How Does Your Forex Broker Measure Up Against The Others?
James Woolley
August 24, 2009
A lot of people are keen to open an account with a forex broker as soon as they have learnt all about forex trading. However this is not a decision that you should rush into. Even if you only intend to start off small, you should still spend a great deal of time choosing the right forex broker.
The wrong choice of forex broker could turn out to be a costly mistake. This is because for a start there are lots of brokers out there that are not fully regulated. Therefore what this means is that if you deposit money into your account, you may not necessarily see this money again, regardless of whether you make any money or not. This is pretty rare but can happen if you go with an unregulated company, particularly one that's located in an offshore location.
Another problem you may face is regarding spreads. In an ideal world you want to choose a broker that offers spreads of no more than 2 or 3 pips on the major currency pairs and certainly no more than 4. If you are more of a long-term trader then these larger spreads won't affect your profits too much, but if you are a short-term trader you will find that these large spreads can make a serious dent in your profits.
For instance let me demonstrate this point by comparing 2 different brokers. Company A has spreads of 2 points and Company B has spreads of 4 points for a particular pair. Now if you were to have 5 winning trades of 10 points each (before accounting for the spreads) in a given day, you would have made 40 points profit trading with Company A and just 30 points with Company B.
So as you can see this is a significant difference, and in the long run these larger spreads can have a devastating impact on your overall profits.
Finally another consequence of choosing the wrong broker is that you may quickly find out that they do not offer some of the features that you require to be a profitable trader. For instance you may start trading with a particular broker only to find that they offer only the most basic of charting software or that they are very unstable during the busiest times of the day, for example.
So the message I want to get across is that you should really take your time researching the various different forex brokers before you make your mind up about one in particular. If you don't you may find yourself wanting to switch to another broker and having to start all over again.
Click here for a full list of forex brokers and to read a complete review of Zecco Forex.
The wrong choice of forex broker could turn out to be a costly mistake. This is because for a start there are lots of brokers out there that are not fully regulated. Therefore what this means is that if you deposit money into your account, you may not necessarily see this money again, regardless of whether you make any money or not. This is pretty rare but can happen if you go with an unregulated company, particularly one that's located in an offshore location.
Another problem you may face is regarding spreads. In an ideal world you want to choose a broker that offers spreads of no more than 2 or 3 pips on the major currency pairs and certainly no more than 4. If you are more of a long-term trader then these larger spreads won't affect your profits too much, but if you are a short-term trader you will find that these large spreads can make a serious dent in your profits.
For instance let me demonstrate this point by comparing 2 different brokers. Company A has spreads of 2 points and Company B has spreads of 4 points for a particular pair. Now if you were to have 5 winning trades of 10 points each (before accounting for the spreads) in a given day, you would have made 40 points profit trading with Company A and just 30 points with Company B.
So as you can see this is a significant difference, and in the long run these larger spreads can have a devastating impact on your overall profits.
Finally another consequence of choosing the wrong broker is that you may quickly find out that they do not offer some of the features that you require to be a profitable trader. For instance you may start trading with a particular broker only to find that they offer only the most basic of charting software or that they are very unstable during the busiest times of the day, for example.
So the message I want to get across is that you should really take your time researching the various different forex brokers before you make your mind up about one in particular. If you don't you may find yourself wanting to switch to another broker and having to start all over again.
Click here for a full list of forex brokers and to read a complete review of Zecco Forex.
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