At the outset you should realize that there are some crucial concepts you need to be aware of before opening a real forex trading account. Any move to trade foreign exchange without grasping the essential concepts is definitely very risky.If you are new to the forex market, trading with a good forex broker can be the difference between winning and losing.The purpose here is to give you knowledge so that you can make your own list of forex brokers and choose the one which you think is the best.
When choosing your forex brokers there are various elements you will have to look at and they are forex margin, forex leverage, ecn forex and the forex spread. For example you should ask yourself what is the margin percentage offered? Do I really need significantly high leverage?.It will be appropriate to mention that on 30th August 2010 the CFTC announced its decision to reduce leverage for major currency pairs to 50:1.This rule which became effective on 18th October 2010 means that retail traders have to put more money as margin to trade the same amount of currencies.
This rule has been previously subject to much debate and many forex reviews sites still recommend not to open a forex trading account with a US regulated broker.Whether they are right or wrong is for you to judge.If you believe that the reviews are right you will want to explore some forex brokers services available in other countries such as UK and Australia.But this is not all.You will need to find if there are regulations in place to protect your money in case the brokers go bankrupt.
The next factor that you have to investgate is the model upon which the business of the forex brokers is based. Put simply is the broker a market maker or ecn?.A broker who operates a dealing desk is potentially dangerous because it can manipulate the movements in currency prices. This is why the best choice is ecn forex.But ecn brokers can at times be costly if they charge a commission on each trade.Will you then prefer to open a trading account with a broker who has a dealing desk?
The forex spread is the next factor to consider in building your list. Typically one will want to trade with a broker who has very low spreads.Generally brokers who operate ecn provide the lowest spread because they can reach a larger pool of liquidity.In this line it will also be relevant to consider if the spreads are fixed or variable. Indeed brokers who have variable spreads usually experience wider fluctutations during major economic news release. A related element which is associated with the changes in currency prices is slippage.This happens when your trade is executed at a different price from what is initially shown on your trading platform.
This article gives you some basic ideas upon which you can draw your list of forex brokers. But you have to be aware that the factors discussed are not exhaustive. Some further questions that you could ask are: Are the trading platforms offered user friendly? Can i trade a large variety of currencies? Do they provide micro or demo accounts which i can use to hone my trading skills?We often recommend new retail traders to practice on a demo account and then open a micro account instead of going for a mini or standard account straightaway.