As a starting point, you should look to carefully educate yourself before trading a real forex account. Any attempt to trade forex without properly understanding these concepts is like a big leap in the dark.If you are new to the forex market, trading with a good forex broker can be the difference between winning and losing.So you should know which factors are important when tracking down the best forex brokers.You can then ultimately select one of them to open a live account.
The concepts that you must pay particular attention to are forex margin, forex leverage, ecn forex and forex spread. In choosing your forex brokers, you should make it a priority to consider each of these factors. As an example, you will need to look at the margin offered by the forex brokers.Usually, a margin of 2% implies that you will be able to leverage your money by 50 times.On 18th October 2010 the new rule of the CFTC has become effective. This means that forex brokers will now offer a maximum leverage of 50:1 for major currency pairs.
This rule has been previously subject to much debate, and many forex reviews sites still recommend not to open a forex trading account with a US regulated broker.Whether they are right or wrong is for you to judge.If you heed to their recommendation, you will want to look for forex brokers operating in other jurisdictions such as the United Kingdom.But that is not all.You will also need to find if there are regulations in place to protect your money in case the brokers become insolvent.
The next step is to inquire whether the brokers are market makers or use ecn? This will make a real difference as you will come to appreciate.A broker who operates a dealing desk is potentially dangerous because it can manipulate the movements in currency prices. This is why the best choice is ecn forex.Conversely, brokers who have ecn can charge a commission on each trade you make. As you can see, you should constantly balance the pros and cons.
The next element that you need to look at is the forex spread. If the forex spread is very low, this is usually a good sign because it implies that the forex broker is not charging a hefty commission.As a rule of thumb, ecn forex provides the most competitive spread because they can tap into a bigger pool of liquidity.Moreover, you have to find if the spreads offered by the brokers are fixed or variable? Brokers who offer variable spreads have large fluctuations during the release of major economic news. A factor which is also associated with the price of currencies is slippage.This occurs when your order is executed at a different price from what you are expecting. During economic news releases slippage happens very often.
The above discussion points to the esential factors you need to carefully examine when selecting forex brokers.You can also find some additional information such as the types of trading platforms and accounts offered. Many brokers now offer micro accounts.The last point is especially important because we believe that all new retail traders should practice on a demo account and then open a micro account.This gives them the experience of trading with real money while risking only a few hundred dollars.
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