Here are some basic questions you may want to ask of any prospective broker.
Charting Package and Features â Does the brokerâs charting package have the charting features and technical indicators you will need to execute your strategy?
Currency Spreads - The size of the spreads the broker offers will affect your profits, e.g. the cost of entering a 100,000 unit eur/usd trade at Oanda is 0.9 pips, or less than $10. At other forex brokers itâs as high as 3pips, which means that the same trade would cost $30 to enter. However, Oandaâs spreads on the eur/usd vary and may go as high as 10pips on holidays and during news releases.
Is The Broker Registered? - Think twice if the broker you are considering is not registered with a regulating authority such as the National Futures Association (NFA), the Commodity Futures Trading Commission (CFTC) or the Financial Service Authority (FSA).
Maximum Leverage - Most offer leveraging facilities as high as 400:1. How much leverage you use will severely affect your trading success. Read my article on âLeverage the Double Edged Sword of Currency Trading.â
Margin Call Policy â Does the broker automatically close all your open positions if your accountâs net asset value falls below a certain percentage?
Minimum Amount to Open an Account â Some brokers require that you start with no less than $10,000 but even some large and well established brokers will allow you to start with as little as $1.
Minimum Trade Sizes â Some brokers only allow lot (100,000 units) size trades. To trade that figure safely, you will need a significant amount of money to start. Still, others allow you to trade whatever size you wish, even a one unit.
Rollover Interests and Fees â If you hold a trade overnight you may be charged a rollover fee. You may also incur an interest charge or be paid interest, depending on the brokerâs policies and interest rate spreads on the currencies you are trading. I know of one broker who will pay or charge interest for every second you have a trade open.
Deposit Options â Does the broker accept deposits by paper Check, PayPal, Bankwire, credit and debit cards?
Mobile Trading â Do you want to be able to trade even if you are away from your desk? Ensure that your broker provides mobile trading tools so you can trade on your Tablet or phone.
After you have reviewed the broker features and characteristics that are important to you, do a broker comparison to find which ones standout based on you preferences. ForexDatasources.com has a very easy to use resource for filtering through popular forex brokers using many criteria such as those that were listed above. Here is a list of forex brokers that are generally considered to be the top 10.
- Interactive Brokers
- CMS Forex
- Deutsche Bank (DB FX)
- FX Solutions
- MIG Investments
- IG Markets
- Interbank FX
- Alpari (UK) Ltd
Before you take the plunge, open a demo account to get a feel for the brokerâs platform and currency trading in general. You may also want to explore forums to see what issues users are having with a particular broker or to seek answers, from seasoned traders, on lingering questions.