ForexGetting Started

Choosing the Right Forex Broker

As the online Forex trading market becomes increasingly saturated and the choice of brokers becomes wider, the decision of which broker to run with becomes increasingly important for the trader.  Although the majority of brokers provide the same basic trading platform, there can be a vast difference in what they offer their clients, both in terms of trading conditions as well as customer support.  By simply visiting a company’s homepage it may be hard to separate the second-rate firms from the professionals, therefore this article will examine the main parameters that should be taken into consideration before creating an account and depositing. 

Account type
The decision of which type of account to open will most likely depend on the amount of capital you have to invest.  Most brokerages offer two main account types: a "Mini" ($100-$200 minimum deposit) and a "standard" account ($1,000-$2,000 minimum deposit).  Mini accounts are best suited to new or amateur traders looking to gain market experience and confidence with a smaller investment, and offer higher leverage, which you?ll need in order to make money with such a small amount of initial capital. "Standard" account holders can expect to enjoy a wider variety of leverage options, but will have to invest a greater sum of money for the privilege.  Although not as commonly advertised, many brokers provide a premium service for large investors (perhaps $100,000 – $250,000+), including additional VIP services, such as a dedicated fund manager and tailor made conditions.

Common to nearly all online brokers is the offer of a demo account, which allows users to get a feel for the software and gain trading experience without the risk of market exposure.  Such simulations are undoubtedly beneficial to potential clients wishing to test the waters, but caveat emptor: they are not always representative of real-market, real-platform conditions, despite claims of full functionality.  Do not be afraid to question a brokerage on this matter – an honest, reliable broker will admit the downfalls of a demo account.

Software Considerations
The foreign currency market can move at a fast pace and will often require you to make quick decisions and executions, regardless of where you happen to be.  Depending on your level and frequency of trading as well as travel habits, it may be wise to choose a brokerage that offers a web-based Java trading platform, which requires no download and enables you to trade from any location worldwide.

Payment Options
Look for brokers that allow you to pay with credit card, as this is the easiest option by far and does not involve the necessity of transferring funds from online e-account.  Other payment options typically offered include wire transfer, which is equally as secure as credit card, but expect to wait a number of days for it to clear and to have access to your funds.

Support
Perhaps one of the most crucial considerations and one that may potentially have a significant effect on your trading success is the issue of customer support.  Whether you are a first time forex amateur or a FX vet, having the support and advice of a reliable, dedicated customer service team is undoubtedly invaluable, so it would prudent to do your homework on this one. The only way to gauge the quality of a support team is to contact them and see how they deal with your inquiries: are they fast, do they give reliable technical and market advice; do you get the sense that they know the industry well enough to advise others, or are they simply good sales people?  This might not be so easy to find out, but as the only point of contact between yourself and the brokerage, it is important to do so. As with any business, pre-sale service might be more satisfactory than post-sale, so again, try to judge whether or not you are being helped or simply pitched.

Platform, Tools & Analysis
In the present online market place it is rare to find a company which does not offer real-time tools such as charting and price updates, but predictably the quality and availability of such applications will vary from broker to broker.  Ideally you should have access to a wide range of tools, enabling you to assess the market 24 hours a day, making your trading decisions accordingly, and in addition your broker should also provide you with daily market reports, prepared in-house by professional analysts.  These reports should cover the basics: economic news relevant to the major currencies, technical movements and general commentary.  The better known, more reputable analysts have their reports published on a number of the larger online forex portals and forums, which is an indication that their data is considered accurate and reliable, which in turn tells you a little more about the reliability of the brokerage itself.

As previously mentioned, many trading platforms offer the same basic functions, but not all brokers cover all areas of the forex market, so before committing make sure your chosen platform will let you trade the currency pairs you require.

Spreads
Spreads are an important factor to consider before investment and will certainly require some shopping around in order to find the best offer to suit your trading habits. The spread is the difference between the price at which currency can be bought and the price at which it can be sold at any given point in time. FX brokers don’t charge "commissions", so this difference is how they make their money; therefore, the lower the spread, the lower the commission, and unlike stocks, currencies are not traded through a central exchange, so the spread may differ from broker to broker.  Spreads differ according to account type, with mini accounts offering spreads between 1.5-2 times higher than those offered for Standard accounts, which in turn are higher than those offered to large volume traders with VIP status.

"Fixed" spreads remain the same day or night, and despite market conditions, and although they are usually somewhat wider than the narrowest of variable spreads, they can be safer over the long term by providing a slightly higher level of predictability and a slightly lower level of risk.  "Variable" spreads change according to market conditions (which may initially be attractive during a calm period, but once the market becomes busy, they are likely to widen considerably, meaning that the market will then have to move significantly in your favor before a profit is turned).

Leverage
Unless you intend to invest a six-figure sum of capital, the use of leverage will be essential in order to make decent profits in forex. Generally speaking, the sum of money made during a successful trade amounts to just fractions of a single cent per unit, so if you are buying lots worth just a few thousand dollars or less, your profits will be minimal. This is where leverage comes into play: in effect by "borrowing" your broker’s funds temporarily you will be able to make larger trades, which, if all goes according to plan, will lead to larger profits. Obviously, this practice involves an inherent risk: if the market takes a turn for the worse you risk losing a substantial sum of money, depending on the amount of leverage taken. For this reason it is advisable to do some further reading on leverage and margins prior to using leverage, so that you are fully informed before exposing yourself to the open market. Under normal market conditions, some common currency pairs are generally less volatile, and may warrant a higher level of risk taking, while more exotic currencies may not be predictable enough and traders would be advised to use less leverage when getting involved with such pairs. Mini accounts provide the highest levels of leverage, with some brokers offering up to x 400. 

Education
While practicing on a demo account may help you improve somewhat and trading with real money might teach you some hard-learned lessons, the best way to improve your trading ability and provide yourself with a solid knowledge base is to educate yourself. To this effect, more and more online brokers are offering trading courses or tutorials, ranging from free five minute "introductions to forex" to curricula covering the smallest of details and costing thousands of dollars. Well established educational centers, such as the Online Trading Academy (OTA), with years of technical training experience are your best bet, providing solid instruction that will not only teach you the basics of the market, but also the technical side of the business (advanced technical analysis, charting, chart reading, Fibonacci calculations etc.). Some brokerages produce their own courses in conjunction with such trading centers, such as the course offered by Forexyard.com. Without educating oneself, the vast majority of built in market tools offered by trading platforms will be wasted on the amateur forex trader.

In summary, there are numerous factors to consider before choosing the right online forex broker, all of which should be researched to ensure that your trading account and broker will allow you to get the most from your investment.  You must be aware that some brokers do not have your best interests at heart, but do not despair, as there are many reputable and reliable companies eager and capable of providing a professional service. As part of your research, be sure to visit the many online trader forums, where you can discuss any of the issues raised in this article with other traders, many of whom will already have been through the process of choosing a broker and will be able to advise you from their own experiences. 

neil

Legendary member
5,167 745
Anyone know anything about this company that is based in Cyprus?
Why Cyprus?
 

neil

Legendary member
5,167 745
who?

Anyone know anything about this company that is based in Cyprus?
Why Cyprus?
 

hanzahar

Junior member
49 1
northfinace based on cyprus
 

Ted69

Junior member
17 1
Hi,

I try demo with intebankfx and they have a huge spread sometimes.
Is it a "right" Forex broker?
What kind of criteria you select to choose the right one?

Ted.
 

maxtail

Junior member
49 0
I am trading with stifx very tight spreads and one thing i like they dont increase spreads at all its fixed. And there customer support is awesome even i email in weekends i get very quick response.
 

Ted69

Junior member
17 1
I am trading with stifx very tight spreads and one thing i like they dont increase spreads at all its fixed. And there customer support is awesome even i email in weekends i get very quick response.
Hi,

Don't see STIFX in the NFA record though they claim it
http://www.cftc.gov/files/tm/fcm/tmfcmdata0704.pdf

What even worry me a lot is that the new requirement for the broker is the funds of more than 5mln and if they don't have - will be shut - so you can loose your funds.

what about saxobank? they seems to have a reliable service, aren't they?

Ted
 

maxtail

Junior member
49 0
If you read clearly, STIFX partners are NFA, CFTC Regulated, thats where funds are hold. And i have checked all the regulation, STIFX is a solid company with solid financial partners who are regulated, and have over 10 Million Capital in NFA record, and are also FSA UK Regulated.
I am with them for so long, and i am happy. and i or nor anyone should be worried, cause STIFX has solid services.
 

Ted69

Junior member
17 1
If you read clearly, STIFX partners are NFA, CFTC Regulated, thats where funds are hold. And i have checked all the regulation, STIFX is a solid company with solid financial partners who are regulated, and have over 10 Million Capital in NFA record, and are also FSA UK Regulated.
I am with them for so long, and i am happy. and i or nor anyone should be worried, cause STIFX has solid services.
Hi maxtail!

I don't see demo account and any desription of what is the minimum depo that have to be on the account to try .
can you desribe their trading platform?

Ted
 

Ted69

Junior member
17 1
If you read clearly, STIFX partners are NFA, CFTC Regulated, thats where funds are hold. And i have checked all the regulation, STIFX is a solid company with solid financial partners who are regulated, and have over 10 Million Capital in NFA record, and are also FSA UK Regulated.
I am with them for so long, and i am happy. and i or nor anyone should be worried, cause STIFX has solid services.
Where can you find the information about their wealth?
I don't think they are good in services as their web site is crap
go to spreads and why is the only one currency can be selected there?
what are their words about spread is most time - and what sometimes is 400pips? :)

Still looking for the good broker. Would like platform like MT4
Ted
 

maxtail

Junior member
49 0
Hi maxtail!

I don't see demo account and any desription of what is the minimum depo that have to be on the account to try .
can you desribe their trading platform?

Ted
Sorry ted for late response.
here is the link for demo
http://www.stifxonline.com/account-opening-demo-trading-stifxonline.html

And minimum amount they accept is $500
They provide MT4 trading platform.
Its better to speak with there support, who are always quick.
Such service is important, support and execution.
 

Ted69

Junior member
17 1
Hi All,

Once I've seen some guy speaking about how good the Finex (www.finex.com) is.
I've tried their demo and it was good till some point in time when they start doing what ever they want. When I asked them WTF? They told me that demo is a DEMO and I should not expect anything from it. Ok maybe they are right. Then how should I find out if they are working at all?
Next came to the point to open live account.
What can you expect - to see any sort of agreement- at least.
No way - is not there at all!!!
You imagine sending money to the account they ask you to send. Best deal!!!
Not to speak about any (I really mean ANY) document from their side. Don't expect - you take all risks :(

On the phone - "we have thousands of happy customers and our support and sales vailable 24 hours 5days a week."
Don't believe - guys in Europe work 10 to 16 and in America so you have a gap in time when nobody will be answering the phone.
You can try yourself.
What these guys expect and who is sending them money?
Will you send?

Is an interesting tendency to open new forex DCs in Switzerland!
And these GmbH - are companies with limited responsibility.
So if one day they decide to close you will claim from them only what is originally needed to open this name - effectively nothing.

So what we left is the only banks and companies in States that are regulated.

Ted
 

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