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.
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