What A Forex Broker Does
By: Brian Channell
Even if you have bought and sold homes before, you
probably would not want to do it without the help of a licensed
real estate broker. The housing market is constantly changing,
and you want someone that understands where that market is headed.
The added expertise in the field gives you a competitive edge
over the rest. The same is true when dealing the FOREX market.
A FOREX broker can be a source of information and strength in
your trading endeavors. Even seasoned traders, rely heavily on
the help of FOREX brokers. Trading is risky business, and your
broker can be there to help ease some of the risk off of your
plate.
The trading decisions are still ultimately up to
you, but having a broker allows you to work quicker and more efficiently.
Utilizing your brokers system can mean quicker trades 24-hours
a day. It is like having someone work for you while you are away
on vacation, or even working a full time job. Don’t underestimate
the value of a reassuring knowledgeable voice on the other end
of the phone. With all the technology available, it still does
not give you that personal guiding hand in the process.
Technology and your FOREX Broker
Many people believe that the FOREX Broker is a dying
breed. With all of the technological advances in field, many individuals
now rely heavily on computers and see no need for a broker. I
would caution this line of thinking, however. If you want the
convenience of an online system but the security of having someone
there to answer your questions, find a brokerage firm that does
both. Most FOREX brokers understand the need for 24-hour access,
and have online portfolios and trading available to their customers.
When you have a tough questions or problem, you will be glad you
kept your broker around.
Top broker benefits
FOREX brokers vary greatly depending on the size
of their firms. You don’t necessarily have to go with one
of the leaders to have a good trading experience, however. You
will want to look for a broker firm that offers real-time access,
price certainty, competitive pricing, and competitive spreads.
Generally speaking, the bigger the FOREX broker
firm, the better their spreads and prices will be. They have more
pull in the market and are able to negotiate prices better. Weigh
all the benefits and downfalls to each firm to ensure an educated
decision. A good price does not always mean the best broker, so
choose wisely.
Choosing a Broker
There are certain questions that you will want to
ask to your prospective FOREX broker. Such questions include:
1. What is the spread? (Hint: The lower the spread
the more money you make!) a. The spread is calculated in “pips”
and is the difference between the price at which a currency can
be purchased and the price at which it can be sold. Simply put,
your broker has to make money. That’s how they stay in business.
Unlike traditional stock trading where brokers charge commissions,
FOREX brokers make money off the spread. The lower the spread
the more profit that there is for you.
2. What are your credentials? (Hint: There are certain
affiliations you should look for.) a. Most large brokerage firms
are connected in some way to a bank or financial institution.
Since the majority of their business is based on credit, this
is a very important partnership. Their affiliation offers you
the opportunity to invest thousands more than you could with smaller
firms. It is also recommended that your chosen FOREX broker be
registered with Futures Commission Merchant (FCM) and regulated
by the Commodity Futures Trading Commission (CFTC). Refer to your
broker’s website or call directly to find out if they have
such affiliations.
3. What tools are available to help me learn more?
(Hint: Not all broker firms are created equal. Find out who offers
the best resources and information to help you make the smartest
trading decisions.) a. This is a critical question to ask. It
is one thing to fulfill your trade requirements, but a FOREX broker
needs to also provide you with educational tools. Ask what kind
of tools they offer for their clients. A good company should offer
real-time charts, technical analysis tools, real-time news and
data, and software or website support. Be weary of any company
that refuses to share information or trial versions before opening
up an account. You will want to try out their system before you
choose to invest money in it. Many offer test accounts that allow
you to “play” the market without actually investing
any capital.
4. What is your leverage? (Hint: This is the determining
factor on how much money you are able to make with each investment.)
a. Leverage is the key factor to your success. As discussed earlier,
the FOREX market runs mostly on credit. Your FOREX broker is able
to supply you with a different margin depending on their size
and your needs. The higher the margin the more money you can possibly
make. If you are limited on funds, finding a high margin FOREX
broker is top priority. If you have the capital already, you may
decide that a lower margin is a smart choice for higher risk transactions
and vice versa.
About the Author:
Brian Channell is an online entrepreneur. Please
visit www.MyForexEducation.com
to learn more about Forex trading