How to choose a broker
All companies which provide services on the exchange market can be divided into brokers and investment banks.
We will consider all main factors below, which influence the adequate choice of a broker:
- The amount of initial capital
- Broker’s publicity and reputation
- Work time during the working week
- Commission charges
- Different additional limitations for trading process
- Reliable communication with a broker and technical support service
- Additional services and products for clients
- Operational convenience of software
- Initial capital. The main factor broker’s selection is the dimension of your initial capital. Nevertheless, nowadays proprietor of any sum of money can find offer in the exchange market. However, the majority of brokers is oriented on the deposit amount like 2000$. However, it is not said, that for such sum of money you will be offered the best terms and hundred-per-cent guarantees of prompt payment and safety of profit. Everything depends on whom you have chosen in the capacity of representative on international market Forex.
- The broker’s reputation. Before money deposit it is necessary to study all the information about broker. Take into account the period of a company’s existence on the market. Sure, it is preferential to choose such broker which works in the market considerable time, however sometimes new companies offer much profitable and comfort conditions of work in the Forex market. Ask your friends, who trade in the market, or visit forums, which are devoted to the currency trade. As a rule, swindle is not unnoticed in the trader’s community. You should draw your attention to such brokers about which you have gathered as much positive information as possible.
- Work time during the work week. You should prefer that company which starts working on Monday night and finishes on Friday midnight. So, for instance, having left the profitable position to weekend in order to earn more, open the hedging order in such a manner that even with the negative result to earn a little in weekend. However, at Monday night unexpected event can happen, and it will lead to strong movement of exchange rates against your position. A broker, coming at 9 a.m., executes the hedging order according to the price which he will see at the screen of his monitor.
- Commission charges. Offering the services of access to the international exchange market Forex, a broker earn on spread. Spread is the difference between buy and sell price. The majority of brokers in the market Forex earns just due to the difference in prices. In cases when you have a broker or a bank in which there is some additional fees, you can easily find other broker because the additional fees will surely affect the state of your account. However, it is necessary to know that all brokers have the fee for transfer of the positions over the midnight - Swap.
- Spread. Spread- is the base of broker’s earnings. There are 2 types of brokers:
- Different additional limitations for trading process. Nowadays there are brokers which practice the additional limitations for trading process. As a rule it is the situation about the obligatory amount of transactions for some period of time. You should be very attentive to all the items of concluded contract and determine what contract conditions are more acceptable for you and what are not acceptable.
- Reliable communication with a broker and technical support service A broker should keep the twenty-four-hour touch, and it is desirable it to be not only by means of electronic terminal and by means of telephone service. As a rule, the technical support service is opened from 9 a.m. till 18 p.m.
- Additional services and products for clients. Among all other services, different programs of analysis, free quotations and news are used more often. It makes the trader’s work much easier, especially in the first months of trading on the market Forex.
- Operational convenience of software. Of course, you can accustom to any software, but before concluding the contract with a broker it is necessary to install the demo-version of the trading terminal and test it. The easier the program interface, the easier the work on it will be. But, it is not the main point during the broker’s selection on the market Forex.
If the broker offers you to begin trade with 1000$ or less it means that your positions will not be executed directly and only by means of summing up the position of some participants.
If you decided to begin the trading activity with big investments, so well-established western bank, in which the sum of initial capital should be not less than 50000-100000$ will be appropriate for you.
Many people think, that the it is necessary to start trading with this amount of money. However, you can manage with little sums. The main rule, which trader should follow, is that the deposit sum should be equal to the amount, the loss of which will not be ruinous for you.
Consequently, because of the pause in broker’s work it will be risky enough to leave the position opened on weekend.
- With a fixed spread
- With a floating spread
The fixed spread is the constant difference between the purchasing rate of exchange and selling rate irrespective of what situation is formed in the market. However nowadays there are a lot of brokers which offer the floating spread. But due to frequent fluctuation of prices on the market Forex by the floating spread there appeared a lot of discomforts for trader, because spread can access about 50 points. However, the floating spread has its advantages. For instance, in the calm market the floating spread can decrease to 1-2 points while the fixed spread remains the former level.