Choosing a Forex Dealer
The importance of selecting a forex dealer cannot be overemphasized. Because it will execute the orders on your behalf, their policies can affect your decisions and transactions to a large extent.
The rapid growth of the forex currency market, coupled with the expansion of the Internet, has led to a profusion of land based and online forex dealers. While this gives the potential trader more options, it can also be confounding. Which one do you choose?
It depends, of course, on what your needs are. But there are several basic guidelines that you can use as criteria to help you decide.
The most efficient way is to make inquiries. If you have a colleague who has experience in forex trading, then ask him'her for recommendations. If this option is not available, read reviews and visit online forums. When you have picked one out, make sure that it is recognized by a regulatory body, such as the National Futures Association (NFA).
While making inquiries about a forex dealer, do not forget to check its financial status. Needless to say, it is important that the forex dealer you choose is financially stable. When examining the contract, look for any hidden costs or miscellaneous fees.
Before agreeing to open an account, you should ask the following questions: does it offer a demo account? Demo accounts allow a trader to practice and hone his skills without using real money. What are the available account sizes available? What is the minimum amount you can trade? Not all dealers tender the same account size, nor do all dealers offer demos.
If the forex dealer offers high leverage, what risk management strategies do have installed? You should examine their margin, stop/loss and limit order systems, and of course liability. Some forex institutions will hold you accountable if your transactions go awry.
Related to this subject is the technical support. What kind of services do they offer? Good forex dealers should offer, chat, phone and email. If you have very little or no experience in trading in the currencies market, personalized training is essential. Does it offer a personal trainer? Ask what kind of benefits you will receive from your Account Service Manager.
Another important aspect you should look into are the spreads. Spreads are the differential between the price you are buying (ask) and selling (bid). The lower the pip difference between the two, the more profitable it is for you. Forex dealers offer different spreads, some constant (regardless of market movement), and others are forex dependent (variable).
Choosing a forex dealer will be one of the first and most important decisions you will make. By asking the right questions and doing research you will be able to render the proper decisions.