Forex brokers are individuals or institutions that offer a range of forex services like management of your accounts and execution of orders. As your success in the forex trading largely depends on the brokerage services, you must take your decision after comparing different forex brokers.
These days you will find many websites that help you to compare forex brokers. There are few basic parameters, like minimum deposit required to open an account, maximum leverage offered, spread of major currencies, commissions charged, number of pairs offered, and the availability of operating a mini account etc which you must consider while selecting your broker.
Identifying your personal criteria for comparing the forex brokers can help you in visualizing the merits and demerits of their services. The first one is to find the brokers who are registered with regulatory agencies like Commodity Futures Trading Commission (CFTC) and are member of NFA. These agencies were made to protect the public against fraud, manipulation, and abusive trade practices. While comparing the forex brokers, you must verify the CFTC registration and NFA membership status of the broker and find out their disciplinary history.
Compare the forex brokers based on their reputation in the market. If it is part of a large group of companies, you can have more confident since the group itself will keep a check on the broker. The longer the broker has been active on the market, the more you can gather feedback from traders who have used their services.
The third step for comparing the forex brokers is to check out the types of account you will be able to open. The broker must provide demonstration accounts or "demo accounts", which allows you to test the trading platform and the
related work environment. They should also have an option of opening a mini account.
The next step will be to compare the forex brokers on the basis of standard accounts they are offering. As in these accounts, the minimum capital is higher than the mini account, the leverage is less important. Some brokers may also offer to open an account in various currencies like euro, dollar, yen, etc. But if you decide to trade in one currency that is not that of your own country, you must consider the exchange rates.
Next will be to find out if the broker is asking for a commission. Most of the brokers offer commission-free trading. So compare the brokers to see if they are offering any additional services/
Spread which is the difference between the sell quote and the buy quote is another important criteria for comparing the forex brokers. You can negotiate the spread with the broker if you plan to trade large volumes. The spread is generally fixed, but at times can vary according to market conditions when volatility changes. Simply quoting the lowest spread does not ensure that you actually get the lowest one. Proper and timely execution of your orders and transparencies in transaction can make the spread actually tight.
Leverage allows you to multiply your position on the market. While comparing the forex brokers find out the leverage they offer. But you must remember that the more you increase your leverage, the more you increase the risk.
Margin and rollover are other important factors for comparing services of the forex brokers. Each broker has his own "margin call" policy in closing your positions. This you can compare between several forex brokers to find out the best one. The rollover fees are negligible but can add up in the long term.