Choosing a Forex Broker
As a trader, you should always consider the total package when deciding on a broker, in addition to the type of spreads the broker offers. For example, some brokers may offer excellent spreads but their platforms may not have all the bells and whistles that are offered by competitors. When choosing a brokerage firm, you should check out the following:
* How well capitalized is the firm?
* How long has it been in business?
* Who manages the firm and how much experience does this person have?
* Which and how many banks does the firm have relationships with?
* How much volume does it transact each month?
* What are its liquidity guarantees in terms of order size?
* What is its margin policy?
* What is its rollover policy in case you want to hold your positions overnight?
* Does the firm pass through the positive carry, if there is one?
* Does the firm add a spread to the rollover interest rates?
* What kind of platform does it offer?
* Does it have multiple order types, such as "order cancels order" or "order sends order"?
* Does it guarantee to execute your stop losses at the order price?
* Does the firm have a dealing desk?
* What do you do if your internet connection is lost and you have an open position?
* Does the firm provide all the back-end office functions, such as P&L, in real time?
Even though you might think you are getting a deal when paying a variable spread, you may be sacrificing other benefits. But one thing is certain: As a trader you always pay the spread and your broker always earns the spread. To get the best deal possible, choose a reputable broker who is well capitalized and has strong relationships with the large foreign exchange banks. Examine the spreads on the most popular currencies. Very often, they will be as little as 1.5 pips. If this is the case, a variable spread may work out to be cheaper than a fixed spread. Some brokers even offer you the choice of either a fixed spread or a variable one. In the end, the cheapest way to trade is with a very reputable market maker who can provide the liquidity you need to trade well.