Foreign exchange (forex) trading has gained in popularity among amateur traders in recent years. There are many online forex companies offering access to 24-hour trading of currencies.
There are many ways to get the best online forex trading as there are many brokers offering their services. As a trader, you need to consider several factors when selecting a right account for you.
1. Select a reputable online forex broker
Before opening an account, it is important to check the company offering forex trading services. It needs to be a well-established company which has enough capital to withstand market turmoil since forex markets can be very volatile.
By doing broker research, you need to make sure that the company is a trustworthy business that is also fully licensed. There are many online broker reviews as well as information about financial institutions to make research easy. Always look at several reliable sources before making a decision.
2. Look at forex spreads
The spread is a difference between bid and ask, a price at which you buy and sell a currency. On major currencies, an attractive spread is one pip or less. (When it comes to US dollar, a pip stands for 1/100th of a cent).
There is no reason to overpay when trading, so you must check out what different brokers offer before opening an account. What’s also important is to see how the spreads change. Although the broker may offer attractive spreads during the most busy trading hours, you also need to see what are the spreads throughout the day.
3. Get good charting system and research
Broker reputation and attractive spreads aren’t all that counts when looking to get the best online forex trading broker. Your broker needs to provide fully comprehensive charting and research for you to succeed at forex trading.
Charts, of course, must be real time and comprehensive. You should get such things as Japanese Candlesticks, moving averages, Bollinger Bands, and various oscillators such as MACD and RSI.
A good broker will also offer analysis of currency markets and economic events. Moreover, real time news will be provided.
4. Look at margin rates
Foreign exchange trading is leveraged. It means that you only need to deposit a fraction of transaction’s value, and borrow the rest. When you sell one currency to buy the other, you will be charged interest on the currency you borrow and get interest on the currency you hold. Interest is charged daily.
Whether you’ll need to pay margin, or earn interest, will depend on the difference in interest rates between the two currencies. Different brokers may charge different rates on the same currencies, so it’s worth looking around for the best deal.
5. Test the system
Many online forex brokers provide free demo accounts. When looking for ways to get the best online forex trading broker, opening demo accounts is a way to test them. This way you’ll find out more about brokers before opening an account.
Competition among currency trading brokers is fierce. As a potential client, you have many choices. By taking into consideration the above five factors, you should be able to make a good choice.