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November 17, 2009
Foreign Exchange Broker
When selecting a foreign exchange broker there is certain information that you should find out. Foreign currency trading occurs on the largest and most liquid exchange in the world trading at trillions of dollars. The forex market is considered to be less volatile than the stock market, making it a popular exchange and you can trade forex 24 hours per day. This is very attractive to those investors who need a flexible trading schedule. This exchange is less volatile than the stock market due to the fact that it is unlikely for the value of a currency to move much throughout the course of one trading day. This is different than when trading stocks.

Before selecting a foreign exchange broker you must understand that there are many different markets within the foreign exchange. There is the forward market, the futures market, and the spot market. In the forward market the buyer and the seller agree to an exchange rate and a transaction is set for a certain time in the future. The trade is executed at that time no matter what the rates are. In the futures market, a futures contract is bought and sold depending on a standard contract size and maturity date. These trades actually take place on public commodities markets. The spot market deals with those trades that are based on the currency values of currencies. It takes two days for settlement and two traders exchange an equal amount of foreign currency.

Now that you understand a bit about the foreign exchange markets, below is a list of those things that you should ask when selecting a foreign exchange broker.
  • What is the business model that the broker follows and how fast is their order execution when trading forex?
  • How user friendly and reliable is their forex trading platform and the software that is used?
  • How many currency pairs can you trade when using the brokerage firm’s forex trading system?
  • Is the broker regulated? What organization is the broker registered with?
  • What do other forex traders think about the brokerage firm?
  • How does the customer service rate against other firms?
  • Are client’s funds insured against fraud when using this broker?
  • What are the requirements for earning rollover interest and is there a minimum margin requirement?
  • What is the minimum amount needed to open an account?
  • Can you earn interest on any of the unused equity in your trading account?
  • Do they offer a forex mini account and if so what are the requirements?
Choosing a forex broker is one of the most important decisions you will make and hopefully this article will help you to make a wise decision.

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