As a Forex trader, your Forex broker is your main connection to the Forex market. Without a broker, you literally can't trade Forex at all. Choosing the right Forex broker for the job is one of the most important decisions that you must make as a new Forex trader. With so many brokers out there, what do you look for? In this article we are going to look at 5 tips to finding a good broker.
1) Spreads
Most brokers use a spread based fee structure where the broker charges an additional few pips (the smallest possible change to the value of a currency pair) to the spread (the difference between Bid (Buy) and Ask (Sell) prices. So, that means that lower spreads is naturally better.
2) Minimum Account Deposits
How much do you need to deposit in order to trade? Most brokers now offer mini and even micro accounts that will let you trade for as little as $100 or even less.
3) Execution of Orders
Execution of orders is another very important thing to look for. The Forex market is very liquid, it moves very fast! Getting in and out of the market fast can mean the difference between profit and loss. Slippage is the term used when you can't fill your order at price you specified. This can happen because the market moves to fast or because the broker is lazy!
4) Technical Analysis and Charting
Your Forex broker should have a platform with charting and technical analysis. Gone are the days of manual calculations. Today, all brokers worth a damn offer extensive technical analysis, charting and plotting.
5) Leverage
Leverage is the x-factor in Forex. Where else can you trade for up to $400,000 for only a $1000 deposit? That's right, nowhere! Leverage is when you borrow money from your initial deposit or open positions to increase your holdings.
Forex Trading - Understanding Basics
How prices are quoted: Since the market works on the fluctuation of one currency against another, prices are normally quoted in one currency relative to another. These are called currency pairs and the most commonly traded currency pairs are:
-EUR/USD: the Euro and US dollar.
- GBP/USD: the British pound and US dollar.
- USD/JPY: the US dollar and Japanese yen.
- USD/CHF: the US dollar and Swiss franc.
- AUD/USD: the Australian dollar and US dollar.
- USD/CAD: the US dollar and Canadian dollar
As you can see, all pairs include the US dollar which accounts for over 80% of trading volume. It is also possible to obtain quotes for the other currencies, one against the other [for example the euro against GBP] and these are known as "cross"
Because of the large lot sizes. small fluctuations matter and prices are therefore quoted to four decimal points except for USD/JPY The smallest measure of a variation is called a "point" or "pip"(.0001). If the EUR/USD price changes from 1.3050 to 1.3055, the movement is described as 5 pips. The term pip is used for reckoning spreads or profits because different people operate in different currencies and the term pip is a common measure for any currency.
Understanding a price quote: in the above example, the EUR is called the base currency and the USD the quote or variable currency. Now if you were to ask your broker for an actual quote you would get a two- way quote which looks like this:
EUR/USD 1.3050 1.3055
It is called a two-way quote because it includes a buy and sell price and you can choose either to buy or to sell. In other words, the first price is the bid price, which indicates how many units of the quote currency you would get when you sell one unit of the base currency. In the above example, you would get $1.3050 if you sold one euro. The second price is the ask price, which represents how many units of the quote currency you pay when you buy one unit of the base currency. In this example, you would pay $1.3055 to buy 1 euro.
It is also possible for you to trade Forex by trading derivatives, such as currency futures. However, it is important to remember that derivatives are an entirely different class of financial instruments and trading in these markets is quite different from trading in the cash Forex market. Spot Forex markets offer the following advantages:
-higher volume and liquidity and thus superior order execution
- Much more active around-the-clock trading
- Price quotes that are easier to understand and
- A higher degree of risk so that effective risk management provides a high degree of return
-EUR/USD: the Euro and US dollar.
- GBP/USD: the British pound and US dollar.
- USD/JPY: the US dollar and Japanese yen.
- USD/CHF: the US dollar and Swiss franc.
- AUD/USD: the Australian dollar and US dollar.
- USD/CAD: the US dollar and Canadian dollar
As you can see, all pairs include the US dollar which accounts for over 80% of trading volume. It is also possible to obtain quotes for the other currencies, one against the other [for example the euro against GBP] and these are known as "cross"
Because of the large lot sizes. small fluctuations matter and prices are therefore quoted to four decimal points except for USD/JPY The smallest measure of a variation is called a "point" or "pip"(.0001). If the EUR/USD price changes from 1.3050 to 1.3055, the movement is described as 5 pips. The term pip is used for reckoning spreads or profits because different people operate in different currencies and the term pip is a common measure for any currency.
Understanding a price quote: in the above example, the EUR is called the base currency and the USD the quote or variable currency. Now if you were to ask your broker for an actual quote you would get a two- way quote which looks like this:
EUR/USD 1.3050 1.3055
It is called a two-way quote because it includes a buy and sell price and you can choose either to buy or to sell. In other words, the first price is the bid price, which indicates how many units of the quote currency you would get when you sell one unit of the base currency. In the above example, you would get $1.3050 if you sold one euro. The second price is the ask price, which represents how many units of the quote currency you pay when you buy one unit of the base currency. In this example, you would pay $1.3055 to buy 1 euro.
It is also possible for you to trade Forex by trading derivatives, such as currency futures. However, it is important to remember that derivatives are an entirely different class of financial instruments and trading in these markets is quite different from trading in the cash Forex market. Spot Forex markets offer the following advantages:
-higher volume and liquidity and thus superior order execution
- Much more active around-the-clock trading
- Price quotes that are easier to understand and
- A higher degree of risk so that effective risk management provides a high degree of return
Forex Trading System - Which to Avoid
Spotting a Forex trading system that screams "fraud" is not easy -- especially for beginners. The Web is littered with them and they come in all shapes and sizes. Victims are lured by visions of overnight riches with risk-free or minimal losses.
Any Forex trading system that boasts all profits and no risk should immediately be discarded as scam.
Behind the scenes ...
Regardless of where your interest lies -- be it investment, monetary speculation, or even gambling, someone is always developing ways to "beat the system," and then selling their "secret" to the general public. It is no different with Forex trading -- it's up to you to carefully examine them and avoid being duped.
Very often, the sellers of these systems aren't getting rich from using it themselves. Gamblers for example, in the pursuit of a perfect and foolproof system, are blindly convinced that if they persevere long enough, their "system" will eventually pay off. But in the meantime they are getting rich by selling it to unsuspecting customers.
What to look for
Before buying, check out the sales page -- what kind of information does it provide? If there is nothing but sales hype and empty testimonials about how good the system is, how easy and quick it is to learn, and how rich it has made them, then it's time for you to exit from the page. This type of sales page is very mysterious -- with no real information about the system and how it works.
When checking the sales pages watch out for outlandish promises -- with no real proof. Is the web page full of grammar and spelling mistakes, gaudy big fonts and exclamation marks? If so, then you should rightly suspect that an amateur has produced the sales page and cannot afford to pay a professional to do it.
What are the odds of winning?
No "system" can guarantee success -- it's impossible. Forex experts base their systems on past history as well as a variety of indicators and external factors. These are first analyzed and then the system will indicate whether or not to place a trade. The problem is that the Forex market is constantly evolving and fluctuating. It will not always perform as anticipated no matter how good a prediction is -- it's still only based on theory. It's even worse when the market is volatile and there's always the risk of losing your money.
What do trading systems offer?
Does that mean that all systems are useless? Not necessarily. Many are based on sound indicator analysis and will also offer you quality training, information, and tips.
Many Forex robots and trading systems offer a set-and-forget mode of operation. Many of these genuinely offer traders -- particularly beginners, the benefit of automated trading even during late hours. This is fine, however you will always get the best and most profitable trades if you combine the use of these together with good Forex training. You will then be able to make the best use of any decent Forex trading system.
Any Forex trading system that boasts all profits and no risk should immediately be discarded as scam.
Behind the scenes ...
Regardless of where your interest lies -- be it investment, monetary speculation, or even gambling, someone is always developing ways to "beat the system," and then selling their "secret" to the general public. It is no different with Forex trading -- it's up to you to carefully examine them and avoid being duped.
Very often, the sellers of these systems aren't getting rich from using it themselves. Gamblers for example, in the pursuit of a perfect and foolproof system, are blindly convinced that if they persevere long enough, their "system" will eventually pay off. But in the meantime they are getting rich by selling it to unsuspecting customers.
What to look for
Before buying, check out the sales page -- what kind of information does it provide? If there is nothing but sales hype and empty testimonials about how good the system is, how easy and quick it is to learn, and how rich it has made them, then it's time for you to exit from the page. This type of sales page is very mysterious -- with no real information about the system and how it works.
When checking the sales pages watch out for outlandish promises -- with no real proof. Is the web page full of grammar and spelling mistakes, gaudy big fonts and exclamation marks? If so, then you should rightly suspect that an amateur has produced the sales page and cannot afford to pay a professional to do it.
What are the odds of winning?
No "system" can guarantee success -- it's impossible. Forex experts base their systems on past history as well as a variety of indicators and external factors. These are first analyzed and then the system will indicate whether or not to place a trade. The problem is that the Forex market is constantly evolving and fluctuating. It will not always perform as anticipated no matter how good a prediction is -- it's still only based on theory. It's even worse when the market is volatile and there's always the risk of losing your money.
What do trading systems offer?
Does that mean that all systems are useless? Not necessarily. Many are based on sound indicator analysis and will also offer you quality training, information, and tips.
Many Forex robots and trading systems offer a set-and-forget mode of operation. Many of these genuinely offer traders -- particularly beginners, the benefit of automated trading even during late hours. This is fine, however you will always get the best and most profitable trades if you combine the use of these together with good Forex training. You will then be able to make the best use of any decent Forex trading system.
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