Choosing a Forex Broker
When we decide to do forex trading, in addition to technical expertise, monetary capital and physical tools, we all need a financial intermediary that allows us to do our trading.
And here comes the forex broker figure, that will be commissioned by the customer to put his buy and sell orders on the market. The broker is therefore an institutional figure that connects the trader to the foreign exchange market by picking orders to buy or sell and entering them on the market, but of course each broker has its own peculiarities that should be analyzed.
Obviously, when we have to choose a financial intermediary, we should always study in depth its generality, that is where the company is based, from which institution it is governed, who are the owners of the company itself. The web is very helpful in this case, as it is very easy to find complete and reliable reviews on many Forex brokers, with strengths and weaknesses of each of them that can help the trader in making a final decision.
A good knowledge about who is handling our capital is critical to avoid disappointment. Knowing the legislation at which the broker is regulated, in addition to the authority that controls it, are two very important factors in the selection phase.
For example in the UK, the control organization is the FSA (Financial Services Authority) which monitors and controls the broker, strictly requesting separated customer deposits from the accounts of the company, in order to protect the capitals of the customers in case of a bankruptcy.
In the rest of Europe, the regulation is delegated to the individual national authorities since there is no single control code; this requires a careful analysis of the customer on the selected Forex broker because there might be some nasty surprises in these details.
Next to the verification of the reputation of the broker, it is necessary to perform the analysis of the costs you will incur in, in case you decide to actually start trading with a forex broker. In forex, costs are nothing more than the bid-ask spread that the broker offers to the client the moment he decides to enter the operations. For this reason the indicative spread table (expressed in number of pips for each exchange rate) is a document to be analyzed with care as it is representative of the broker’s price list.
At this point you have the chance to try the quality of the offered service by opening a virtual account that does not use real money.
A little experience never hurts, especially in a market where financial volatility and the large leverage make operations very risky. Through a number of fictitious transactions, a trader can understand how the forex works, the strategies but most of all the quality of the platform offered by the broker and then decide at the end of the trial period, if he wants to open a real account with real money and start trading.