When we talk of any money transactions like those pertaining to the stock exchange, one hears a lot about brokers. FOREX traders are known to use brokers to carry out their transactions for them. So how would one define a broker? In the true sense of the word, a broker is a person or a company that a prospective investor trusts to buy and sell as per his decisions. He then pays the broker a commission which is how the brokers earn their money. A fund for margin trading necessitates the FOREX broker to be connected with big financial institution like banks. As protection against fraud and abusive trade practices a broker should be registered as a Futures Commission Merchant or FCM with the Commodity Futures Trading Commission or CFTC.
An account would need to be set up with a FOREX broker before trading FOREX. There are a lot of brokers available on the Internet and one need to go through all that they are offering as part of their services before making an informed decision and ensure that you are apprised of the fees and other charges involved. As with all businesses the best way to advertise is the kind that goes by word of mouth and this applies to FOREX trading as well. Get information from friends and associates who have been dealing with brokers and find out the pitfalls in any that you need to be aware of and if they had any problems with their particular broker.
Everyone who has something to sell will have excellent pre-sales services and these may differ from the actual service they provide once you are registered with them. Look out for this aspect especially if you are looking at online FOREX brokers. Brokers need to be quick with buying and selling and ideally an online broker should ensure automatic execution with clearly stated policies on slippage and what percentage of slippage to expect in normal and fast moving markets. You would need to know what spread the broker is talking about, whether it is fixed or variable as per type of account, do mini accounts attract wider spreads and the charges for this, if any. More profit is accrued by the trader for smaller spreads but it may lead to a trade off between service and spread so go into the nitty gritty of the deal before signing up with any broker.
It is essential to understand the broker's margin terms before you take on a contract with any broker as the life blood of the FOREX trading is these margin accounts. You would need information on things like the calculation of margins, requirements of the margin, whether the margin changes are based on the currency that is being traded and whether the broker has different margins for different accounts like mini accounts and standard accounts.
Fast moving markets need that you have reliability and an ability to perform and since trading software is very essential for online FOREX traders, see that you pan the options available, maybe try a demo or two and then make your decision. Ideally the software should have auto trading, trailing stops and chart trading as some of its special features. They may be charged extra so check what you need and go through the charges with the broker as well. Minimum account balances, interest account balances, currency trading and if non-standard sized lots are traded as well as clients' funds insurance and to what extent are some things for which the broker would have certain policies and one must get all the information on them.
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