money talk

How to Choose a Forex Broker

When you get into forex trading, you want a good broker.  Forex trades are happening all the time, which means it opens on Sunday afternoon and closes after the traders complete on Friday. The volume of this is huge, and the thing is, you want to make sure that you have a broker that’s by your side. Unlike with stocks, you as a trader aren’t’ borrowing money or securities from the broker, and the broker might have to pay a rollover fee.

The brokers hold all the money, and of course, this changes with profits and loss, and of course, they’ll handle the commissions, give you expert assistance, and of course, handles the withdrawal requests too.  The problem is, a lot of these brokers will hide the fees in their legal jargon, which is hard to find. Instead of fretting about it in a large legal document, here are a few ways to help you choose the forex broker that you want.

How to Choose

Choosing a broker is important, and you first want to figure out what kind of investor you’re going to be, and what kinds of currencies you’re looking to invest. Every broker has their own advantages and disadvantages, and of course, some of them have different fees. The security features of these vary as well. Some of them have the two step authentication on their sites, while others do not.

Many are often regulated by different associations, but not every single forex broker is, so also watch out for that. Some brokers also have an account minimum, and transaction fees on there. Before going to a trading platform, you might want to create a budget for this, including how much you want to invest, what you’re willing to pay in fees, and what the goals are. There’s a lot to explore when choosing this, so make sure to take all of this into account.

The Basics of Forex Currency Pairs

Before choosing a broker, also know about the forex currency pairs.  This is the values of two different currencies that go through a numerator/denominator relationship, with a base and a quote in relation to that. For example, the most common one is the EUR/USD pair, which is used to quote different currencies.  This is the ratio that matches what you’ll pay if you visit one place and the other, and how much that equals to a dollar in respect.

Each one here is quoted in two to five decimals and also comes in a flipped version, which creates a new pair of currencies that move in different directions. These measure the value of the euro against the dollar, and of course, you can see how much it’ll be.  This is how people take their long and short positions, and people will trade with the pair that has the highest volume. This is also based on the most popular versions of this too.

Margin Accounts

There is also margin accounts, which of course let clients get or sell the pairs of currencies with the total trade size that’s larger than the money used to fund. Brokers typically allow for as low as a couple hundred bucks and offer significant leverage. 

But, also unlike stockbrokers, forex brokers wont’ charge interest for using margins, but the positions held overnight do get debits or credits that’s determined by the relationship between the interest rates of both of these the total trade value determines the debit or credit, not just the portion in excess of your account balance. At the basic level, the trader will get paid on a nightly sense when holding long positions in the higher interest currency and will pay nightly when holding position in the lower currency.