Wagering on the Forex Market
If you are considering currency trading, you should be an experienced trader who can handle financial losses. Forex trading is risky and is not suitable for most investors. If you have been an active day trader, you likely have the skill set applicable to exchange successfully, or at least possess a rational understanding of the risk involved. It is prudent to keep in mind that market maker forex brokerages are not motivated to help you turn a profit. Quite the opposite, in fact. For the most part, brokers collect money from you regardless of whether you gain or lose, so they have little motivation to help you make money.
When selecting a broker, you need to consider whether the broker is a market maker or an Electronic Communications Network (ECN) broker. For the most part, market makers are considered the more nefarious of the two since some have been known to manipulate spreads artificially for their own gain. The more honest market makers only make money off the actual spread between the buying and selling price. ECN-type brokers usually just charge a commission but do not make money off the bid-ask spread, so they are not motivated to manipulate spreads. Be sure to read all fine print and contract details before opening a new account.
To help you find a broker, we offer articles about forex trading and full reviews of the top forex brokers. If you're trading from the U.S., we recommend that you consider Alpari or MB Trading or global traders may want to investigate Dukascopy.
Forex Brokers: What to Look For
You should not rush to choose a new broker. We recommend that you take advantage of several free demo accounts and compare them carefully before you commit to one. You should also read our reviews, peruse a few forums and find other resources to further educate yourself about the broker. To help you make an informed selection, we compared trade details, brokerage types, funding options, trading platforms, and help and support.
Trades
While volume investors fuel the majority of the $4 trillion dollar per day foreign exchange market, increasingly opportunities are opening up to lower-volume investors. In the past, minimum deposits were in the thousands; now you can fund a new account with as little as $100. This low deposit requirement gives you the opportunity to test out a few services without having to risk large sums of money. Most forex trading brokers also require only a 1,000 minimum trade lot size. If you are trading from the U.S., leverage is limited to 50:1; however, if you are trading from other countries, you may be able to leverage as much as 400:1. In terms of trading pairs, brokerages offer a choice of 30 to more than 60 trading pairs. While you may not choose to trade more than 60 trading pairs, you will want to verify the trading pairs available to ensure that the ones you are interested in are accessible through your selected broker.
Brokerage & Funding Options
Before selecting a new broker, you should consider the broker's reputation, funding and payment options, and all associated fees and interest. While conducting our research, we noticed that withdrawing money seems to be trickier than depositing money into your account. Keep in mind that it may take days or longer to retrieve your funds, so you should not trade with money that you actually need. It would be prudent to investigate customers' experiences with withdrawals before signing up with a new broker. Also, be careful to note what type of broker they are and what governing agencies the broker is regulated and licensed by.
If you are a day trader, you may not have to worry about interest rates. However, if you hold a position overnight, the broker will charge you interest. For Muslims, most offer interest-free accounts that charge a fee rather than interest. Other fees to consider include wire-transfer fees, margin rates and routing fees.
Trading Platforms
Most forex brokers offer MetaTrader to their clients as the trading platform. If you are an experienced trader, you are likely already accustomed to using this popular trading platform. Those that offer MetaTrader also provide access to the mobile version. All platforms are now web-based, and many brokers offer their own proprietary trading platforms as well. If you are trading with a market maker broker, it is recommended that you monitor a few trading platforms to ensure that they are offering you fair deals.
Help & Support
Although nothing can replace extensive research and experience with a broker over an extended period, we did compare how easy it is to contact the forex brokers and what kind of education they provide. The best forex brokers offer telephone and email support during generous business hours. Many also provide limited chat support. All services provide free demo accounts so that you can practice trading strategies and using the trading platform.
Forex trading involves a high amount of risk, so we recommend that you educate yourself as much as possible before you start. The top brokerage services provide documentation, videos and tutorials to help you learn how to minimize your risk.
At TopTenREVIEWS We Do the Research So You Don’t Have To.™
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