Finding a Forex Broker
To trade forex, you will need to open an account with a retail broker. Their are several factors to consider when evaluating which broker meets your needs.
In the United States a broker should be registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) and a NFA member. The CFTC and NFA were made to protect the public against fraud, manipulation, and abusive trade practices.
Look for responsive firms with a clean regulatory history, several years of experience, and a positive reputation.
The NFA recommends you read "Trading in the Retail Off-Exchange Foreign Currency Market" before becoming a forex trader.
YOU SHOULD TRADE IN A DEMO ACCOUNT FOR AT LEAST 2 MONTHS BEFORE TRADING FOREX WITH REAL MONEY
- Regulation
- Is the broker regulated? If so, by who? What protections does that regulator offer?
Do NOT trade or give money to a non-regulated broker - Check history and complaints with the NFA at www.nfa.futures.org/basicnet/ or call (800) 621-3570
- Are funds insured against fraud and bankruptcy?
- Is the broker regulated? If so, by who? What protections does that regulator offer?
- Trading Account
- What is the minimum opening balance?
- Do you earn interest on unused equity (the margin available discussed earlier)?
- What is the initial and maintenance margins on the currencies you want to trade?
- Execution
- How fast is execution?
- How fast are they to the answer phones and emails?
- Hidden Areas That Weigh Down A Trader
- How tight is the spread (the difference between bid and ask prices at time of trade)?
- What are the commissions?
- Trading Platform
- How reliable is the software?
- How many currency pairs are available?
- Real time currency quotes
- Any special features
- Web based
- Mobile device access
- Broker
- How many years of experience
- What styles / systems do they use (eg scalping)?
- What is the brokers reputation (Did you Google the names of the brokerage and broker?)
- What is their track record for the last 5 years, last 3 years, last year, and last month?
The CFTC lists 9 tips to avoid fraudulent brokers
- Stay away from opportunities that seem too good to be true
- Avoid any company that predicts or guarantees large profits
- Stay Away From Companies That Promise Little or No Financial Risk
- Don't Trade on Margin Unless You Understand What It Means
- Question Firms That Claim To Trade in the "Interbank Market" (see above)
- Be Wary of Sending or Transferring Cash on the Internet, By Mail or Otherwise
- Currency Scams Often Target Members of Ethnic Minorities
- Be Sure You Get the Company's Performance Track Record
- Don't Deal With Anyone Who Won't Give You His Background
YOU SHOULD DEMO TRADE FOR AT LEAST TWO MONTHS BEFORE YOU TRADE FOREX WITH REAL MONEY.
There is a substantial risk of loss in forex trading.
You should only trade with risk capital that you can afford to lose without impacting your lifestyle or retirement plans.
The views expressed on this site represent the current good faith views of the authors at the time of publication. Please be advised that these views are subject to change at any time and without notice.
