Here is the second part of the 10-point guide to finding the best FOREX broker. This part covers point 6 to 10. For points 1 to 5, please read the first part.

6. Is Your Broker a Member of any Regulatory Body?

FOREX markets are not legally regulated and therefore, not all brokers are members of a regulatory body. Make sure that the broker you are planning to trade with is part of at least one regulatory body. Trading with unregulated brokers will only help you lose money. In the United States, there are bodies such as the National Futures Association (NFA) and the Commodity Futures Trading Commission (CFTC) that offer protection in case the broker fails. All countries have some bodies like these. It is wise not to trade with brokers who are not members of any regulatory body. You’d not want the broker to take all your money and vanish one day, would you?

7. Is the Spread Suitable?

A broker makes money through the spread. Spread is the difference between the ask price and the bid price. Spread depends on the broker you are trading with and the currency pair you are trading. Normally, a spread of 1 to 3 pips is okay for the major currencies. Before choosing a broker, get details regarding the spread for the currency pairs you’d trade through the broker. Do not fall for low spread as there are several traders – mostly the ones that make very little number of long-running trades- offering a low spread and charging traders with additional fees.

8. Is the Lot Size Suitable?

The lot sizes are standardized in the following way.

1000 currency units for a micro lot

10,000 currency units for a mini lot

100,000 currency units for a standard lot

However, some brokers offer more flexibility and let the trader create a lot size of his own. Traders would not need this much money as they’d be trading on margins.

9. Are you OK with the Leverage?

It is the leverage and margin that allows you to control large sums of money with a much smaller investment. The standard leverage is 100 times. A leverage of up to 200 times is possible. Certain brokers prefer to keep the leverage at 50 times thereby bringing down the risk. Leverage and margins vary from one broker to another. So, make sure the leverage provided by your broker suits your plans.

10. What is the Broker’s Business Model?

The business model of the broker is also a very important factor that can influence your success. For example, there are brokers who own a dealing desk but access the FOREX market through the electronic communications network. There are also market makers who are similar to traders, but not exactly traders. Market makers are people that help you find a match for your trade. They usually do that through brokers. Sometimes, they might match your trade too. This could be dangerous for you as the market maker with whom you have trusted your funds is like your opponent. When they match your trade, they would lose if you gain.

Whether you are availing the services of a broker or a market maker, taking a look at their past history and feedback is important. Look at the reviews provided by independent forums and do not rely on testimonials by a couple of people.

The broker is the man who will serve as a link between you and the market; he is the one that provides you with leverage so that you can control large sums with smaller amounts of money. Therefore, finding a good broker and setting up a brokerage account are vital steps. Here is a ten-point guide that will be of immense value in helping you find the best broker.

1. What is the Minimum Investment Requirement?

The minimum investment requirement varies from one broker to another. Earlier traders needed to invest a minimum of $10,000 to $50,000 or more to trade. However, with mini and micro accounts traders can start with investments as low as $25. Make sure that the minimum investment requirement of the broker with whom you are planning to work goes well with your investment plans.

You might find a lot of brokers who support your investment plans. The broker you trade with should have clients whose account sizes are similar to yours. This ensures that the broker’s services are suitable for you.

2. Support, Availability and Market Access

Make sure that your broker provides a 24-hour access to the FOREX market. Almost all brokers provide a 24-hour access. Learn how good their support services are and how efficient they are in resolving technical issues.

3.  What Currency Pairs are supported?

The broker you would work with must support all the currency pairs you want to trade. Beginners need to make sure that all the major currency pairs are supported. The seven major currencies are the USD, EUR, JPY, GBP, CHF, CAD, and AUD.

4.Are there Charting and Alert Services?

The services provided by the broker are very important. Make sure the broker provides charts and indicators necessary. It is great if the broker also has a news alert service. For an experienced trader, these services might not make a big difference as they might already have subscribed to charting and news alert services.

5. Is the Software Compatible?

Understand the software platform the broker is using. Make sure that your broker allows you to test the software with a demo account. A broker that lets you test from a demo account for an unlimited period of time is ideal. Testing might take longer than expected if you are planning to use the software in multiple systems.

See Part 2 for the remaining 5 points.