There are many forex brokers or providers, and unlike other types of trading, there is no one centralised market. Instead there are thousands of forex brokers, or market makers as they’re also called, who set their own currency prices and spreads.
But because the market is competitive, there’s usually not a large enough difference in prices and spreads between different brokers to practice arbitrage. But every forex broker is slightly different, and you should check that the broker that you’re looking at will give you a good deal.
1. Margin provided (usually 1-4%)
2. Their spreads for the currencies you’ll be trading (the EURUSD will usually be 3-4 pips)
3. Amount of funds required to start an account
4. Any fees for small trade sizes (many don’t charge fees for smaller trade sizes, but some do)
5. Any other fees (there will be rollover fees for positions held overnight with any provider, which are usually small, though the details of this fee can vary)
6. Whether the broker automatically closes your position if the position goes against you by the entire value of your account not used as margin for that trade (not that you’re likely to face this situation if you follow system rules, but just in case it does!)
7. What their charting package and forex trading platform is like
8. Whether the trading platform provide a demo account for you to practice on
9. How established the company is, and any problems within the company (of course this may be difficult to find out until after the event!)
Forex Trading Platforms
Forex brokers will provide you with an online trading platform, either downloaded to your computer and requiring you to log in with them when you trade, or as a totally online interface.
The best way to see if the platform is adequate is to run their demo account to see if you can do all of your trading tasks on their platform.
You’ll be looking at the currency charts, applying your system rules and indicators to assess the currencies you’re looking at, placing orders of various types for the spot forex market (market orders, stop orders and limit orders), and viewing your account details, including your leveraged float available for trading.
Most providers will provide forex charts as a part of their online trading platforms. However the quality of the charting packages may vary, so check that you can do essential things such as drawing lines, writing notes, and plotting indicators. That is, whatever you need to do to trade the system, and this does vary from system to system. Many forex charts will be able to do all this, but sometimes they are not. Some providers have up to 2-3 levels of charting available, but one level is free.
Whether you need to upgrade will depend on the indicators you need to draw for your system. So try their demo accounts out to be able to tell.
Explanation Of Rollover Fee
If you hold forex positions overnight, there is what is called the rollover fee.
This is an amount that you may either receive or pay. If you buy a currency pair where the base currency has a higher interest rate than the terms currency, then you’ll receive interest, and vice versa. Usually this is a small amount when compared to the pip gains and losses from a system, and is not a significant factor. One difference with some brokers is that you may need to have say 2% margin instead of 1%, before the amounts are paid to you.
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