Before a trader can start trading Forex, he/she will have to make a decision as to which online forex broker they will open an account with.
Outlined below is a list of things a trader needs to research about any potential broker before actually opening an account:
1. Firstly, before opening an account with any broker check to see if the broker is authorised and regulated by a financial services authority.
The Forex market is essentially an “unregulated” market. Regulation with regards to the Forex market is reactive.
This means that only after you have lost a considerable amount of money will the appropriate authorities take action.
2. The Forex market is the most liquid market in the world and is open 24 hours a day, 5½ days a week.
With this in mind therefore, it is imperative that your Forex broker offers 24 hour customer services and support.
Before opening an account call up the brokers you have shortlisted as potentials and ask them a variety of questions.
Observe how quickly they respond to your queries and if they seem knowledgeable.
You would not like to entrust your business to a broker that doesn’t seem to know or understand the market they operate in.
3. Ensure that the broker you choose to open an account with meets the following important requirements:
- Low spreads on available currency pairs e.g. 2 pips EUR/USD, 3 pips GBP/USD. The spread is the commission amount you will have to pay your broker in order to initiate a trade.
- Instant automatic execution is a must for any trader. This means that as the trader clicks to initiate an order, that order is processed and executed instantly.
- No widening of the spreads in times of high volatility. Some brokers tend to widen their spreads in times of high volatility such as when economic figures are released. Try to find a broker that keeps spreads the same no matter what the market conditions are.
- The broker has the ability to offer potential clients different types of trading accounts with varied margin requirements. For instance, traders depending on their level of experience and trading style might want to open different accounts such as a mini or standard account. The level of margin requirement will differ depending on the account type.
4. Free charting and technical analysis: Choose a broker that gives you access to the best charting and technical analysis available to active traders.
Look for a broker that provides free professional charting services and allows clients to trade directly on the charts.
5. Another important issue that needs to be considered before opening an account with a broker, is the timing and method of withdrawals and deposits.
Check to see how long it will take to receive cleared funds in your bank account once you have requested a withdrawal and what the exact procedure is.