Choose the Right Forex Broker (Part I)
Almost 90% of the investors enter currency markets as short term speculators. Most of the investors look for quick capital gains in forex. Many start forex day trading as a speculative venture. If you have made the positive decision to start forex trading, your first step should be choosing the right forex broker. This is very important. The right choice of a forex broker will greatly influence your success as a forex trader.
Now days, the market is overcrowded with companies and banks offering online forex brokerage services to individual retail traders and small investors to access the currency markets. It will not be easy for you to make the right choice without a certain set of criteria. These criteria will mostly depend on your interests, preferences and means as an individual trader depending on your trading strategies and tactics.
You may ask, what is the best way to choose the right broker? You should compose a list of questions to ask the forex broker before making a final decision. The following are some of the suggested questions that you should ask. You should ask these questions before making a final decision.
What is the amount of the interday and overnight margin? What is the corresponding leverage? Many online forex brokers offer margin between 2-5%. They provide leverage ranging from 20:1 to 100:1. Higher margin requirement means lower investment efficiency for you. Margin is the amount the broker sets aside as guarantee against your trading losses.
However, lower margin means that most of the time the forex broker will be against his own clients and will do everything possible to prevent them from winning. It will become difficult for you to work under such conditions because you will face many trading problems.
What is the minimum contract size? Now days, the standard contract size is $100,000. This contract size is quite affordable and allows for reasonably effective money management with limited capital. This contract size also allows small individual investors to participate in currency speculation.
What are the minimum deposit requirements demanded by the forex broker? It is not unusual that many new traders dont have sufficient funds to open an account. The investment and financial means of traders differ. $10,000 is the required minimum amount corresponding to the forex market conditions by good dealers. In my opinion, the optimal minimum amount is $10,000 with 2% margin requirement.
What are the terms of setting and executing stop and limit orders by the forex broker? The ideal condition should be the execution of the stop and limit orders at the fixed price. This should be regardless of the market conditions, its speed and its direction. Some forex brokers provide this type of execution. Other brokers reserve the right to fulfill an order with slippage under unsteady market conditions mostly defined by the broker themselves.
The amount of slippage depends on the current state of the currency market. It can vary from a few pips to tens of pips. It is practically impossible to arbitrate the prices received from the broker during a currency transaction. The slippage creates favorable conditions for the abuse of an individual trader by the forex broker. - 23208
Now days, the market is overcrowded with companies and banks offering online forex brokerage services to individual retail traders and small investors to access the currency markets. It will not be easy for you to make the right choice without a certain set of criteria. These criteria will mostly depend on your interests, preferences and means as an individual trader depending on your trading strategies and tactics.
You may ask, what is the best way to choose the right broker? You should compose a list of questions to ask the forex broker before making a final decision. The following are some of the suggested questions that you should ask. You should ask these questions before making a final decision.
What is the amount of the interday and overnight margin? What is the corresponding leverage? Many online forex brokers offer margin between 2-5%. They provide leverage ranging from 20:1 to 100:1. Higher margin requirement means lower investment efficiency for you. Margin is the amount the broker sets aside as guarantee against your trading losses.
However, lower margin means that most of the time the forex broker will be against his own clients and will do everything possible to prevent them from winning. It will become difficult for you to work under such conditions because you will face many trading problems.
What is the minimum contract size? Now days, the standard contract size is $100,000. This contract size is quite affordable and allows for reasonably effective money management with limited capital. This contract size also allows small individual investors to participate in currency speculation.
What are the minimum deposit requirements demanded by the forex broker? It is not unusual that many new traders dont have sufficient funds to open an account. The investment and financial means of traders differ. $10,000 is the required minimum amount corresponding to the forex market conditions by good dealers. In my opinion, the optimal minimum amount is $10,000 with 2% margin requirement.
What are the terms of setting and executing stop and limit orders by the forex broker? The ideal condition should be the execution of the stop and limit orders at the fixed price. This should be regardless of the market conditions, its speed and its direction. Some forex brokers provide this type of execution. Other brokers reserve the right to fulfill an order with slippage under unsteady market conditions mostly defined by the broker themselves.
The amount of slippage depends on the current state of the currency market. It can vary from a few pips to tens of pips. It is practically impossible to arbitrate the prices received from the broker during a currency transaction. The slippage creates favorable conditions for the abuse of an individual trader by the forex broker. - 23208
About the Author:
Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading and swing trading stocks and currencies. Learn Forex Nitty Gritty. Develop your own Forex Trading System.
posted by X - Men @ 1:30 AM
0 Comments
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home