Before trading Forex you need to set up an account with a Forex broker . What exactly is
a broker? In simplest terms, a broker is an individual or a company that buys and sells
orders according to the trader’s decisions. Brokers earn money by charging a
commission or a fee for their services.
You may feel overwhelmed by the number of brokers who offer their services online.
Deciding on a broker requires a little bit of research on your part, but the time spent will
give you insight into the services that are available and fees charged by various
brokers.

Is the Forex broker regulated?
When selecting a prospective Forex broker, find out with which regulatory agencies
each dealer is registered. The Forex market is label as an “unregulated” market, and it
basically is. Regulation is typically reactive, meaning only after you’ve been bamboozled
out of your entire savings will something be done.
In the United States a broker should be registered as a Futures Commission Merchant
(FCM) with the Commodity Futures Trading Commission (CFTC) and a NFA member.
The CFTC and NFA is here to protect the public against fraud, manipulation, and
abusive trade practices.
You can verify Commodity Futures Trading Commission (CFTC) registration and NFA
membership status of a particular firm or individual and check their disciplinary history
by phoning NFA at (800) 621-3570 or by checking the broker/firm information section
(BASIC) of NFA’s Web site at
www.nfa.futures.org/basicnet/
.
Among the registered firms, look for those with clean regulatory records and solid
financials. Stay away from non-regulated firms!
Customer Service
Forex is a 24-hour market, so 24-hour support is a must! Can you contact the firm by
phone, email, chat, etc. Do the reps seem knowledgeable? The quality of support can
vary drastically from broker to broker, so be sure to check it out before opening an
account.
Here’s a good tip: choose several online brokers and contact their help desks. Seeing
how quickly they respond to your questions can be key in gauging how they will respond
to your needs. If you don’t get a speedy reply and a satisfactory answer to your question
you certainly wouldn’t want to trust them with your business. Just be aware that as in
other types of businesses, pre-sales service might be better than post-sales service.

Online Trading Platform
Most, if not all, Forex brokers allow you to trade over the Internet relatively easy. The
backbone of any trading platform is, of course, the order entry and exit process. Trading
software is very important. Get a feel for the options that are available by trying out a
demo account at a few online brokers.
Closely examine the dealer’s screen layout. It should include the ability to view real-time
currency quotes, an account summary showing your current account balance with
realized and unrealized profit and loss, margin available, and any margin locked in open
positions.
Most trading platforms are either Web-based, in Java, or a client-based program you
can install on your computer. Which version you choose is your personal preference,
Web based software is housed on your brokers web site. You won’t have to install any
software on your own computer and you’ll be able to log in from any computer that has
an Internet connection.
A client-based software program, or one that you download and install into your own
computer will limit you to transactions only to that computer.
Usually, the “download and install” program runs faster, but most programs are
operating system specific. For example, most brokers only offer their trading platform
application to run on Microsoft Windows. If you are a Mac user, you won’t be able to
install the application and will either have to use your dealer’s Web-based or Java-
based trading platform. These two (the Web or Java-based) will run on any computer
since they run through your browser.
Java-based software programs are preferred by most brokers who think they are more
safe and reliable. Java-based software tends to be less vulnerable to attack from
viruses and hackers during transmissions than “download and install” software.
Be sure to open a demo account and test out the broker’s platform before opening a
real account!

Don’t forget your high speed Internet connection
The Forex market is a fast moving market and you will need up-to-the minute
information to make informed transactions. Make sure you have a high speed Internet
connection. If you don’t, you might as not even bother trading. Dial-up will absolutely not
work for Forex! If you plan to trade online you will need a modern computer and high
speed Internet connection. I can’t stress this enough!

Bells and Whistles
Any Forex broker worth his salt should offer you real-time quotes and allow you to
quickly enter and exit the market. These are minimal requirements of any trading
software. Upgraded software packages are usually offered at an extra monthly fee by
brokers.
Most dealers now offer integrated charting and technical analysis packages with their
trading platforms. These are definitely worth exploring if the charts or technical tools
offered are of value to your method of trading. The level of integration with the trading
platforms varies and is worth understanding carefully.

Mini-Accounts
Most dealers offer very small “mini-accounts” for as little as $300. Mini-accounts are a
great way to get started and test your trading skills and gain experience.

Broker Policies
Before selecting an online Forex broker, you should closely examine their features and
policies. These include:

Available Currency Pairs
•
You should confirm that the prospective broker offers the at minimum the seven
major currencies (AUD, CAD, CHF, EUR, GBP, JPY, and USD).

Transaction Costs
•
Transaction costs are calculated in pips. The lower the number of pips required
per trade by the broker, the greater the profit that the trader makes. Comparing
pip spreads of half dozen brokers will reveal different transaction c osts. For
example, the bid/ask spread for EUR/USD is usually 3 pips, but if you can find 2
pips, that’s even better.

Margin Requirement
•
The lower the margin requirement (meaning the higher the leverage), the greater
the potential for higher profits and losses. Margin percentages vary from .25 and up.
Low margin requirements are great when your trades are good, but not so great
when you are wrong. Be realistic about margins and remember that they swing
both ways.

Minimum Trading Size Requirement
•
The size of one lot may differ from broker to broker, spanning 1,000, 10,000, and
100,000 units. These brokers usually offer a mini-lot, which is one-tenth of a lot.
Some brokers even offer fractional unit sizes (called odd lots) which allow you
create your own unit size.

Rollover Charges
•
Rollover charges are determined by the difference between the U.S. interest
rates and the interest rates of the other country. The greater the interest rate
differential between the two currencies in the currency pair, the greater the
rollover charge will be. For example, if the British pound has the greater interest
differential with the U.S. dollar, then the rollover charge for holding British pound
positions would be the most expensive. On the other hand, if the Swiss Franc
were to have the smallest interest differential to the U.S. dollar, then overnight
charges for USD/CHF would be the least expensive of the currency pairs.

Margin Account Interest Rate
•
Most brokers pay interest on a trader’s margin account. The interest rates
normally fluctuate with the prevailing national rates. If you decide to take an
extended break from trading, the money in your margin account will be accruing
interest

Trading Hours
•
Nearly all brokers align their hours of operation to coincide with the hours of
operation of the global Forex market: 5:00 pm EST Sunday through 4:00 pm EST
Friday.

Other Policies
Be sure to scrutinize a prospective broker’s “fine print” section to be fully aware of all the
nuances that a specific broker may impose on a new trader.
Finding the right broker/dealer is a critical part of the process. It’s not easy and requires
some real work on your part. Don’t pick the first one that looks good to you. Keep
looking.

Summary
What to look for in an online Forex broker/dealer:
1.
Low Spreads.
In Forex trading the ‘spread’ is the difference between the buy and sell price of
any given currency pair. Lower spreads save you money.
2.
Low minimum account openings.
For those that new to Forex trading and for those that don’t have thousands of
dollars in risk capital to trade, being able to open a mini trading account with only
$300 is a great feature for new traders.
3.
Instant automatic execution of your orders.
This is very important when choosing a Forex broker. You want what we call a
WYSIWYG (wizeewig) broker! This means you want instant execution of your
orders and the price you see and “click” is the price that you should get…
W
hat
Y
ou
S
ee
I
s
W
hat
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ou
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et!
Don’t settle with a firm that re-quotes you when you click on a price or a firm that
allows for price ‘slippage’. This is very important when trading for small profits.
4.
Free charting and technical analysis
Choose a broker that gives you access to the best charting and technical
analysis available to active traders. Look for a broker that provides free
professional charting services and allows traders to trade directly on the charts.
5.
Leverage
You don’t want too much leverage. Firms offering excessively high leverage
aren’t looking out for the best interest of their customers. A good rule of thumb is
to not use more than 100:1 leverage for Standard (100k) accounts and 200:1 for
Mini (10k) accounts.