So you want to trade forex online? You’ve done your research, studied the market, know the major pairs to trade and have even studied some charts. In other words, you’re ready to go. But forex trading isn’t like walking into a casino where you just pick your game of choice and slap some money down on the table. You can’t approach forex trading like that. Even with gambling, there are certain casinos that are better to gamble at than others. At least in theory. What we’re getting at is that you can’t just pick any old forex broker.
In fact, selecting the right forex broker is one of the most important things a new forex trader has to do. There are hundreds of forex brokers competing for your business and your options really open if you feel comfortable trading with an unregistered or offshore broker. Unfortunately for U.S. traders, new regulations that are being set forth by busy-body overseers of the forex market in the U.S. are making it harder for new brokers to enter the U.S. market and many are even leaving, but that’s a story for another day.
New forex traders should approach finding the right forex broker as they would shopping for a new pair of jeans. You have to find the right fit. Fortunately, the topic of forex broker selection is one of the most talked about forex-related topics out there. There are tons of free resources across the Internet that review every forex broker you’ve heard and probably a bunch you’re not familiar with. Reading some of these reviews will arm you with the information you need to make an informed choice and make you a smart forex broker shopper.
No matter what forex broker you’re evaluating, there are basic factors to consider. Obviously, you want to make sure your forex broker allows you to trade 24-hours a day and has customer service that is available at any time during any forex session. Of course you’ll need to consider how much leverage various forex brokers extend to their customers. Some forex brokers use 50 to 1 leverage. Others use 100 to 1 and some forex brokers will even extend more than that.
Other things you’ll want to research are whether or not your forex broker offers free demo accounts. Even more important than that may be finding a forex broker that offers mini or micro trading accounts so you don’t have to commit a ton of capital just to start trading. You’ll also want to see if your forex offers any bonuses such as free charting package, real-time news
All of that said, far and away the most important thing you need to consider when evaluating forex brokers is the cost of trading. That is, what are the spreads between the bid price and the ask price on major pairs at various forex brokers? All things being equal, if you’ve narrowed your choice down to two brokers and you notice that the EUR/USD pair is trading at 1.4565 by 1.4567 at Broker A and Broker B shows the same pair trading at 1.4566 by 1.4570. That’s a difference of two pips between brokers, or $20 on a standard lot, so your choice is clear.
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