Most investors who trade Forex stocks use a broker. A broker is an
individual or a company, who buys and sells stocks according to the
investor's wishes. Brokers earn money by collecting commissions or fees
for their services.
You should check that a broker is registered as a Futures
Commission Merchant (FCM) with the Commodity Futures Trading Commission
(CFTC) as protection against fraud or abusive trade practices. A Forex
broker also needs to be associated with a financial institution, such as
a bank in order to provide funds for margin trading. Picking the right
Forex broker for you will take some work on your part. There are brokers
who charge a flat fee and some that charge commission. It may be a good
idea to talk with friends and business associates about their brokers.
You may get some good leads, and you're certain to hear who to stay away
from. There is nothing like word of mouth advertising.
If you are thinking of investing online, you could choose
several online brokers and contact their help desks. Seeing how quickly
they respond to your questions could be key in how they will respond to
their customers needs. If you don't get a speedy reply and a
satisfactory answer to your question you certainly wouldn't want to
trust them with your business. Just be aware that as in other types of
businesses, pre sales service might be better than after sales service.
Before you choose an online broker get a copy of their online
demo account. What features are included? Is the software reliable? Does
it offer automatic trading? Are there extra software features that cost
more?
Before setting up an account with a Forex broker you will need
to do further investigation. How quickly will these brokers execute your
buy/sell orders? What is their policy on slippage? What are the
transaction fees? What is the spread, fixed or variable? What are the
margin requirements and how are they calculated? Does the margin change
with currency traded? Is it the same for mini accounts and standard
accounts?
Don't forget to ask about minimum account balances and interest
payments on account balances. Make sure that your funds will be insured.
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