Selecting a broker is one of the first decisions a new trader must make - and it's often one of the most important. No broker can be a one-size-fits-all solution. Instead, you need to research and compare your options to find a broker that is suitable for both your trading style as well as your account balance. In this article you will learn 4 foreign currency exchange trading tips that will help to choose a Forex broker.

check a broker's credibility

Despite being the biggest market worldwide with more than $4 trillion traded on a daily basis, the foreign exchange market in general is still significantly unregulated. Extending across national borders, no-one country or authority is able to regulate foreign exchange brokers or market makers. As an end result, there are a number of firms, ranging from major operations to those small enough to fit the size of a home based business.

Typically to evaluating a broker’s credibility, most stable and trustworthy institutions don't take credit cards, nor would they accept small minimum investments. However, it is not always the case, and each investor should conduct their very own required research about a firm before handing over information, such as bank account numbers or tax IDs.

Learning more about the spread.

The bid and ask spread has a tremendous impact on both your cost to trade currency pairs, along with the profitability of your personal strategy.

Although spread is frequently more important to short term traders and scalpers, the spread comes with an impact on every account as being a cost to trade. For instance, when trading single lots of currency, the main difference of just one pip over the course of 100 trades means $1000.

Many brokers will specialize in a couple of currency pairs, offering extremely low bid and ask spreads on the majors, while some will tout their low spreads on more exotic currencies.

A good broker will offer you good software and charts

For some investors, the software and charting information granted to investors may be the number one priority; for some, the software may be the least of their worries.

The most significant concern for a trader utilizing a broker’s charting package should be the quality of the data supplied by the broker. Your broker must provide charting with highly reliable data. Furthermore, if you are a swing trader you should also be mindful of 4hr & daily close times. We have discovered that the profitability of many strategies may vary substantially when placed on brokers with different close of day. This is why we recommend a 5pm close of day, which happens to be provided by FXDD and other similar brokers.

If you’re employing an automated system, it might be better to evaluate which platform a brokerage uses; you do not want to constrict an already programmed strategy. You should back test your system on the platform of the broker. You should not trade a system with a broker if it has performed poorly historically on that broker’s platform. Back test your system first or demo trade it on each broker before considering live trading with that broker.

Some brokers might additionally charge a monthly fee for access to the software or API, that is needed for automated use. The long-term trader is unlikely to set much emphasis on software, while a high frequency trader demands rigorously tested platforms to complete complex, minute-by-minute trades.

Interest and Swaps

Interest payments on both your deposit and on trades are very important for some forex strategies. Carry trade systems, which depend on leveraging the difference between bid and ask interest rates, require brokers with rates that are conducive to profiting on the trader's favorite currency pairs. All brokers utilize different bid and ask rates for currencies, despite the fact that interest usually generates under 1 pip a day in profit, this value is critical for a lot of investors’ strategies. Be skeptical, however, as interest rates can vary dramatically depending on the broker and its location.

Indeed, not all fx brokers are created equal. By evaluating a broker’s credibility, spread, software options, interest and swaps, you'll find one that will fit your specific trading needs and goals. I hope these foreign currency exchange trading tips were able to enhance your trading career and understanding of Forex trading.