Choosing The Right Forex Broker

Nowadays, most FX brokers offer commission free trades. Instead they earn from the currency pair spread when you trade. For example, if the USD/JPY currency pair is quoted by your broker at 121.56/58, the spread is 2 pips, which is the difference between the bid and ask price. This means that if you were to buy JPY at 121.58, you immediately have an unrealized loss of 2 pips. The market has to move in your favor by more than 2 pips before you make a profit. Hence, when selecting an online broker, shortlist the brokers with the narrowest spread.

Then, check the amount of leverage offerred. Most brokers offer between 50:1 to 100:1 leverage. This means that by putting up a margin of US$500 allows you to trade up to US$50,000 worth of currency. High leverage allows you to maximise your profits against your own capital invested. Of course, the opposite is also true, so manage your risk and expectations prudently.

Next, check on the types of accounts available. If you are a newbie, look for a demo or game account when you can learn to trade with virtual money. Then upgrade to a mini account which requires about US$250 - 300 to open. Every broker will have a standard account which need about UD$2000 to open. These usually offer more leverage options and powerful trading and research tools.

Some other factors to consider in choosing an FX broker would be having a stable and reliable trading platform, technical analysis tools, real time charting capability and quality news information.

Some recommended brokers:

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