A forex broker plays a very important role in online foreign exchange trading. It is impossible for an average trader to participate in forex market without going through one. But then, your choice of a broker can either make or mar your chances for profitable trades.
On the surface, it might appear to you that all forex brokers are the same in terms of products and services they offer, but they actually differ when their experience and the quality of service they render are considered. In order to make your task easier, here are some useful tips for choosing the right forex broker for you.
This ranks among the most important factors to consider when looking choosing a forex broker. Spread is actually the difference between the price paid by a buyer and that demanded by a seller. It is a way by which the brokers usually make money. Pay attention to how much the broker you have in focus takes in spread; make sure that is low consistently. This helps to increase your earnings, as trading costs (spreads) are kept low.
You need to be aware of the fact that some brokers are often found guilty of underhand dealings. Most, if not all, of these are usually not registered. In case you do not know before now, broker registration is not made compulsory in the forex market as obtains in the stock market; so, these brokers are likely to go unpunished if something wrong was done by them. For the safety of your investment, you are advised to sign up with a forex broker that is registered with a recognized market regulatory agency.
Start with a small lot size
Forex trade is conducted in lots, available in differing sizes. You need to be aware that the higher the lot size you are trading, the higher your chances of recording massive gains or incurring colossal losses. It is, therefore, advisable for someone just starting out to begin with mini or micro lot sizes. Make sure the forex broker you are planning to sign up with allows such small lot sizes for trading.
Freedom of leverage
Leverage is one of the main factors that make forex trading interesting and rewarding. But while it could increase gains greatly, it is equally capable of doing same with losses. Low leverage is recommended for novices in forex trading. The right forex broker, in this instance, would be one that allows you freedom to choose the leverage you feel confident to work with.
Last, but not the least, you should spare a thought for the set of trading tools that each forex trader offers before finally settling for one. These tools will assist you in analyzing market indicators so as to enable you develop a trading style that will suit your needs.
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