The forex market is the largest capital market in the whole world. As one might expect with any volatile market, the opportunity for great return comes along with the frightening risk of suffering devastating losses if adequate money management techniques are not appropriately and diligently applied.
Trading in the foreign exchange market can be a really challenging endeavour for an individual without access to and the unwavering support of a competent online broker. It is therefore very important for a potential investor serious about opening a forex trading account to carefully evaluate and select a suitable forex broker in order to maximize their trading results on a long term basis. Your forex broker can make or mar your trading career.
A smart forex trader has a number of different issues to carefully consider before starting to trade in a fully funded account with an online forex broker. Some of the issues involve the trader’s personal goals, the amount, and flexibility of trading capital and their overall trading strategy or plan.
Once those key issues have been sorted, the first and foremost consideration for a forex trader involves selecting a suitable forex broker to partner with in meeting trading goals. This article will discuss the top considerations a forex trader should take into account when choosing a broker.
Forex Account Types
You will have to decide on the type of account you wish to open if you are just starting to trade forex with a broker. Account types are mostly based on the amount deposited and usually have different names like mini account, micro account, standard account and VIP account etc. Each of this account has a minimum deposit and minimum lot requirement. For instance, the standard lot has 100,000 units, while owners of mini and micro accounts are allowed to trade with lots that are equal to 5000 or even 500 units. The leverage that comes with this accounts are also different and can be anywhere from 1000:1 to 1:1. You should always check out the types of account that are offered by a broker to see if you find the one that matches your requirement.
An operating license from a regulatory agency is an important accreditation for a Forex broker. Though doing business with a regulated forex broker is no guarantee of problem-free trading, it can serve as the much-needed insurance against potential fraud issues. It is vital that you check the location of the company because legislation requirement for financial registration varies from country to country.
Forex trading allows you to trade with dealers and brokers. To explain it in a simple way, brokers are the middlemen between individual traders and market makers. The usually process orders by computer systems and this is normally called a Non-Dealing Desk. The spreads that are offered to traders may be variable or fixed, and sometimes the brokers can earn their commission as a percentage of the spread. On the other hand, dealers are the market makers, and they have a Dealing Desk which is responsible for processing the order. The ECN model is also very common as it gives small-scale traders access to a pool of offers that are quoted directly by the market makers, which result in low spreads.
Margin Call and Leverage
Before opening an account and funding same with any broker, it is crucial that you are aware of their margin call requirement. As you most probably know, a forex broker has the right to issue a margin call when the margin in our forex trading account becomes insufficient. The applicable rules in such situations differ between brokers who may choose to close the trader’s deals or ask him/her to increase the margin. Also, leverage is vital, and you need to choose the broker that offers the one that best suits your ability and trading needs.
Withdrawal and Deposit Methods
Withdrawing and funding your account is very vital to the success of your forex trading career. You need to find out the funding and withdrawal method the broker offers. For instance, almost all brokers accept Bank Wire Transfer, Credit/Debit cards, Skrill and PayPal. It is recommended that you check all the available withdrawal options and the fees applied to each of the methods. You should also check the minimum withdrawal and deposit requirement.
A majority of brokers offers bonuses to their new and old clients, which is an awesome way to increase trading capital. For instance, brokers might give 100% and 50 % bonus on the first deposit of a new trader. This means that the bonus will be added to the trading account and can be used for trading. Traders can withdraw this bonus if they reach a certain trading volume. Investors are advice to read the broker’s bonus terms and condition before accepting the bonus. This is necessary to understand all the advantages and restriction that might come with accepting the bonus.
Since Foreign exchange is traded 24 hours a day, a forex broker should be able to offer an uninterrupted customer service to its clients. New traders should endeavour to test the availability of a broker's customer support by contacting them through all communication channels available. It is crucial that they respond within a very short period of time and this is especially true for live chat services. Other things to consider before opening an account with a broker are politeness, speed, and quality of customer service.
If you have complete confidence in your forex broker, you will have the rest of mind and freedom to focus on analysis and developing forex strategies. A little bit if research before committing to a forex broker can go a long way, and can increase a trader’s odd of success in the competitive forex market.