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Selecting a Forex Broker

The popularity of online forex trading has expanded at a never-ending pace over the past five years and so has the number of forex brokers as well. Competition among foreign exchange firms is a good thing for those who trade forex as it encourages more choices, better services and all around improvements.

So what are some of the items one should look for when selecting a foreign exchange firm to open and trade a FX account? Directly below are some items you may want to take into consideration when selecting a forex broker.

Forex Pip Spread

Unlike commodity futures and equities the foreign exchange markets are not traded on centralized exchanges. Therefore, the pip spread will vary among forex brokers. This is by far one of the most important issues you will want to address when selecting a firm to trade the foreign exchange markets.

Forex Online Trading Platform

Good forex trading software will show live spreads that you can actually initiate trades at. This is commonly referred to as “what you click is what you get”. It should also offer the ability to initiate market, limit, stop and contingent orders at a minimum. Additionally, the platform should be reliable so that it isn’t prone to crashes and lockups.

You’ll want to try a demo of any platform that you are considering. However, be sure to watch for demon platforms. A demon demo platform is one where the demo greatly varies from the actual platform.

Types of Forex Trading Accounts

Forex brokers usually offer the following types of foreign exchange FX accounts:

Mini Forex Account: Allows you to transact in small deal sizes. Normally, the lot size is 10K as opposed to the regular 100K lot size.

Standard Forex Account: Allows you to transact forex deals in the standard amount of 100K.

Institutional Forex Account: These types of forex account are designed for individuals, corporations, or large funds that trade in large amounts. Additionally, other services are usually provided for these account types such as API connectivity. Types of institutional forex solutions include the Currenex and FXall platforms. These types of forex platforms aggregate large amount of liquidity and that is what large foreign exchange traders demand.

Financial Stability

Lastly, you’ll want to inquire out about the financial stability of any forex broker that you are potentially considering to open an account with. If a broker is vague when it comes to questions about their financial stability it would be wise to look elsewhere.

Choosing a forex broker doesn’t have to be a monumental task, but don't rush into any decisions either. Shop around and try out their trading platforms before you make a commitment.

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