Forex Brokers. How to choose one for me and my FAP Turbo

By jtelo March 22, 2009 20:45
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Forex Brokers. How to choose one for me and my FAP Turbo

The first question that pops up when talking about Forex Brokers is,

What is a Forex Broker?

A Forex Broker is an individual or company who buys or sells orders according the investor’s decisions, just like a Stock Broker, with the difference that the last one buy or sell stocks while the FX Broker does the trading with currencies. Brokers have to be associated with a bank or financial entity in order to provide sufficient funds to investors. In Short, brokers act as intermediaries in negotiating exchange of currencies, making all buy/sell transactions through the Forex Market.

Choosing a Forex Broker is probably the most important step when investing in the FX Market, this can make the difference between generating profits or not, and it could be a bit tedious. The reason of this, is that there are lots of Brokers offering different options and facilities to get people to invest with them. So, after encountering this important step, another question comes to mind:

How do I know which Forex Broker I have to choose?

There are many parameters that affect when the time has come to choose which broker is the best to invest with, based on what the investor needs. These parameters are:

Pip or Percentage in points: this represent the value of the last significant digit place in a currency quote, in other words, is the smallest amount by which the value of a currency can change. It’s generally the fourth decimal place. For example, the exchange rate of EUR/GBP is currently at 1.0095 and then the exchange rate changes to 1.0098, this means that pair did a 3 pips movement.

Spread Rate: this represents the difference between the bid price and the ask price, which is the cost of the trade, or the trader’s commission. For example, if the bid price of USD/CHF is 1.1270 and the ask price is 1.1273 then the pair has a spread of 3 pips.

Leverage: this represents the investment ratio to actual value. Leverage is also the use of debt to support an investment; it is used with the purpose of magnifying the potential positive or negative outcome. For example, a broker that offers a leverage of 200:1 means that for every dollar you invest you will have 200 dollars in Forex Market to trade.

Account size: this represent the minimum investment to create an account in a given broker. For example, a broker could offer a 500 USD$ mini account size. This means that the minimum investment for this broker is of 500 USD$.

Two last extra parameters that have to be taken into account area the reliability and transparency of the broker, meaning if the broker performs the asked tasks or trades and provides currencies information at right time with no delay.

So now, knowing the most important stuffs about brokers, the only thing left to do is practice. A very, very important, probably the most important of all things about Forex Brokers for me is,

Does this broker offers Demo Accounts?

This is probably the first question you have to do to yourself before hiring a broker. Even if you’re not a newbie, testing the parameters and options of a broker first is the most important thing to do. Not every broker suits well to your strategies and needs, and if you’re using Forex Robots, not every broker supports them and they don’t work at their best performance with all of them.

So if you’re planning to hire a broker and use a robot with it, here are the most common parameters you should be looking for (this parameters are optimized for FAP Turbo):

MetaTrader 4 platform capability.

Demo Account capability

Small minimum account sizes.

High leverage.

Spread rate:

  • EUR/USD – 2 or 3 pips
  • USD/CAD – from 3 to 5 pips
  • EUR/CHF – from 3 to 5 pips
  • GBP/CHF – 7 pips
  • EUR/GBP – from 2 to 5 pips

To finish, I will leave a link to a website that has some of the best brokers and their information listed on it: Forex Brokers.

By jtelo March 22, 2009 20:45
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