How to Choose a Forex Broker

If you want to be involved in forex trading, one of the first things that you will need to do is to find yourself a broker. Now, these types of brokers are a dime of dozen. What you need to focus on is how to choose a forex broker that is right for you.

How to Choose a Forex Broker That is Right for You

By employing a broker that is compatible with your needs and expertise level, you are much likely to be able to trade more successfully. Here are some of the tips you can follow for finding your best possible option:

Is the Broker Regulated?

As mentioned, you will find no shortage of brokers on the internet. This can make deciding between the legitimate ones and the scams quite difficult. If you want to be assured that you are making the right decision, then it is best to opt for a broker that is regulated by an authoritative agency.

Each country has a regulatory association that is responsible for forex brokers within their borders. For the United States, this is the National Futures Association and the U.S. Commodity Futures Trading Commission, while in the UK it is the Financial Conduct Authority and the Prudential Regulation Authority.Australian brokers are managed by the Australian Securities and Investment Commission whereas the Swiss brokers have to be regulated by the Swiss Federal Banking Commission.

In Germany, there is the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) while France and Canada adhere to rules set by the Autorité des Marchés Financiers.

What are the Account Offerings Like?

Each broker is going to make various promises regarding the leverage and margin, commissions and spreads, as well as the minimum initial deposit. It is a good idea to make comparisons between the brokers to decide which one is making the best offerings for you.

Each broker is going to have different accounts and then ask for varying minimal deposits. It is always a good idea to stick with an account that you can afford so that you don’t run out of cash too quickly.

If the leverage that is offered is competitive, then you can significantly increase on your initial deposit. However, to avoid falling into debt, you should remember to limit how you use the leverage.

There are two ways that brokers make money – commissions and spreads. Those that are involved in commissions generally charge a certain percentage of the spread. The brokers that don’t charge commissions, though, and make money from wide spreads. As such, it is best to stick with more popular currency pairs with these type of brokers.

What Currency Pairs are Offered?

There are some currency pairs that are known as majors. These include the EUR/USD, USD/JPY, GBP/USD, and USD/CHF. If you are interested in trading with these or others that are similarly popular, you are in luck as almost every broker is offering these. If you want something more exotic, though, you will have to first ascertain that a broker that you are interested in actually offers these pairings.

What is the Trading Platform Like?

If you aren’t able to use a particular trade properly, there is a good chance that you will make numerous mistakes with your trades. As a result, you can lose a lot of money. To avoid this, you will need to find a trading platform that you are comfortable using. All of the controls and features must be easy to use and you should have no problem entering or exiting a trade. Similarly, it should offer you a lot of trading tools to choose from. Trading alerts and automated trading options can also help you a great deal when trading.

How Easy it to Deposit and Withdraw Money?

To make quick trades, you are going to need to deposit money into your account quite quickly. So, in addition to bank transfers and checks, you should also be able to place money into your account via credit cards and PayPal for faster options. Now, you should also look at the methods as well as the terms and conditions surrounding your withdrawal options. These tend to be tricky so you should ensure that you can take your money out with minimal hassle and cost to you.

This is how to choose a forex broker that is right for you. With some research and due diligence, you should be able to decide on one that is reliable as well as profitable.

Forex vs Stock Exchange

brokersWhich is best for you – Foreign Exchange or Stock Exchange? To answer that question, we must weigh both of them on the same scale and see if one can tip the balance over the other.

If you are the conventional ‘long only’ or buy-and-hold investor, you have some very good reasons for staying involved in the stock market. Statistically speaking, investors tend to get profitable returns from stocks and the taxation is sufferable.

But if it is trading you are keen on, you might want to hold your horses and take long hard look at Foreign exchange as well because it too has its own share of unique benefits.

Let us now go over some of the considerations that you would have need before choosing between them. Is it going to be Forex or Stock? Let’s find out.

1.Do you prefer fundamental analysis or technical?

If you are into assessing things in technical terms, then Forex is the better suited art form for you. On the other hand, if you are more about inherent value and subjective evaluation, your trading strategy is better suited to stock exchange. Your preferred method of analysis will come in very handy in your activities as a trader.

2.Leverage

Forex markets differ a lot here from any other kind. While in stocks you will usually  come across a ratio along the lines of 2:1, Forex can give you ludicrous ratios up to 100:1. So with Forex trading, whatever returns you get are exponential as per the given ratio of leverage. The upside is, you can make a heck of lot of green off of a very small seed. The downside is you can lose the same amount if your trade goes south.

3.Self-control

Bad trades come with the burning desire to make up for lost bounty. But can you actively control and suppress that desire when logic dictates you take leave it alone and reassess your trading strategy. You can never really know until the situation presents itself. This is an essential skill you need to make Forex trading work for you. With stocks, any potential losses are unlikely to go beyond your initial investment.

4.Bearish bets

Bearish bets with Forex trading is a rather simple matter. For instance, if you are predicting the Canadian dollar will end up higher compared to the US dollar, simply sell the Canadian dollar vs. US Dollar in the market.


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5.Number of positions

Number of currencies you can trade in a Forex market is obviously finite. In fact, as of 2013, only four of them account over three quarters of the trillions of dollar worth of trades executed each day. They are the US dollar, Euro, Japanese Yen and the English pound. Other major currencies include the Australian dollar, Swiss Franc, and Canadian dollar. A stock trader however has a veritable options list numbering in the thousands, and that is just in US.

6.News feed

Is your focus more toward a macroeconomic perspective on events or do you prefer doing some thorough searching in the sewers of whatever corporation or industry you are trading in? If you prefer the former, currency exchange should be right up your street.

7.Risk management

Your approach toward potential risks is a key factor to consider when choosing between trading stocks and trading currencies. If you are not suited to taking on risky moves, do yourself a favor and play stocks instead of Forex.

So which is it to be then? Hopefully, with the considerations listed above, you now have a clearer idea of which kind of trading would suit you best.

How to Start Forex Trading

In very simple terms, Forex trading is the most lucrative department of online trading you can be involved in. It is the market where all the currencies of the world are traded and daily transactions regularly amount to trillions of dollars.

The market is open 24 hours a day on all week days except holidays. There are many ways to get in on the action and many fortunes and losses to be made. However, if you are considering getting involved as a trader in the Forex market, there are some fundamental early steps to be considered before you can stand any chance of making a successful turn of it.

Here are some of the key variables and methods you should know about before starting out in Forex trading.

What should you know beforehand?

It is imperative that you get to know the trade before stepping into it. In the case of Forex, getting to know the trade outside of being involved is only half the job. The other half involves getting to know you as a trader. Forex trading is not for everyone. There are certain aspects of your personality that could give you an edge in thriving in this environment. Characteristics like high intelligence, patience, a natural intuition for trading and understanding of human psychology should all be abundantly present in a successful Forex trader.

If you feel that you do not adequately possess these faculties, you should probably second guess your decision to participate in Forex trading unless you have a strategy to circumvent your shortcomings. It is nothing to be discouraged about. Some people are just more adept at trading than others. Regardless of whether someone is theoretically capable of making an efficient trader, it will still be a trying experience in Forex Trading.

Where should you start?

Once you have gained a good amount of background information, you are almost ready to start trading. But before that, you must secure for yourself the services of a broker to enable you trade. In this regard there are some key factors to look for in taking your pick.

  • Licensed and regulated: If the broker is licensed and regulated by a government agency, you have added assurance that it is not a scammer.
  • Trading platform: Make sure the platform is user-friendly and easy to access so you can make trades unhindered.
  • Account types: The types of accounts on offer and how they are maintained is largely subjective to each broker. And so your ideal choice here will be best suited to your personal style of trading. It would be a tremendous added benefit to select a broker that offers the option of maintaining a demo account.
  • Leverage: This too is subjective to each broker. It is the ratio of the required margin relative to the value of the currencies being traded.
  • Customer service: Make sure the broker offers reliable customer support and is easy to contact on any given working day.

Are you ready yet?

After doing some elementary research in advance and picking a broker to collaborate with, you now have the two bare essentials to help you open your account into the Forex market. However, you cannot be completely sure of how those two will work together. To help straighten things out even further, you can start off by activating a demo account. It will enable to make trades in real time but without requiring you to stake your personal funds and run the risk of losing them.

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More importantly, you will be able to gain first experience into the market as it is without it being filtered to you through a book, a website or somebody’s advice. You will know what it is like to play the real game.

Now you are ready

Once the knowledge and experience to be had from the demo account has run its course, it is time to open a real account, deposit your real funds into it, and start really trading. You will be able to bring in all the knowledge and skills you have honed through the preparation stages to become a formidable trader in the market.

Start With Forex Trading

Decide wisely about getting involved, learn all that you can before getting involved, choose the right broker with which you will be getting involved, get a real idea of what it is like to be involved and finally, really be involved. These are the crucial steps you should take in order to make it as a Forex trader.

Best Forex Brokers

If you are new to the world of Forex trading or perhaps an experienced player who has hit a bit of a rough patch financially, you might find it helpful to reconsider your strategy in the game.

A big part of that strategy involves what broker you choose to get you into the game and equip you with the tools.

Choosing the right broker is not an exact science. While there are official ratings of brokers to consider how good their services are, what really matters is how well equipped they are to comply with your personal trading style. Before you take a look at the types of accounts on offer, bonuses, trading assets, platforms and so forth you need to find out it if the broker is licensed and regulated by a government agency. No matter how attractive the other features are, the lack of official regulation can make you a lot more vulnerable to being scammed.

Once you know the broker is legitimate, you can probe into its other features to find out how well it will stack up with your preferred financial strategies and devices. Here are our top candidates for you to consider as your ideal broker in Forex trading.

And now, onto our top three selections of the best Forex brokers you can trade with right now.

eToro

eToro is based in Limassol, Cyprus and was founded in 2007. It is licensed and regulated under the FCA, ASIC, CySEC and MiFID. It is currently home to world’s leading network in social trading. Traders are able to communicate and discuss different strategies and experiences.

The minimum initial deposit required to open an eToro account is $100 except in Middle Eastern countries where it is twice that amount. As ever with Forex brokers, it is important to consider the two main categories that make up the cost of trading: spreads and commissions. Apart from day traders all other traders also have to consider swap rates which refer to overnight charges. Fortunately, those rates are displayed on the official website. Maximum leverage stands at 400:1.

There is also a practice account available for the benefit of novice traders as well as a demo account with access to the social trading platform. However, trading profiles and activity is only accessible for real account holders.

Social networking has been majorly integrated into the online trading as of late and eToro has been quick to make good use of this rising trend by encouraging active communication between traders learn, invest and share knowledge of trading. The most successful traders are even featured on the landing page along with elementary details like their gain percentage, win ratio and number of copiers. This is no doubt, hugely beneficial for other traders.

A dynamic range of trading options are offered by eToro including assets in financial markets and commodities like precious metals and crude oil. Bitcoin has also been included as an option to trade in. However on eToro’s platform, it factors in as a stock rather than a currency and is traded as a CFD.

AvaTrade

Founded in 2006, AvaTrade is one of the world’s leading Forex brokers with subsidiaries in Dublin, New York, Sydney, Tokyo, Milan and more. It is a regulated Forex broker under the Central Bank of Ireland, Australia’s ASIC, Japan’s FSC, the B.V.I Financial Services Commission and is licensed by the MiFID of the European Union.

Traders get just one account to trade with which requires a minimum initial deposit of $100. Leverage stands at 1:400. Beginning from 0.9 pips, both fixed and floating spreads are available by this broker, some of the most competent spreads anywhere.

AvaTrade is one of the pioneering brokers in implementing CFD trades and trading in digital currencies making Bitcoin accessible to retail traders. Their trading platform is user-friendly and available in English, French, Spanish, Portuguese, German, Italian, Chinese, Japanese, Taiwanese, Russian and Arabic.

The types of orders a trader can make on the AvaTrade platform include Entry Stops and Trailing Stops, Stop Loss orders, Limit orders, Entry Limits and Market orders. More advanced orders like IF Done orders and One Cancels Other orders can also be made.

Plus500

Plus500 is a broker based in the United Kingdom. It is regulated under the FCA, ASIC and CySEC. When it comes to spreads and commissions, this broker usually charges a floating spread worth 0.8 pips during high activity hours in the market on the EUR/USD currency pair. Meanwhile for GBP/USD, the spread is usually 1.9 pips and for USD/JPY, 1.7 pips. Happily, Plus500 charges absolutely nothing on commissions.

Plus500 offers a high quality CFD trading platform consisting of over 2000 instruments including around 50 ETFs, shares, indices, commodities and Forex pairs covering over 20 global markets. To activate an account requires a minimum initial deposit of $200.

This broker also offers some useful options for a trader’s risk management. Traders have the ability to manage their leverage by trading high, low or no leverage at all. They can also quote price levels for particular products as ‘Close at Profit’ or ‘Close at Loss’. It is a unique mechanism for risk management that is not offered by most other brokers. Also, you can activate price alerts to let you know when the market reaches a particular buy or sell price. Plus500 also offers a tool called trailing stop which is essentially seals profit for the trader and saving them the trouble of constantly monitoring a position and readjusting the stop price.

To get the hang of it, traders are entitled to using a demo account for an unlimited amount of time until they are ready for an active account. The trading platform itself is easily negotiable and available in 32 languages.

Conclusion

These are currently some of the most reputed and highly rated Forex brokers you can select right now, but of course, the really important thing to know about any of them is that they are compliant with your own personal tactics and strategies as a Forex trader.

US Forex Brokers

There are not an awful lot of Forex Traders operating in the United States – not licensed and regulated ones at least. That is because the United States imposes strict regulations and laws on its finance industry in the interests of financial security for all of its citizens.

A considerable variety of trading forms available have in turn provided need for establishing different governing bodies that offer licenses and regulations.

USA Forex Brokers

Of the various trading forms currently operating in the United States, Forex trading is one of the most prevalent. It is in fact the leading form of online trading internationally. In the U.S, it is fairly limited compared to many other countries, a testament to the rigorous standard upheld by prevailing government agencies. The Primary authorities in charge of overseeing all Forex trading activities in the United States are the National Futures Association or NFA, and the Commodities Futures Trading Commission or CFTC. The key thing to understand about these institutions is that their regulations are not based so much off legal procedures so much as ethical ones for the online trading community.

Here are some of the top Forex Brokers currently available for traders based in the United States.

Forex.com

Forex.com has been around since 1999 and is run by Gain Capital Holdings. It is one of the highest rated Forex brokers anywhere in the world and it meets the licensing and regulatory protocols under the jurisdictions of seven government authorities including the NFA, CFTC, FCA and ASIC.

At Forex.com the types of accounts available to traders are a standard trading account and an Active trader account. Where the standard trading account requires minimum of $50 worth of an initial deposit to be activated, the Active Trader account requires $20,000. The added benefit of the latter is that traders are supplied with a so called ‘Relationship Manager’ to further assist their trading activities. There is also a demo account available for all traders with an initial deposit of $50,000.

When it comes to trading costs, spreads and commissions are two very important factors a trader must consider when choosing a Forex broker to work with. For currency pairs such as EUR/USD and USD/JPY, the usual floating spread charged by Forex.com is 1.7 pips. For a GBP/USD pair, it is normally 2.1 pips. For holders of an active trader account, these spreads can be a lot lower. For instance for EUR/USD currency pair, it can go down to 0.4 pips.

The trading platform is another important feature offered by a broker. The one offered by forex.com is simple and easy to operate with virtually no room for confusion. Trading options are available in binary, spot forex and CFDs in over 3200 markets.

The main criticisms with this broker is that it offers no bonuses or promotions and variety of available accounts is limited to just two.

FXCM

FXCM or Forex Capital Markets is one of the first brokers to implement online trade. It was started in 1999 and is based in the United States. Its headquarters are situated in New York and subsidiaries in the United Kingdom, Australia, France and Italy. It is licensed and regulated by the authorities of each jurisdiction that it operates in, most notably the FCA, NFA, and ASIC.

A diverse range of account types are offered by FXCM to suit novice traders as well as experienced traders. The standard account requires an initial deposit of $5000 to be activated while the Active Trader account requires $25,000. A mini-account is available as well and requires a minimum deposit of $50. It offers 50:1 leverage for traders based in the United States and 1:200 for traders based overseas. Training accounts are also available at FXCM for 30 days. There are also two types of demo accounts: the standard demo account is available with $50,000 and the mini-demo account comes with $2000. The trading platform used on all these accounts is exactly the same. However, you do need a separate password and ID to access each one.

When it comes to trading platforms, FXCM offers the widely used MT4 platform. It is quite easy to navigate and can be customized to your individual preferences. The available assets to trade include day trading, trailing stop/limit orders and entry orders, and stop loss and take profit.

Customer support from FXCM is available 24/7 in over 20 languages inclusive of weekends and other days when the market is closed. As a trader, you can get in touch over the phone, through email or online chat.

Nadex

Nadex is part of the global financial services provider, IG which is worth over 2.2 billion pounds and based in Chicago. It is a derivatives exchange regulated by the CFTC and only offers assets with limited risks. Its design is mostly in the interests of retail traders. Although, primarily a binary options broker, Nadex offers traders access to financial markets including Forex, commodities, stock indices and crypto currency bitcoins with over 2400 binary option contracts on a daily basis.

When it comes to accounts, traders can maintain just one completely free until they place their first trade. To continue thereby would require an initial deposit of $250. Apart from that, the account must also hold enough capital to pay off any loss that may result from a trading position. Fortunately, a demo account is available with a handsome deposit of $25,000.

The contracts on offer at Nadex can last anywhere from 5 minutes to a week so traders have numerous trading options to consider as well as being able close off a position before its designated time of expiry.

Bonuses are available here as well. The offer from Nadex rather peculiar. Called the Free Holiday Bonus, it involves traders getting full days where they can trade without being charged with any exchange fees.

Nadex offers support to its customers via phone and email 24 hours a day starting from 6 pm on Sunday to 4:15 pm on Friday.

Conclusion

These Forex brokers are currently some of the best ones operating in the United States as well as internationally. However, as a trader what is most important to consider when choosing which one to trade with is not their popularity so much as how well they can suit your trading style.

Can a Beginner Make Money with Forex

Many people get started with forex trading for the wrong reason. They believe that is a way for them to get rich quick. As with any legitimate trading avenue, however, this is not the case. The short answer to whether a beginner can make money with forex would be ‎‎‎‎‘yes’.

This doesn’t mean that every new trader will make money or that it will be an easy process. Forex is an industry that is advantageous to individuals who understand the specifics and inner workings of it. On that note, let’s take a look at what it takes for a beginner trader to make money with forex:

1) Mastering the Basics of Forex Trading

To be a good forex trader, you first need to equip yourself with the necessary tools. Here is what you need to know about the fundamentals of forex trading:

A Good Broker Is Essential

The key to starting off with an advantage is to choose the broker that is right for you. It is best to stick with a broker that is licensed by the Futures Commission Merchant and regulated by the Commodity Futures Trading Commission. Depending on where you live, you may need to find a broker that is affiliated with an authoritative agency that pertinent to the region.

The other thing to consider when looking for a broker is low spreads. Spreads are the difference between the purchase price and selling price of the currency. They are calculated as pips. In certain trading industries, brokers make their money via commissions. With forex, however, the brokers rely on spreads.

Due to the fractional price deviations with forex trading, traders need their brokers to offer them leverage. You should decide on a broker that gives you the option of either low or high leverage. Depending on the situation, you may need to make use of either of these.

Many brokers need to borrow large sums of money to equip their traders with leverage. They acquire these loans from banks and other large lending organizations. You should look for brokers that are backed by reputable banks to minimize fallout in the future.

Adopting a Strategy

The strategies in forex trading are based on either fundamental analysis or technical analysis. Fundamental analysis typically depends on news reports regarding the various factors impacting currency. Technical analysis, on the other hand, is about identifying the various price trends in the market. Traders can choose to use a strategy that consists solely of these types of analysis or they use one that is a combination of the two. In the end, it is about finding and using a strategy that is in accordance with your trading style.

2) How Beginners Can Make Money with Forex

Now that you know what is needed, how can you make money with forex as a beginner? Here are a few guidelines:

Start with a Demo Account

Most brokers offer traders the opportunity to use a demo account, at least for a limited period of time. A demo account lets you make practice trades without actually investing any real money. This helps you to learn how trades are made and also gives you an opportunity to test out your strategy. All of this prepares you to make your first trade and improves the chance of you being successful.

Do Research

When you don’t have experience at your disposal, you need to utilize the next best thing: knowledge. Fortunately, the forex market has been well researched along with the many strategies that you can use. Reading books, joining forums, and asking questions are all essential to learning how to trade better. It will give you a better idea of just how this form of trading works.

Trade with the Trend

When you are just getting started, your greatest advantage will be to trade with the trend. Trading against the trade could offer better profits but tends to be a riskier option. This is why you should follow the trend unless you have strong evidence to go against it.

3) Forex Trading Mistakes to Avoid

One of the reasons that beginner traders tend to fail is because they make too many mistakes and are unable to recover from them. Here are some of the common ones to avoid:

  • Not being patient and playing the long game when necessary
  • Making too-large trades
  • Letting emotion cloud your trades
  • Focusing on making profit rather than preventing losses
  • Trying to get rich quick

A beginner can make money with forex but you need to understand that it is not simple. It requires study, effort, and most important of all, patience. Only then will you begin to make profits.