. Now what is a forex broker? For a beginner in the business of forex trading or e-currency trading, the forex broker provides access to the forex market and also acts as an intermediary between you, the trader, and the market. Additionally, the broker or agent will offer advice to clients to enable them to improve their forex trading ability.

A forex broker will explain various forex trading strategies to his or her client and will assist in their process of putting these strategies to work. The advice you receive from your broker will basically include technical analysis approaches and research methods followed by experienced traders and brokers that boost the client trader's performance as a forex trader.

In the earlier days of forex trading, the banks and large financial institutions had sole access to the forex market, but now with the advent of the internet technology, things have changed. As more novice traders have taken up forex trading as a home based business, the forex brokers are also realizing the importance of this trend and moving away from the conventional banks. More and more forex brokers hrough internet based businesses and offer their clients a complete suite of services based online. Today's forex brokers recognize that their customers are no longer the rich individuals or large institutions and have tailored their forex trading strategies to conform with the needs of their new, home based, middle class client. They know that the stakes for this type of client are lower and that they wish to maximize their profit but have a different appetite for risk. Also, in terms of certification, it is useful to work with an NFA (National Futures Association) member broking house.

Forex brokers that offer sound advice and have well recognized and verified credentials are, of course, the ones that you should be looking for. Additionally, don't rely blindly on the advice of a forex broker. If it sounds too good to be true, it probably isn't. Learn to trust your own judgment and ask your forex broker lots of questions. Reliable brokers will not be bothered with this.

Let your needs guide you and your trading level help you choose the right broker for you. It will typically depend on whether you are a novice or an experienced forex trader. There are many forex trading brokerage firms that are targeted towards the beginner in forex trading. These will generally offer detailed research material and plenty of advice for the newbie trader. Additionally, these types of firms will provide access to forex trading software that will simulate the real trading environment and help to make the forex trader accustomed to using the tools of the trade.

For more experienced forex traders, this type of detailed instructions may not be required since these individuals will know their way around the forex market. For them, there are different forex brokerage firms that will offer advice with a greater emphasis on the logic behind the forex trading strategy and will go into greater depth on this matter. To find the best fit, read about various forex brokers, ask friends, ask about the forex broker's package offering and take the trials offered by a few of the online forex trading firms.

Online Forex Brokers List

A comprehensive forex broker list includes investment banks with dealing rooms, commercial banks with treasury operations, and online brokerages that serve a larger market. The investment banks with forex trading capabilities include Morgan Stanley, Merrill Lynch, Goldman Sachs, Salomon Smith Barney, Lehman Brothers, Credit Suisse First Boston, Deutsche Bank, JP Morgan, Prudential Securities and Bear Sterns).

Some of the brokerage services are not directly accessible for all customers. For example, inter-bank market dealers and treasury operations in commercial banks handle large customer orders themselves.

Some of the top commercial banks for forex brokerage, having inter-bank and treasury operations, include JP Morgan Chase Bank, Bank of America and CitiBank.

A list of online forex brokers includes: Forex Capital Markets, MG Financial Group, CMS Forex, Global Forex Trading, GCI Forex Direct, Forex.com, GAIN Capital, Real time Forex SA (Geneva), Global Forex, Commerce Bank and Trust, FX Solutions, Forex MHV, swissDirekt (Swiss), Goetz Financial Forex, NY Broker Borsentermin AG, Act Forex, Online Trader, Shield FX Online Currency Trading, Forex Trade Signals, CMC Group PLC, Foreign Currency Direct Limited (UK), FX Advantage, FXCM, Forex Millenium, ACM REFCO, REFCO Spot, Easy Forex, Online Forex Trading Inc., Lincoln Corporation, Global Trade Waves, Ltd., and CIBC FX Web Dealing.

Why It’s Good To Have An Account With A 24/7 Forex Broker

Even if Oanda isn’t a forex broker that is suited to your forex trading needs then I would highly recommend that you set up an account with them regardless!

Why?

Well, as far as I know - and correct me if I’m wrong dear friends - Oanda are the only forex broker that allow you to trade 24/7. Most forex brokers, especially the main players that I’ve reviewed, only operate between Sunday 1700 NY EST and Friday 1700 NY EST.

What happens if something happens over the weekend?

That’s two days of NO trading activity - nearly 30% of the week is taken up during the weekends… but does that mean that because the forex broker’s are closed the world closes too?!

Of course not.

If something occurs over the weekend, by having instant access to a market quote you can amend existing orders or enter new ones… and even if you don’t use Oanda you’ll at least be able to enter into trades that will hedge existing open trades from your closed forex brokers.

Think about it.

An Informative Forex Broker Review

According to our forex broker review, Gain Capital and Oanda come out on top.

Forex broker Gain Capial has set a high standard with trailing stops. The trailing stop can only be entered as a separate order. Once the investor is in an order he can enter his trailing stop limit in pips to trail the market the distance the investor has set with the closest distance the investor can go being 10 pips. Gain Capital also has a facility whereby a trader can download 5 years of tick data on the 6 major currencies. In addition, an investor can also download a free DDE application whereby he can obtain live quotes.

While most brokers allow only the standard ($100,000) or mini ($10,000) lot size, Oanda gives traders the ability to trade any lot amount. Another attractive quality is that has its own user forum. In addition, Oanda has the capacity to have multi-denominated sub accounts other than in USD with no minimum deposit. The different currency accounts available include AUD, EUR, JPY, GBP, CAD & CHF. This allows the user to transfer between their primary account and their sub account easily, with the only restriction being that the investor cannot externally withdraw funds from a sub account, and withdrawals must come out of the primary account only.

FXCM Review

What’s The Attraction?

I lost my forex trading virginity with FXCM. When I had learnt the basics of the forex trading world and felt ready to open a live account I thought that by trading with the largest forex broker in the world I would no doubt be trading with the best.

Unfortunately FXCM began to wear quite thin quite quickly - the large spreads (at that point in time) were one of the largest in the business and their platform was nothing spectacular. I immediately began to wonder why they were the largest in the business as there certainly wasn’t anything that kept me attracted to it.

So, after being a client of FXCM for a couple of years I failed to see the reason for the large attraction. Maybe it was their large advertising budget… maybe it was their ability to large land clients… or maybe it’s their ability to offer such a great commission to referrers who land clients for them (FXCM pay the highest commission to referrers who open a live account and have their clients trade with them). Whatever it is though I think you too will be pleasantly surprised at why this featureless forex broker is the largest in the business.

But then again maybe that is the attraction: FXCM is just simple. I know from my personal experiences in life that the simple things are often the best! Maybe FXCM have been able to successfully apply this adage to their business!

Therefore, if you’re looking for a good reliable platform then look no further than what FXCM has to offer.

Live & Demo Differences

One of the best aspects to FXCM is that there are no differences between their demo and live accounts. What you see in the demo account is what you will get in the live account. In fact all you need once you have a live account is to simply flick the switch on your login entry screen from “demo” to “live”. That’s probably the only difference!

What We Liked About FXCM:

Once upon a time the best feature at FXCM was its ability to honor stops. Unfortunately those days of guaranteeing stops are no longer around especially around volatile announcements such as the Non Farm Payrolls.

But what we do like about FXCM is its ability to offer 18 different currency pairs with the 4 majors having 5 pip spreads bar the EURUSD which has 4 pip spreads (FXCM has changed and they now offer 3 pip spreads on the EURUSD & USDJPY) which remain fixed regardless of the underlying market conditions.

FXCM also offer mini accounts ($10k contract sizes) with leverage of 200:1 alongside their standard accounts ($100k contract sizes) with leverage of 100:1.

What We Didn’t Like About FXCM:

Some of the restrictions recently imposed by FXCM weigh on the negative side for FXCM. As FXCM seem hell bent on maintaining a no slippage policy they have resorted to these restrictive measures to help the “client”. These measures deny any stop or limit orders being placed 5-15 minutes prior to a major announcement, and deny any stop entry orders being filled if the currency never trades at your stop entry price! This makes designing a forex system very difficult if your forex system utilizes stop entry orders, because now you have to wonder if FXCM wouls have been able to enter you into your hypothetical backtesting trades… and if they wouldn’t have then you’ll have to reanalyze your backtesting data!

Another problem we found was that you can only open an account in USD. This is fine for the majority of forex traders that live inside the US, but can be a little annoying for our international partners who have a currency that is appreciating against the USD and thereby has to lose capital while the US dollar continues to depreciate. Of course this can work the other way too. I think it would be great if FXCM could offer the ability to have multiple currency denominated accounts so that the customer can have their capital appreciate over the long-term by transferring funds into the currency that will appreciate the best in the long-term. The client receives the income from their trading activities, plus the appreciation of their capital. Other forex firms have this capability with Oanda being the smoothest.

We also particularly didn’t like FXCM’s news and charting platforms - two klunky programs that need a LOT of polishing.

Lastly, we found that mini positions do not accumulate interest during rollover. This is only a minor issue, but other forex brokers pay interest regardless of what the position is, one notable forex broker that pays rollover interest on mini positions is CMS.

In summary then…

FXCM PROS:

• One of the largest forex brokerage firms in the world (has partnered with the Refco Group)
• Excellent platform, easy to use
• 100:1 leverage
• Good 24/7 Support
• 3 pip spreads on some majors

FXCM CONS:

• FXCM’s entry order restrictions
• Charting and news packages could be better
• No rollover interest received on mini positions
• Platform fairly basic and featureless