Selecting your forex trading brokers can be a daunting task, there are so many to choose from. If you are new to trading, you will likely find that some of the brokerages recommended by old hands are not the best ones for you. They may become your best bet once you are seasoned, but when you are demo trading, different parameters apply.
As a new demo trader, you do not need five platforms and the virtual personal servers offered their big clients by many brokers.
What you do need is education and a simple platform, like Meta Trader. The MT4 platform is in the same standard form at almost every brokerage. The bells and whistles offered for your education, however, differ among brokers and are important for the new trader. Find a broker that offers a direct feed for the latest economic news and the forex calendar. Many brokers send messages with commentary on the latest news as it happens. These come straight to the screen where you are trading. Newsletters giving the day’s overview are common as well.
Another aspect to consider is how your trade is handled. If you are starting out with a small deposit many forex trading brokers use a dealing desk, meaning a human broker will place your trade.That broker may not have your best interest at heart by working against you with manipulations to increase personal commissions. There is software available like Broker Nightmare where you can input your trade and stops unseen by the broker until execution.
No matter how wonderful the customer service sounds in a broker’s promotions, test it with an email or phone call to see how fast they respond. A service oriented broker will leap at the opportunity to bring a new trader into the fold with careful service. Internet connections do go out sometimes and you can be left standing with a trade that has no stops. Find out whether you can get action quickly by phone, before the worst happens.
You will want to check the spreads, which is where most brokerages make their profit. On the major pairs, 1 or 2 points is what you look for in average market conditions. There are reputable firms that have a commission structure apart from the spread. They are known as ECN or Electronic Communication Network brokers and are also known as NDD (Non Dealing Desk) brokers. Human intervention is not supposed take place, but be aware that some brokers say they offer ECN but do not. It becomes evident to the savvy trader if this is the case. Until a few years ago, ECN was rarely available for individual traders with smaller deposits. That has changed and is a welcome feature to look for with forex trading brokers.
The location of your broker can be critical. There are reputable forex trading brokers all over the world. Ones in the UK, Switzerland, and Cyprus are some of the favored ones. Some U.S. traders are reluctant to send their money overseas where regulation may be unfamiliar to them. However, since the rules prohibiting hedging in forex accounts were implemented in May, 2009, accounts elsewhere may be more desirable. Many of these off shore brokers no longer accept U.S. clients, but there are still some very good ones. One of the reasons traders like them is for options like CFDs (Contracts For Difference) to trade oil and precious metals, not always offered by traditional U.S. brokers.
As an example, Dukascopy, a large bank and brokerage based in Switzerland, has a world of helpful platforms and education available. Until recently, a $50,000 deposit was the minimum for live trading so you only found recommendations for it from big players. They have now lowered that requirement to $100. Even though they offer Meta Trader, there are several other platforms, many of them for advanced trading, that are there to entice you. Keep in mind that forex trading is a process that takes time. Jumping into a complicated platform or trading system can be devastating to the growth of a new trader.
Be careful with the leverage offered by brokers. Dukascopy, interestingly, only offers up to 1:100. There are firms that boast a 300:1 leverage. These brokers are offering you to trade $300 for every dollar in your deposit. Seasoned traders generally recommend staying under 100:1 leverage as a new trader.
Stay away from spread betting, as enticing as it may be. Popular in the UK, the concept mimics the conventional system, but is still betting, and is illegal in the U.S.
As you progress in your knowledge and experience, options like advanced platforms, and VPS service will become more important. The right forex trading brokers can help you keep it simple as you grow in the trading business.
