How to Choose a Broker
It is impossible to trade in forex without a broker and thus choosing one is of utmost importance. But how to choose a broker who understands your requirements is equally crucial. Deciding on a brokerage firm is an investment decision that will decide your future course. Stockbrokers can be a reliable guide to trade wisely, and they help make informed decisions through their expertise in the forex markets. While choosing a broker, it is imperative to keep in mind the type of investment to be made. A broker is a trader’s connection to the stock exchange and is usually working in a brokerage firm. He is the one who carries out the Forex transactions.
Full Service or Discount Stock Brokers?
Another important decision is whether the investor wants a full-service or discount broker. The former provides many financial services and expert advice to clients at a higher price compared to the latter. The full-service brokers take care of all the ground work, too. The discount brokers just carry out the transactions and offer no other benefits and are relatively cheaper. Choosing a broker should depend on the money one wants to spend, and the services required.
Regular brokers or Broker-Resellers?
There are also regular brokers and resellers that traders can choose while going for forex trading. The regular brokers will deal with investors directly while the resellers work like a mediator for the client and a larger brokerage. As the former offers more personalized dealing and are more reputable in the market, they are the preferred choice for traders compared to broker-resellers. While choosing a regular or reseller, broker, it is important to ascertain the type of investment.
Online forex trading is on the rise, and almost every broker offers the service. With internet trading, staying updated and having access to the account becomes easier. Online trading offers better usage and costs less compared to the manual process that is also offered by brokers. For the ones, who do not like online trading, telephone and fax are the other alternatives. Best online forex brokers can be selected on the basis of the services offered.
Placing an order
While placing an order, there are two important terms that one needs to know – At Market and At Limit. For the former, orders are placed concerning market price. If the currency rates are volatile, brokers will try to get the best selling price or lower buying rate. Placing an At Limit order requires traders to give the lowest selling price or the highest buyer’s rate. The understanding of forex should dominate the choice of option.
The commission rates vary from one brokerage to another and thus it cannot be ascertained. According to the services that a trader requires from a broker, the commission changes. A broker may charge less commission if he is only making transactions while the one involved in managing the account and offering full research may demand a higher commission. It is best to see the services on offer while choosing a broker.
Minimum/ Margins/ Withdrawal
While starting a live forex trading account, brokers have a minimum balance requirement ranging from $500 to $1000. If the minimum balance is not maintained, the brokerage charges a fee. There are margin accounts that require a higher minimum balance, and there may be extra charges for maintaining margins too. Many brokers also charge for making withdrawals as they have to maintain the minimum balance in the account. It is best to choose the account on the basis of the investment to be made.
Services, Perks, Research, and Investment Tools
For every broker, the services and incentives would be different. While some may offer transparent accounts that the investor can check anytime to know the status of transactions, others may offer full-fledged exclusive market research. When taking an investment decision, the broker will send a contract note that will confirm the transaction. Some brokers also offer 3-5% interest on the cash in the forex account. This can be another way of earning at the forex. Best forex brokers offer many perks to clients.