Opening a currency trading account is a very important step in becoming a successful forex trader. Some people new to forex trading assume that all brokers are the same and open an account with the first one that they find. This is a mistake. There are many points to consider before you sign up with a forex broker.
1. Regulation
Forex brokers may be based in any country in the world. Some countries have tight financial laws while others do not. It is important to check whether the broker you are considering is regulated under the laws of their country, and what those laws actually mean for you. Is the company a member of any regulatory bodies and if so, do they offer you any protection? What would happen to the money in your currency trading account if the company collapsed?
2. Account size
Brokers tend to market their services at a certain level in terms of account size. Some only offer standard accounts with a minimum of $10,000 investment or more. However, more and more brokers these days are targeting their services at the smaller time home investor. In a few cases the minimum investment is less than $100.
The important factor here is to go with a broker who wants clients like you. Do not invest more than you can afford just to get in with a high level broker. There is always a risk that you will lose whatever is in the account. It is better to go with a broker who tailors their services to suit clients at your level.
3. Services
You will want to use a demo account in the first stages of trading so check that this is available and that it works in the same way as the live account.
You will also want to check the charting services that are available. What you need will depend on your trading system, but you can expect brokers to provide candlestick charts as well as the option of bar and line charts, and several indiators including the Stochastic, Bollinger Bands and MACD.
4. Leverage
Leverage varies with different brokers. The most common levels are 100 times or 200 times, meaning that to control a position size of $10,000 you would commit $100 (100 times leverage) or $50 (200 times). Occasionally, 400 times leverage is offered.
High leverage means a greater potential return but also greater risk. If you have a very small balance you may be willing to risk losing it for the chance of greater returns if you are successful, but otherwise it is usually better to keep the leverage relatively low.
In some cases, brokers will offer different levels of leverage to different clients, depending on their balance and other factors such as their trading history.
5. Security
Your money is accessible via the broker's website so it is important that they have high levels of security. This can be hard to assess so you may want to check for user experiences in forex forums or ask questions of the broker through their support center. Also, of course, make your password as secure as possible by including upper and lower case letters plus numbers and symbols.
There are many forex brokers available and the number is growing. The choice can be confusing, but it is important. If you take account of all of these factors, you will be in a good position to find the best broker for your currency trading account.
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