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Forex Broker: Choosing The Right Forex Broker

Sometimes it's hard to make a decision on which Forex broker to open our trading account, there are just too many of them. Most of them have different features, capabilities, weaknesses and advantages, for this reason I have created a checklist that can help you decide the broker to use in your Forex adventure.

1. Is it regulated?

The first question you have to ask yourself is: is the broker I want to use Regulated ? There must be no doubt about this first point. All regulated brokers must submit financial reports to regulatory authorities, and when they fail to do it, authorities have the right to fine them or terminate their membership. This enforces Forex brokers to keep transparent financial reports.

The brokers must be regulated by their local regulatory authorities, for instance, for brokers based in the US , they must be regulated by the NFA (National Futures Association) and CFTC (Commodity Futures Trading Commission), Swiss based brokers must be regulated by the FDF (Swiss Federal Department of Finance) and so on.

Also when a Forex broker is regulated allows investors to dispute any resolution, increasing the investor protection.

2. Trading Conditions

This point refers to the features of the trading platform and the trading conditions with the chosen broker. Amongst the most important factors are:

Spread - Obviously the smaller the spread on currency pairs the better the conditions are for investors and traders.

Platform execution - Trading execution refers to how fast and consistent are the execution of trades. Some brokers guarantee fast and transparent executions during normal market conditions.

Fractional trading � Some brokers allow investors and traders to trade on a fractional basis, instead of trading full lots �100,000 units� or �300,000 units�, they allow you to trade �163,345 units� or �325,911 units�. This is very helpful for trades risking certain percentage of their balance on each trade.

Safety of funds � We need to make sure our trading funds are kept in a segregated account or at least insured.

Trading platform � Easy to use and understand platform, is it reliable during fast moving markets? And what extra features it offers such as: one click buying/selling, trading directly from a chart, supports mobile devices, trailing stops, etc.)

Minimum investment � What is the minimum amount of money required to open a trading account? This aspect is very useful because before trading your full account, you need to test the waters and see how well you perform with an account with limited funds (after trading a demo account).

Margin (leverage) � What kind of leverage can be used with the chosen broker? Just to make sure our leverage requirements by our Forex strategy and methodology (leverage above 100:1 is not advisable).

Commissions � Some brokers charge commission, it is ok if they do if the spread is smaller than other brokers.

3. Diligence

Hopefully you have eliminated most brokers at this point. You should have 3 or 4 finalists. In this step do your diligences on forums, ask other traders about their experiences using their brokers, and so forth.

Some forums where you can ask for broker information are: ForexFactory, MoneyTec, ForexNews.

If brokers are registered by their local regulatory authorities, you can visit the regulator website and you will find plenty of information about Forex brokers. Some of them publish resolutions regarding Forex brokers.

Amongst the aspects you should ask and get informed are:

Customer service � This aspect is the most important of them all, are they rude to customers? Are they willingly to help customers? These are the questions you should ask in forums and fellow traders.

Slippage � Slippage is the difference between the price where the trade was executed and actual value of it. Do they honor stop loss and take profit levels? Do they guarantee it? If any one had any discrepancies, did their broker revert the result?

Manual execution � Some brokers don't like scalpers, if they catch someone doing it, they will put this trader into manual execution, so a dealer (human) must accept all transactions made by this trader. Do they do this?

Re-quotes � a re-quote happens when you click the buy/sell button and the platform doesn't accept our price, so it will give us another quote for that particular trade.

4. Testing

In this phase we should test our Forex broker, first on a demo account to see how it works, also test your system to see how it performs. If you are satisfied with the results, then try the same platform with limited funds to see how it performs on real trades. If you are satisfied again then open your full trading account with the chosen broker.

I hope this checklist help you all traders to take the right decision when choosing brokers.

Let's Talk About Forex

foreign exchange converter



In short, EUR/GBP and GBP/CHF are leading indicators for EUR/USD and USD/CHF, and GBP/JPY, EUR/JPY and CHF/JPY are leading indicators for USD/JPY. EUR/JPY plays a very important role in EUR/JPY direction too, while GBP/JPY plays the same role for GBP/USD. For example, yesterday?s EUR/USD weakness largely started from EUR/JPY sales keeping EUR/USD and USD/JPY downwards. As a rule of thumb, if EUR/USD does not move but EUR/GBP moves first, it is a good indicator that someone is maneuvering in EUR/USD front in the same direction later, and when EUR/USD moves but EUR/GBP does not move first or in tandem, then it is highly likely EUR/USD move is countered by its opponent and the opposite move is highly likely soon. Same applies in USD/JPY and EUR/JPY, GBP/JPY front in the same fashion. Imho. Good trades.

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Forex charting is nothing but a software program specially designed to trade forex efficiently and effectively. Forex charting makes understanding the rises and falls of rates clear and simple. As a tool for your investments, Forex charting comes in handy all the time. You need to see where the market is going and, as a result, understand what leads to these fluctuations. Studying Forex charting helps you anticipate the occurrences that will spurn the next change.

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FAIR VALUE
The concept of fair value in any currency is largely that of CBers and economists and not much about trading. Almost always currencies overshoot from the fair value areas some 20-30% in their medium-term trend and what makes all hard currencies range in reasonable areas overtime since we had this floating regime in 1971 must the ability of relevant CBs to control the currency ranges and their real economy's weakness or strength to support those ranges. ECB folks were not joking when they said Eur/usd was some 25% undervalued from the fair value when Eur/Usd was below parity levels two years ago. Same goes for BOJ when they were saying Yen was some 10-20% overvalued when it was trading around 100 some three years ago too. That is how these folks view the markets and try to guide the market. Of course, when US Treasury folks say "Dollar is still strong" when it is falling, they are begging the market to sell more dollars
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