Tips for selecting a forex broker
If you happen to be a forex exchange market trader, there are several brokers with zar account that look to win your business. Check out on any news website and you will be able to find news which are overwhelming of the internet advertisements from the forex brokers. The following are some of the things that you need to consider when picking the broker who is right for you.
Each of the forex brokers has various offering for accounts. The following are the four areas that you will have to consider when comparing the features among the brokers: margin and leverage, spread and commissions, the initial deposit requirements and the ease of withdrawals and deposits.
- Margin and leverage: Depending on the broker being used, the forex participants might have access to the leverage which are placed in their margin account. If you use for example a leverage of 50:1, a trader that has an account of about $1000 will be able to hold a position which is valued at about $50000. There are some brokers that offer as much as about 200:1 in leverage. The leverage is known to work in the favor of a trader with the positions which are winning, because the potential for profits is enhanced greatly. But the leverage can be able to destroy the account of the trader quickly because the potential loss is as well magnified. You have to use the leverage with a lot of caution.
- Spreads and commissions: A broker who is known to take commissions might end up charging a certain percentage of the spread, that refers to the difference between the ask and the bid of a forex pair. Most brokers who charge no commission instead decide to make their money with the winder spreads. Know how your brokers are making its money and thus shop around. An example is a spread that could be a fixed spread of three pips – pips referring to a minimum price change of a unit in forex, or the spread might be a variable depending on the volatility of the market. When the spread is wide, it becomes difficult in making profit. The popular pairs like GBP/USD, EUR/USD will have a spread which is tighter than pairs which are thinly traded.
- Initial deposit: Majority of the forex accounts can be able to get funded with an initial deposit which is small even as low as about $50. With the leverage, the power of buying tends to be greater than the minimum deposit that is one reason forex trading tends to be attractive to new investors and traders. Majority of the brokers tend to offer standard, micro and mini accounts with the various initial deposit requirements.
- Ease of withdrawals and deposits: Each of the forex brokers has an account which is specific for funding and withdrawal policies. The brokers might allow the holder of the account to fund the account online through credit cards, Pay Pal, ACH payment, bank check, wire transfer, or personal or business check.