Online Forex Broker – Don’t Take the Wrong Choice

Online forex broker is a company that help traders by provide trading platform where they can buy or sell various currencies. As a trader, you will use these brokers services to access the forex market 24/5.

These brokers are usually compensated through the bid-ask spread of a currency pair. For example: EUR/USD bid price is 1.4613 and ask price is 1.4616. If a trader makes entry to the market at that time he can either buy at price 1.4616 (ask) or sell at price 1.4613 (bid). In this case the spread is 4616-4613=3 pips.

Different online forex broker will have different policies about the spread for each currency pair, so you must read this information first, particularly your favorite currency pairs. For widely used currency pairs like EUR/CHF, GBP/USD, or EUR/USD, it is pretty common to have low spread 2-4 pips. But other currency pairs like CAD/JPY, EUR/CAD, and CHF/JPY have higher spread of 8-17 pips.

Although most of forex brokers make their incomes through spread, there are also brokers that charge commission fee per trade in addition to their profit from spread. This fee is charged per lot. One lot equal to 10,000 units of currency; for example: 10,000 units are equal to USD 10,000; EUR 10,000; GBP 10,000; etc.

So, do you need $10,000 in order to enter forex trading? Not anymore; the current forex trading has solve that problem with leverage system. A 200:1 leverage means that you only have to deposit 10,000 / 200 = $50 in order to trade 10,000 units or one lot. Basically, a forex broker that ask for fees per lot will make you lose that much for each trade.

When you decide to use an online forex broker, you will gain access to their online trading platform. You can get live chart, price movement, news, and various other functions to support your trading activities such as execute orders and put trailing stop from these platforms.

Based on experience, not every trader are comfortable with certain trading platform, so it is a wise decision to open a practice account first and test the trading platform for a period of time. I suggest you try a few trading platforms at once and see which one fit you the best. Remember to pay attention to how quick the platform executes your order.

Opening a practice account has other uses too. If you are an experienced trader and have certain strategies, you might want to test if the platform supports it or not; for example: hedging.

Hedge a trade is have buy and sell trades in the same currency open simultaneously. This method can be utilized by a trader to lock any loss trades that he has.

Example: a trader buy EUR at 1.4815, then the price dropped to 1.4785. Instead of closing the lose trade, he sell EUR for 1.4785 and thus lock the loss at 30 pips. Then he waits the market movements and hopes to avoid loss by closing the two positions at the right price. This is quite high risk strategy, so usually a trader will choose stop loss instead.

So here are what to check on an online forex broker:

1. How they gain their compensation; is it through spread? Is it through spread and commission fees? Check the spread for your preferable currency pairs and if they charge commission, check the commission rate per lot.

2. Check the trading platform; make sure it suit you, provide various resources for your trading, execute order quickly, and doesn’t go down too often.

3. In case you have certain strategy that not usual, ask the customer support if their trading platform allows it or not.

4. If you are planning to use Forex Robot, ask them first whether they allow forex robot or not. You can do this quickly by utilizing the live chat feature. There are some very good robots at the market currently and you may decide to use one of them someday, so I suggest you take the one that allows it.

Pick the credible online forex broker doesn’t has to be a difficult task; what you need to do is test their trading platform and ask the rest of the questions via live chat or email.

As a trader, Matthew John has tried many different systems. Read about his suggestion about a forex broker that offer the most benefits at 4XP review. If you need further research to make sure that you have selected the right one, read his guide atcurrency trading account.