Online Forex Broker – Avoid Selecting The Wrong Broker

Online forex broker is a firm that accomodate traders with online trading platform to buy or sell foreign currencies. As a trader, you will use these brokers services to access the forex market 24/5. In this manner, picking the right broker becomes very vital phase if you want to participate in global trading in forex market.

By standard, these brokers are gain money through the difference between buy and sell price. 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. Common currency pairs such as EUR/USD, GBP/USD, or EUR/CHF usually have low spread; about 2-4 pips. However, other currency pairs such as EUR/CAD, GBP/CAD, or GBP/NZD have spread from 6-17 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? No; the current forex market is using 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. In other words, if you use a forex broker that charges $40 per lot, you will see $40 missing from your profit each time you trade.

When you decide to use an online forex broker, you will gain access to their online trading platform. These platform will give you access to live price, chart, news, put take profit or stop loss order, execute a trade, and various other resources to support your everyday trading.

Based from various testimonials, not every trader can get used to a particular trading platform, so it is a good idea to test it first in a demo account for at least a week or so. I suggest you try a few trading platforms at once and see which one fit you the best. Another thing that also important is the speed of the order execution.

Create a demo account also has other merit. 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.

However, if you are a novice and still learning, I suggest to check a review of eToro ; they have very unique trading platform and system that designed to support anyone who are still learning to get better understanding of forex trading.

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

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

2. Test the trading platform to make sure you are comfortable with the interface, has various resource to support your trades, execute your order in an instant, and the server doesn’t 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. If you are a forex robot user or have plan to use it in the future, I suggest you to read a report of AvaFX online broker as it is one of credible forex broker that allows forex robot.