Anybody who wants to get involved in forex trading needs a forex dealer, also known as a forex broker. You need to hook up with a company that will give you access to the live market through their account management system and trading platform. It is an important choice and in some cases can mean the difference between profit and loss in the forex market.
But just as with systems, there is no perfect forex broker that suits everybody. So here are 5 questions that you should ask yourself when you are selecting a forex dealer.
1. Are They Right For Your Level?
There are three basic levels of investment in forex accounts. They go from micro accounts where you would usually invest a few hundred dollars, through mini accounts where you need a few thousand, to standard accounts where you would be investing $10,000 or more.
If you only have a small amount to invest, obviously you need a broker that offers micro accounts. If on the other hand you plan to come in at a high level, you will not do yourself any favors by joining a service that is aimed at the very small time trader.
2. Is This An Authorized Forex Dealer?
An authorized forex dealer is a company that is approved by certain regulatory bodies. They are screened before acceptance and have to follow a certain code of practice. You are not likely to be scammed by an authorized broker and you may have some protection if the company goes out of business. In the USA, the main authorizing bodies are the NFA (National Futures Association) and the CFTC (Commodity Futures Trading Commission). Dealers based in other countries should be members of similar bodies in their own country.
3. Are The Costs Reasonable?
Not only the amount but the basis of costs can vary from broker to broker. Some simply charge a spread, that is, an imposed difference between the bid and ask price of a currency pair. Spread is different for different pairs, so look at the pairs that you are most likely to use. Also check whether there are other costs, such as a fee per transaction.
4. Is The Platform Easy To Use?
At this point you can sign up for a demo account and test the platform. Check the technical analysis tools that are available. Does your system depend on an indicator that is not provided? Do they offer a forex calendar or news alerts? When you come to place an order, is everything clear and simple? Confusion at this point could lead to errors.
5. How Fast Is The Response From Support?
When you have a live account and are trading for real, you will need support fast if anything goes wrong. Once you have the demo account set up, try asking a technical question to test the speed and helpfulness of the response from the forex dealer‘s support desk.
