How do you select the best forex brokers?

At the beginning, you should realize that there are some crucial concepts you need to be aware of before opening a real forex trading account. Any attempt to trade forex without properly understanding these concepts is like a big leap in the dark.In the following paragraphs we will consider some key qualities which generally the best forex brokers possess.The purpose here is to give you knowledge so that you can make your own list of forex brokers and choose the one which you think is the best.

When choosing your forex brokers there are various elements, you will have to look at and they are forex margin, forex leverage, ecn forex and the forex spread. As an example you will need to look at the margin offered by the forex brokers.Usually a margin of 2% implies that you will be able to leverage your money by 50 times.On 30th August 2010 the CFTC which regulates retail forex in the US has decided to reduce leverage to 50:1 for major currency pairs. This means that the margin available with US forex brokers for major currency pairs will now be 2%.

Consequently, many brokers reviews sites do not recommend trading with brokers based in US.Rather they propose retail traders to open trading accounts in UK for maximum leverage. Again it is up to you to decide whether they are right or wrong.What you can do is browse the reviews sites for maximum information, bearing in mind that they might be biased, and then decide whether to open a forex trading account in the US or abroad.In addition you have to consider if there are enough regulations to protect your funds against fraud and bankruptcy of forex brokers.

The next question that you will need to ask is: what business model does the forex broker operate? Is the forex broker a market maker or ecn?.Indeed this is crucial because a forex broker who operates a dealing desk can trade against your positions. This is why ecn brokers are preferred.But what if ECNs charge a commission when you open and close your positions? Are you willing to accept that?

The next element that you need to search for is the forex spread. If the forex spread is very low, this is usually a good sign because it implies that the forex broker is not charging a hefty commission.Ecn forex brokers offers very low spreads because their platforms can tap into a huge pool of liquidity providers.Nevertheless whether it is an ecn or a dealing desk broker you will need to find if the spreads are fixed or variable? If they are variable, how wide do they get during the release of important economic reports such as the Non Farm Payroll Report. A factor which is also associated with the price of currencies is slippage.This occurs when your order is executed at a different price from what you are expecting. During economic news releases slippage happens very often.

So these are the vital factors which you will need to look at when making your list of forex brokers. You will need to ask the following questions: What are the trading platforms offered by the forex brokers? How many different currency pairs can you trade? Do they offer micro, mini or standard accounts?In fact, we advise traders who are new to forex to trade demo and then micro accounts.Hopefully if they are succesful they can then aspire to trade mini or standard accounts.



To learn everything about forex brokers it is important that you find more information about the key factors that we have discussed.Visit the following link and read more about forex leverage.The other factors are also explained by forex expert Amit Achameesing.