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Forex Brokers- How do I Find The Right One?

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  • Forex Brokers- How do I Find The Right One?

    Points to evaluate:

    Low Spreads - The spread, calculated in "pips", is the difference between the price at which a currency can be purchased and the price at which it can be sold at any given point in time. You should know that Forex brokers don't charge a commission, so this difference is how they make money. In comparing various brokers, you will find that the difference in spreads in Forex is as large a spread as you would find in the stock market.

    To keep more of your profits keep the spread lower.

    Quality Institution - Forex brokers are usually tied to large banks or lending institutions because of the large amounts of capital required. Forex brokers should be registered with the Futures Commission Merchant (FCM) and regulated by the Commodity Futures Trading Commission (CFTC). You will find this important information on the website of its parent company.

    Make sure your broker is backed by a well known and stable institution.

    Tools and Research - Forex brokers offer a multitude of trading platforms for their clients. Before committing to your chosen broker, be sure to request free trials to test different trading platforms.

    Find a broker who will give you the correct tools you need to succeed!

    Questions to ask your prospective broker:

    What are the normal spreads?

    Are the spreads fixed or do they vary?

    Do the spreads differ depending on ticket size?

    Do all clients on your platform get the same spreads?

    Some types of transactions

    Margin Trading
    Margin means borrowing money from a broker to buy a stock, or commodity, or currency pair and using the investment as collateral. It is, to all intents and purposes, a performance bond in cash or another means of security deposited by a trader.

    Barriers
    This is a standard option that automatically cancels out if spot trades through a prearranged knock-out level. This level is set below the initial spot for a call option, and above spot for a put.

    Reversals
    Reversals are primarily a Floor Trader strategy used to capitalize on minor price discrepancies between calls and puts. As implied by its name, reversals are the exact opposites of conversions.

    Types of brokers

    Market Operators

    This most reliable group includes big commercial banks which are regulated according to bank laws and rules. If you elect to deal with such banks you will need large amounts of money to start. Minimal lot is approximately $1, 000, 000.

    Market-makers

    Market makers are financial which work with smaller broker companies and offer probable opportunities of Forex trading to individuals whose trading capitals exceed $50,000. They offer lower cost of Forex market trading. The minimal size of the bill is $50,000.

    Small brokers

    Smaller brokers working with individuals' small capital - which ranges from hundreds up to several thousand dollars. Risks of carrying out of deals begin when these little broker enterprises clear orders of their clients and work with the dealer or a market-maker.

    Kitchens

    The scheme of "kitchen" works fine if somebody doesn't start to win all the time. Their founders know that many clients just lose their money. And the profit of "kitchen" is these clients' losses. Then "kitchen" is closed with the remnants of clients' money and about two months later appear under other name. The scheme usually works like that. They offer to teach you for free and to learn how to trade in Forex market. Be aware that anytime money is involved, some one will try to help themselves to it.

    Hopefully, I have helped to whet your appetite for Forex Trading.
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