Forex brokers are foreign exchange brokers who act as intermediaries between the investor and the foreign exchange marketplace. They give advice on how to structure different strategies so that their clients can gain the best results for their investments. The advice they give ranges from how to go about researching in the most profitable way, to how to carry out any technical analysis that may be required and applied to improve your Forex trading experience.
A foreign exchange broker can be either a company, or an individual, that buys and sells according to their Forex trader's decisions. The Forex trader is then you, the investor. The Forex broker makes their living by charging their client a fee or commission for the service they provide. However, because of the way their business is structured, a foreign exchange broker will need to be closely associated with a bank or other financial organisation so that they have sufficient funds available for margin trading. Most countries require a foreign exchange broker to be registered or licensed to protect against fraud.
Online Forex Houses Open Forex Trading to a Wider Market
In order to gain access to a foreign exchange broker in the past it was necessary to make contact through a financial institution or a bank, but with the internet being such a bustling marketplace in every industry, it is now possible to work from home through an online broker. Online foreign exchange brokers will arrange their websites so that you have full access to any pertinent news services as well as any other advice you may need in order to make an educated decision on how you wish to proceed. These online foreign exchange brokers operate from firms known as houses and they will walk new Forex traders through all stages of Forex trading. They will offer detailed research advice and even have simulators set up to help you in the usage of various tools used in the process. More experienced Forex traders are looked after by other online Forex brokering houses. These houses offer less instruction but give more in-depth advice. Before you decide on which online foreign exchange broker to use it is best to try out many. All will be different and use different tools to gain the best trading results. Where one structure might not be suitable for you personally, another could be.
When seeking the best foreign exchange broker to work with, it is prudent to carry out much research in order to discover the standing of the various houses. Some of your enquiries should cover the following points:
- Account Balances. Ask what the broker’s requirements are regarding minimum account balances? Interest paid on account balances? Which currencies can be traded and which can't? Are your funds insured and what small print is involved in that insurance? And what is the size of the lots that must be traded?
- Trading Software. Trading software is a most important part of being a successful online Forex trader. Don't be afraid to ask for some demonstration software so that you can get a feel of what you are getting into. Some software features may only come at a cost so find out which services you have to pay for, and at what cost? You will be entering a very fast moving market so you will need to be in control, the software will need to offer automatic trading and trading from the chart, as well as trailing stops.
- Margin Accounts. Margin accounts are at the heart of Forex trading therefore you will need to know your foreign exchange broker’s margin terms before setting up your account. Find out how your margin is calculated and what the requirements are? Does the margin change when currency is traded? Does it remain the same under all conditions? Is there a different margin for standard and mini accounts?
- Fees. Is there any trade off between spread and service? The smaller the spread the more profit for the trader. Are mini accounts subjected to wider spreads? Is the spread fixed or variable and does it change according the account type? Are there any other fees to be concerned with?
You will find that foreign exchange brokers display live prices on their trading platform site but the important thing to know is will these prices be honoured when you push the buy and sell button? You can find this out by starting off with a demonstration account. In this way you will get the chance to see how fast the broker’s execution is. This is important because when you decide to buy you will want to do so immediately. Not wait around for five or ten minutes to have your order confirmed.
When you start trading with an online foreign exchange broker, you could finish up trading with a broker who is on the other side of the world from where you live. It is therefore important that you are certain that if something goes wrong you can contact somebody by phone, especially if your internet connection fails at a crucial stage. It is a 24 hour a day market therefore your broker should be able to offer you 24 hour support.