How to Choose the Right Forex Broker?

When you decide to take the plunge in to the Forex markets, there are a number of things you need to think about. How much money should you commit, which trading style is best suited to you, and of course - which broker should you choose?

There are many brokers available to trade Forex through - each with its own set of features, pros, and cons. Here is a list of the things you should weigh up before signing up to a particular broker.

1. Customer Service

Arguably the most important factor of all - customer service is a hugely important aspect of Forex trading. Why? Because in a financial market - where trades are being executed at the push of a button - things can sometimes go wrong.

The last thing you want is for an unsupportive FX broker to simply shoulder you off. What you really need is a broker who works alongside you; a broker who is there for you whenever you have a question or query. Never underestimate the value of good customer support in any financial market.

These days, a few brokers also have personal account managers - almost like a dedicated bank manager to assist you whenever you need help.

2. Deposit Requirements

It's pretty obvious that if you have $200 to commit to the Forex markets, you're not going to want to sign up to a broker with a minimum account deposit of $1,000. Hence - it pays to do your homework before filling in the entire application form, only to find out that the broker is not the one you wanted to go with.

If you only have a small amount of money to invest, there are brokers around with initial deposit requirements as low as $100 - or even "no minimum" at all.

3. Trading Platforms

When it comes time to place a trade, you'll want the experience to be easy, streamlined, and hassle-free. This is where the brokers trading platform comes in to play.

There are generally two different types of trading platforms available - online trading and desktop trading. Some brokers offer only one of these types of platform; others offer both - so that you can choose.

The key here is to decide exactly what it is that you want out of a Forex trading platform - and then search for one which has all the features you need. Looking to start small? A simple FX platform might be right for you. Already an experienced financial trader? A platform with features such as trailing stop losses, conditional orders, and market depth information is probably going to be what you're looking for.

4. Slippage and Execution Speed

When you see a rate quoted, you expect your order to be executed at exactly the rate displayed when you push the "buy" or "sell" button right? Of course you do. However, some brokers purposely build in a delay between execution and quotes - usually to buffer their own profit levels.

To prevent this, look for a broker which advertises a solid "slippage" policy. Assuming you find one - you'll be able to relax knowing that the rate you see is exactly the rate your trades will be executed at.

5. Spreads, Commissions and Costs

It's generally accepted in the Forex Trading world that there is no such thing as commissions in Forex trading. This is often true. However, brokers still need to make a profit, and this is where the spread comes in.

The spread is the difference between the bid and ask prices of a given currency quote. Let's say that the bid is at 1.4000 and the ask is at 1.4001. This represents a spread of 1 pip.

In the above example - the "actual" market spread might only be 0.2 pips, meaning that the broker is making 0.8 pips in profit for your trade. In this instance, the broker makes a profit. You'll usually find that pips vary of currency pairs, usually between 2 and 10 pips. Brokers usually advertise their pips in advance - so look for a broker with the lowest pips possible to minimize your trading costs.

6. Regulation and Security

The last thing you want when you sign up to a broker is for your capital to disappear because the broker went bankrupt. Therefore - it's always best to choose a reputable, regulated broker. You'll be able to find a regulated broker by looking at the small print at the bottom of their home page. If they are regulated, they are required to publicly display their regulatory authority, as well as their registration number.