When you are looking to get into playing the foreign currency exchange market, it can be hard to determine who to go pick as your broker. The Forex market doesn’t have an establish brick and mortar location, all the trading occurs online and all of the brokers are based online as well. While using a purely electronic form for the market does allow you to access multiple markets all day long and for longer than the regular commodities trading exchanges, the drawback is that it is hard to know who you are dealing with and who is a good choice for your broker.
Creating the List of Variables for You
Before you can go determining who is better at the currency exchange business than others, you have to know your own variables first. Make a list that outlines the boundaries of how much money you have to play with and what are your goals for earning. The boundaries of your deposit are defined by how much money you can lose without impacting your life. Do not enter into this business thinking you are going to temporarily loan money you need to pay bills to make a killing on the markets and have more. As you are learning the ins and outs of what to expect from the exchange market, make sure that if you lose your investment on the market it will not harm your life. The second goal, define your goals for earnings, means you have to define a realistic profit range. This may seem counterintuitive to investments, but if you do not have a range defined you are twice as likely to participate in a scheme that you know is shaky because you are momentarily blinded by greed. Start with tight boundaries and as you become more successful, expand them.
Looking at the Variables for a Forex Broker
The next step is to create a list of variables for the Forex brokers. This will include the minimum to open an account with them, what their average leverage is, the pip they offer, historical reporting and future projections for the combined markets. Most of this information you can find by searching the Internet. The historical reporting and future projections, however, is something you will need to contact the Forex broker to fine. The historical reporting is just an average of the returns on investment the broker has provided for other clients over the years, it is much like an annual report summary. While this is important, it is not nearly as important as the future projections they offer. A new broker, who may not have a proven track record, may have a projection analysis that will make the broker the best choice for you. Projecting how the markets will go is difficult. It involves an astute reading of the variables than influence Forex trading. These variables include economic environments, consumer spending indexes, employment and manufacturing reports and political climates. The trader may not be the originator of their analysis, brokers may use an outside agency to draw their information from and that is fine. Verify that the outside agency has a solid reputation for projection. It is also a good idea to contact others who have used their trading services if possible.
Your first contact with your Forex broker should establish your account details. You need to know how much the brokers require as a minimum deposit to open the trading account and how they will accept the deposit. Some traders require an electronic transfer from a brick and mortar bank; often a broker will accept PayPal and others will use electronic funding services from non-traditional financial services. Once the deposit is received, then you need to establish the acceptable leverage from your trader. Prices are listed in two ways on the Forex market, the first is the asking price and the second is the bid price. The difference between the two is called the spread; the amount of pips in this is how the Forex trader makes the profit. It is the leverage, or the amount of money the brokers will loan you to allow you to buy into a group purchase of a higher pip rate, that will determine the flexibility of your investing. The higher the leverage, the more you can be part of larger block trading bids. However, the higher the leverage, the more you stand to lose out of your core deposit as well. Your agreement detail with any of the brokers also has to include the specifics of how you will maintain contact with the trader. Many of the brokers play across global Forex trading markets so they can trade currencies 24 hours a day. You need to understand their established patterns of communication with their clients to avoid mishandling of trades.