Trading on the foreign exchange currency markets can be a great way to rack up quick profits. Regardless of the Forex tactics you intend to employ, you’ll have a constant partner in your trading ventures: your broker.
Although Forex success requires plenty of skill and care when it comes to placing trades, you also need to make a smart decision when you pick out your broker. Here are some points to keep in mind when you look at the different brokerage firms you could work with.
The primary figure you want to be concerned about is, of course, the fee a particular brokerage house assesses on each of your trades. It’s important to have some familiarity with your own trading style before you look at this figure. The size of the bite your broker takes can turn your trades from profitable to unprofitable if you like to work narrow margins. Make sure you do business with a brokerage that fits your style.
The frequency and volume of your trades are really going to dictate which broker is right for you. If you make large moves with plenty of time in between them, you can probably get a good deal with a firm that has high trading fees but low costs in other areas.
If your trading strategy relies on many fast, small moves, though, you should be willing to pay a little more for a Forex account that features minimal fees on individual trades.
Be cautious about firms that advertise really stellar fees and low rates. Although few brokers will out-and-out lie about the amounts they charge, they may require you to jump through quite a few hoops to qualify for their great advertised deals. Make sure you’re clear about all of the minimums and requirements that a broker applies to your trading account before you open one.
Forex brokers can take money out of your transactions in many different places. In fact, many brokerages charge you at multiple points along the trading timeline. If a broker offers great bargains but charges you to put money into your account, charges you to take profits out, and charges you yet again to make a trade, you might not be getting such a great deal. Develop a clear idea of how much you’re going to be sending your broker on each trade, and at what times.
You should also cast an eye over the calendar when you’re considering opening a new Forex account. Just like phone and utility companies, Forex brokers often attract new customers with special introductory rates. Don’t sign up with a broker without being clear on whether the fees they’re charging are temporary or permanent. If you intend to take advantage of a special introductory offer and then quit the brokerage, make sure there aren’t significant penalties involved.
Finally, you want to take your time reviewing all of the legal documentation that your broker provides you with before you open an account. The most important thing to look out for is real fiduciary protection. A solid fiduciary brokerage firm has an obligation to protect its clients’ money as though it were the company’s own.
This is not a binding legal requirement for Forex brokers, though, and if you go with a discount firm you may not receive full fiduciary protection. This isn’t necessarily a deal-breaker, but you need to be entirely crystal clear about the level of risk you’re exposing yourself to.
A reliable, ethical broker will be a safeguard in your Forex trading experience. Picking the right firm is often the difference between turning a profit and losing money. Your choice of brokers matters a great deal, so be sure that you give it the thought it deserves!