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In forex trading when we mention the word forex broker we describe the financial firm which has been granted a license by a reputable exchange commission to offer an online forex brokerage service which will allow end users to trade with the use of the internet by connecting to a server which offers market access and trade execution services, through an online trading platform, in foreign exchange markets, CFDs, international equities, commodities and Exchange Traded Funds (ETF).
Each broker may pick to use a different trading platform which can be shared by numerous organizations or various trading firms and each forex broker can have an entirely separate trading methodology although offerings to other rivals might be similar. Similar to stock market trading the forex broker has the duty and the task to mediate between the buyer and the seller with the slight difference that in the case of a forex broker just like trading-point.com the entity which is described as the forex broker does not mediate himself but mediates by offering the support, the banking and the added benefits to make the trading software he adopts as appealing, efficient and user friendly to the private trader which has selected to execute online trades from the very own convenience of his home, his office or while on the go simply by registering an account with an online forex broker.
Before you find the appropriate forex broker for your needs it is important to understand what forex brokers are first of all so your selection is based on knowledge and understanding. The term forex broker can have many different meanings within the Foreign Exchange Trading markets, especially in the street jargon. At its basic meaning forex brokers are the entity that stands between the trader (yourself) and the actual forex market. It is the entity/platform, where you will post your wanted transaction and they will be executed in the market. In the days we live almost all forex brokers adopt online platform(s) from which you can trade directly in the foreign exchange. Within the platform you provide the broker – through the platform – with your transaction (buy or sell) and the broker will execute it in the market. In other words the brokers dealing room goes to the market finds what you want to buy/sell and executes the transaction for you. Bear in mind that the foreign exchange market is what we call OTC (over the counter), so there is no formal exchange center like in the case of shares, but all interested parties that buy or sell currencies make up the market.
Thus for the retail customer forex brokers can be considered as his/her entry point to the foreign exchange market. Forex brokers in this case can be an entity that provides you with an online platform or telephone access to market data and transaction execution. As an online currency and commodity trader in order to be able to reach out to the forex market you are required to maintain an account with a forex broker as you are classified in the category of individuals which trade forex and the relative products offerings of a forex platform for speculative retail reasons. As a speculative forex trader you do not trade currencies in order to enhance your business activities but clearly for the reason of accumulating a profit from the fluctuations the forex market presents.
Your forex broker will execute your transactions on time (high importance), the forex brokerwill hold your trading capital (high importance) for you to be able to trade, he will provide you through their platform with real time prices (high importance) for you to make accurate decisions, but he will also train you to use their platform and trade on the forex markets, provide you with analysis/expectations of the trading item you choose and also assist you in all forex trading needs you might have.
As the number of brokers increases together with the increase of popularity of online trading the task of selecting the appropriate forex broker is becoming increasingly difficult due to the huge number of brokerages currently online, with all different services, costs and regulations.
Selecting or distinguishing the best forex broker is a very broad saying as a number of the forex brokers available offer a very similar service and even the same platform altogether. What makes the difference in each of the firms operating an online forex brokerage site is the added benefits and the overall package which comes together with the platform which includes features including support, deposit and withdraw options, forex coaching, execution methodology, possibilities for forex managed accounts and most importantly a registered license to operate which supports proof of financial ability and therefore a guarantee that the traders funds are safe and guaranteed from a respected chain of banks to which the trading firm operating a forex brokerage online is associated with.
The differences between the various forex brokers are many and should be reviewed before choosing the forex broker you will trust with your money and use their platform to enter the forex market. Regulated by a Financial Regulator in a country, which and for how long. Platform used by the forex broker. Type of account and technical details. Different forex brokers have different type of accounts in size, lots of trade, commission received, leverage, rollover interest policy and other technical’s that will increase or decrease your risk and cost management for each trade. Level of information and service: Each forex broker provides their clients with different level of analytical information and service. Some have online chat sessions, answer emails and phones immediately, provide their customers with deep and accurate information/predictions, watch the trades of their customers and intervene when needed. Some forex brokers provide advanced information, as charts and analyses for free, some other provide it as a premium service.
Last but not least – does the forex broker suit your need? Do you feel comfortable with the platform, at the same time with their customer service, the information and training they provide, their payment in and out policies, as well as your cost of trading. Does it all make you feel comfortable? Its important.
7 Tough Questions to ask yourself and your forex broker;
Its crucial that you get an understanding of some basic terms and some basic key points which distinguish forex brokers from one another before moving forward with depositing funds and trading. Getting a vital understanding of some fundamental information which make brokers different from one another and moreover make brokers worth trying or making brokers worth staying away from altogether; understanding these will keep you safe from getting a sour taste of the forex market and will therefore keep you on the safe side of learning, improvising and implementing a forex trading strategy which can potentially earn you profitable trades.
Where is your online trading broker licensed?
Although quite a basic question; you should be asking yourself where your broker is licensed as it’s only reasonable that a forex broker which is regulated by a respected authority or a respected commission is most likely worth his title and therefore is performing services within the boundaries set by his regulator which has granted him his license. Moreover you should realize that trading with a licensed broker means you got a door to knock if something goes wrong. Generally speaking the first thing a broker will take the time to do is safeguard his license as it most likely cost him a respected amount of money to get things done by the book in order to get a license in the first place so he wouldn’t likely jeopardize losing it by mistreating a customer.
Respected banks and reputable electronic wallets which are the primary gateway of income to any online business simply do not issue bank accounts for companies that cannot prove their legitimate existence and cannot prove that they are not associated with money laundering so its more of a case that a license is they key to banking which at the end of the day is the piece of the puzzle which cannot be missing in order for a company to be competitive.
Almost every broker we have come across somehow advertises offers for the lowest and tightest spreads of the industry when in reality there’s so much behind the chapter called spreads meaning that you are not really getting the other flip of the coin when you are coming across a banner saying the lowest spreads in the market. Does your broker publish his spreads? These are questions you better start asking yourself before you fill in the registration form and share your personal details with another broker which will most likely start giving you a sales pitch over the phone in the next hour after you register trying to convince you to deposit funds and get going trading on his revolutionary platform which in most cases is the same as what everybody else offers.
You got to understand that whats in the box is more or less the same at most brokers and that’s not to be criticized as there is a reason why the majority of forex brokers you have come across are offering MT4 solutions. The answer is surely not because it’s the easy way out or the cheap way to do things as it does cost a fortune to license the MT4 software itself. Going back to the offerings what you should grasp on is that its not what’s in the box that matters when it comes to forex brokers but how the actual box is delivered. Coming back to our topic here; spreads; you should be fully aware of all the typical spreads for not only the typical currency pairs but for each and every currency pair and trading instrument offered within a forex broker. Why? Simply because if you decide to move out of the league and trade a non typical currency pair you shouldn’t find yourself paying a fortune which will most likely average out the so called competitive spreads offered by your broker on the popular and widespread pairs.
Do spreads vary accordingly to size?
If you’re a newcomer to the forex market you are most likely starting off with a micro or mini forex trading account; right? Well go through the hassle of asking your forex broker if his spreads apply to all account sizes; you should be aware that in many cases attractive advertisements of low spreads only apply to big accounts and are therefore reserved for the sharks. Make sure you are not with a capitalistic broker that eats up his small traders but pats his big boys on the back with better spreads.
Ok so the spread is cool; all is good; its tight, it applies across the border and all seems just too good to be true; is your broker charging you a cap on top of the spread as commission for his services; makes sure your not been offered spreads that come in a pair with a commission which will be evening out the so called competitive spreads you are being offered. Commission schemes and other charging plans which have been observed at forex brokers till today include a monthly fee for maintenance of account; minimum fee for maintenance of account when a minimum trading volume is not achieved or last a monthly commission fee for making use of the platform offered to you for “free” by your broker.
Does anyone other than the firm itself get paid as a result of my trading activity?
Have you been referred to a broker by a middleman? When you have either under your consent or without you realizing landed in to a forex broker through a middleman it is very likely that you are getting charged a premium to cover the portion of commission the middleman is getting from every single order you execute. As you can understand brokers advertise their services through mass media, through news portals, through investment research portals, through ad networks and moreover through affiliate programs so make sure the fee paid for the media is not getting charged to your bill. Serious brokers put the expense of advertising on their own bill and do not charge or adjust the spread in order to cover middleman costs so be aware you are not paying a premium to a small time salesman.
Important, Important, Important! You see tight spreads going as low as 0.9 pips for example and it looks neat; the question here is will you have the luxury of getting near them or will you be provided a requote every time the market is in your favour and you need the tight spreads to make a profit? We recommend you select a broker with a no requite policy or at least select to trade with a broker that is honest enough to declare that he does offer the tightest spreads but he does offer requotes during breaking news or important announcements.
Do I have unlimited access to a live demo platform?
Do your demo accounts work similarly with your live accounts is the first question I would ask my broke as I wouldn’t want to be caught in a broker that offers a sweet demo version but has tweaked the live with different execution policy and moreover with different spreads. Moreover you should be aware to select a broker with a non expiring demo account as expiring demo accounts can mean that you will be most likely harassed by the sales team of your demo provider to switch to real when the demo period elapses although you might not be really ready to enter online trading with real funds yet due to lack of experience and knowledge. Practice makes perfect so make sure you select a broker that offers non expiring demo accounts.