When it comes to trading on the forex market, there is nothing more important choosing the right forex trading broker. There are a few things you need to know before you decide to go out, join a broker and start trading.
Start Up Costs
The first thing you need to look at when it comes to choosing a forex broker is the required start up costs involved. The majority of brokers require you to have enough funds, before they allow you to open an account. This usually ranges anywhere from $ 1000 – $ 10,000 depending on the broker and the type of account you wish to open.
There are usually three different accounts – a mini account, standard account and an advanced account.
Mini accounts have small start up costs, usually around the $ 1000-$ 2000 mark. They also don’t offer trading on the lowest spreads which means the potential to make a lot of money is severely reduced. When it comes to choosing a broker, make sure you sign up for an account that charges no commissions. A lot of forex brokers make their money by charging their clients commissions. Make sure you check to see this isn’t the case before you sign up.
Standard accounts, usually have slightly higher start up costs, anywhere from $ 5000 and upwards. They also allow for trading on much lower spreads then that of the mini account, which usually means you have the potential to make much greater earnings. If you have the money for the initial start up costs, then you’re best off going with a standard account rather than a mini.
Advanced accounts are made for advanced traders only. They allow for trading in the lowest spread, usually 2-3 pips on the major currencies and instantly execute every trade you make. They also require much higher startup costs, sometimes $ 50,000 or more! The potential to make a lot of money is certainly higher with this particular account, but so are the losses, so leave it to the experts, unless you are one yourself!
Most brokers allow people to try out forex trading before they make a decision to create an account. These free accounts are just practice accounts and don’t deal in actual real money. They are a good way to get to know what it’s like to trade on the forex market and it’s recommended that you try one of these accounts before you move onto the real thing.