1. Getting Started - 3. Choosing a Broker

There are many Forex Brokers to choose from that offer different tools and investment opportunities. Choosing a broker can be hard, especially not knowing which type of trader you are. Here are a list to help you choose which broker is right for you.

Low Spreads - The spread, calculated in "pips", is the difference between the price at which a currency can be purchased and the price at which it can be sold at any given point in time. Forex brokers don't always charge a commission, so this difference is how they make money. In comparing brokers, you will find that the difference in spreads in forex is as great as the difference in commissions in the stock arena. Lower spreads save you money!

Account Types - Most brokers offer two basic types of accounts—standard and mini. For many, the amount of investment capital they have is the deciding factor in which type of account they choose. While standard accounts typically offers a variety of leverage options, these accounts require a larger initial investment than a mini account. A mini account can be opened for as little as $250 and offers the high leverage necessary to profit from such a small investment, but that high leverage also means more risk.

Leverage - Leverage is needed in currency trading due to the fact that price movements or deviations are only fractions of a cent. Generally leverage is expressed as a ratio between the amount of capital you provide, to the amount a forex broker will lend to you. As an example, take the ratio of 100:1. This means that your broker will lend you 100 times the amount of capital you provide. However just remember the more leverage you have the more risk there is of getting a margin call, but this also means the potential for bigger profits and vice-versa. In general when you are just starting out with a small amount of capital, ensure that the forex broker offers a wide variety of leverage options. This will give you more control over the risk exposure you are prepared to take.

Quality Institution - When choosing a Broker, you should make sure that your broker is backed by a reliable institution. Unlike equity brokers, forex brokers are usually tied to large banks or lending institutions because of the large amounts of capital required (leverage they need to provide). Also, forex brokers should be registered with the Futures Commission Merchant (FCM) and regulated by the Commodity Futures Trading Commission (CFTC). You can find this and other financial information and statistics about a forex brokerage on its website or on the website of its parent company.

Platforms and Tools - Forex Brokers offer many different trading platforms and tools to their clients. To help decide which platform is right for you, you must look to see what each broker offers. These tools may include:

Real time currency price charts, news and data
Technical/Fundamental analysis tools
Economic calendars
Support

Broker Comparison List

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