Are you interested in forex trading but you don’t know where to start? You came to the right place. In the simplest of terms, forex trading is the process of converting one currency into another. You need to buy one currency while simultaneously selling the other. Currently, the forex market is one of the most traded markets in the world. According to Investopedia, forex transactions valued at $6.6 trillion happen daily, and this is equivalent to an average of $220 billion hourly.
If you want to successfully start trading in foreign currency, you need to identify a forex broker. Do check out this list of the best forex brokers as you shop around and see what they have to offer and their fees before you sign up.
Who Is a Forex Broker?
While it’s actually possible to trade forex without a broker, it is not as easy as it may seem. As a trader, you deal with so many things on your end, such as identifying market trends of the instruments, finding interested parties for your currency and also, having enough money to be able to approach the bank directly and request the bank to allow you to trade in the interbank market.
Remember, if you are a small player in the market, large banks will not give you their time ,and this is where the forex broker comes in. A forex broker is a financial services company that acts as a link between the forex trader and the forex market. When you work with a forex broker, he/she will not only arrange for your trading transactions but also can leverage all your trade so that you don’t have to put all your savings in one investment. However, when choosing a forex broker, you must exercise caution to avoid negative results.
Five Steps
Here are five tips to choosing a forex broker for currency trading.
1. Check His/Her Reputation
The first thing you need to do when choosing a forex broker is to check his/her reputation. If you live and work in the United States, be sure to check if the broker is a member of the NFA or the National Futures Association. You also need to confirm that the broker is registered by the Commodity Futures Trading Commission. Additionally, if you only want to trade using MetaTrader 5 brokers in the USA, then make sure your broker allows this too. It’s important to research carefully before investing. Taking time to make sure that your trusted versions are meeting your needs can help keep your trading profitable for years to come.
Go to the broker’s website and under the “about us” section, check if the forex broker has provided his/her NFA member number. If you are not in the USA, be sure to research and find out if the forex broker you intend to work with is regulated by the regulating body in your country. Remember, a flashy website does not mean that the forex broker is trustworthy. If the forex broker is not regulated, do not risk your hard-earned money as you might be disappointed.
2. Choose a Forex Broker Who Has Low Spreads and Costs
You need to know that brokers earn money through commissions thus, they will charge a percentage from the entire spread. The spread is the difference between the price an individual is willing to buy an asset with and the price the seller is willing to accept as security. The brokers that do not charge commissions earn their money using wider spreads. If you want to succeed, make sure that you take time to understand how your potential forex broker makes their money. Remember, if the spread is too wide, it will be very difficult to make profits.
3. Consider the Customer Service
The foreign exchange market doesn’t sleep and your forex broker shouldn’t sleep too. Consider getting a broker who offers 24-hour customer service. If you get one who does not respond promptly, it can result in major losses. Before you sign any contract with a forex broker, make sure that you test out his/her customer service by either emailing the forex broker or sending him/her a message online and testing the response time. Doing so will help you determine if you will be able to work with the forex broker and if his/her response time is conducive to your expectations.
4. Ask About the Initial Deposit
Nowadays, you can open and fund a forex account with as little as $50. This is why the forex market is expanding by leaps and bounds every single day. However, you need to know that brokers are different. While some will offer standard initial deposit requirements, others will vary depending on the account you wish to open. Make sure that you ask before you agree to work with a particular forex broker.
5. Don’t Forget to Ask About the Trading Platform
The trading platform is the online trading system that allows investors and traders to position their trades. As such, the forex brokers platform should be one that is well designed with clear buttons for buying and selling and can be entered and exited with ease. Look for a demo account from each forex broker’s website, and ask to try out the trading platform before you open your account.
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