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.

If you are reading this article, you are also probably looking for some good FOREX trading training course. Before you proceed any further, ask yourself why you want to trade in the FOREX market. Yes, it is a profitable business. But, it is risky like no other business is. When there are several ways in the world to make money, why FOREX?

As a trader or a prospective trader, you must be able to answer what makes FOREX trading better than any other business including trading in the stock market.

Liquidity

Liquidity of anything is the ease with which the thing (commodity) could be converted into money while least affecting its value. Liquidity in the FOREX market is very high because what you are trading is already money!  You are trading with the most liquid commodity on the planet.
The liquidity of a market increases with its turnover. The daily turnover, on an average, in the FOREX market is about $4 trillion. This amount is greater than the money traded in all the stock markets of the world put together. Not only does high liquidity make your trading profitable, it also makes insider trading impossible.

Leverage

Leverage determines the extent to which one could control a large amount with a relatively small amount. For example, while trading on margin, you invest a small amount into a broker account to control a much larger amount. What actually happens is that the broker loans you a larger amount. Whether or not the broker actually invests the money in the market shall depend on how his business functions.
Traders can easily have a leverage of 100 to 200 times their actual investment. Such leverage is unattainable even in the stock markets and empowers the trader to make huge profits with very little investments.

Relative Pricing

There are no fixed prices in the FOREX market; all prices are relative. When the price of one currency rises, the price of another is bound to fall and vice versa.  Thus, you can always make profit irrespective of what happens to a certain currency.
You never have this advantage in any other market. Take the stock market for example. A major crash in the stock market brings down the value of all the stocks. The only option you have during a stock market crash is to leave the market as soon as possible. This will never happen in the FOREX market as the price of all the currencies will never fall together.

Time zone- Free Trading

Trading in the FOREX market is not restricted to any time zone. So, you always have the option to trade at any time of the day that is convenient for you. The only time when you cannot trade is during the weekend.

Currency trading the Canadian dollar is special. A lot of traders trade with CAD due to some of its interesting features. In order to find out if trading CAD is suitable for you, you must understand these features.

The main exports of some countries are raw materials. This includes Canada whose main export is oil. Certain countries also export raw materials such as valuable stones or metals. For example, the main export of Australia is gold. The currencies of the countries that mainly export raw materials are commodity currencies.

Canada is, in fact, the second larges producer of oil only behind Saudi Arabia. The importance of oil in the industrialized world is well known. It is vital from small garages to large industrial plants. Therefore, oil is also fondly called ‘black gold’.

The value of CAD is very closely related to the price of oil and the conditions in the oil market. Let us look at an example. Assume that a large oil field is discovered in Saudi Arabia. This means the share of Canada in the oil market is reduced as a result of which the price of CAD would drop.

A majority of Canada’s oil exports go to USA, which is the largest consumer of oil. It is from Canada that USA meets the most of its oil demands.  Therefore, the oil prices would also affect the USD. The same movement in oil prices would therefore have opposite effects on the CAD and the USD. That is, if the oil prices rise, the USD/CAD would fall. A fall in oil prices would result in a rise of the USD/CAD.  A trader with a good understanding of the oil market can trade profitably with the USD/CAD currency pair.

Traders with an inclination towards the commodity markets can make profit trading the USD/CAD currency pair. However, the oil prices are not the only factor affecting the value of the CAD and the USD. There are several political and economic factors involved. Apart from understanding the oil market, you must be aware of the other happenings affecting the USD/CAD value.

A lot of FOREX traders believe that their success rate would increase if they had the perfect trading system. Sadly, there is not one trading system that can be labeled ‘perfect’. There are so many trading systems available today and traders buy one and modify it to suit their needs.

System vs. Strategy and Schedule:

A good FX trading system has a set of strategies from which it employs the most suitable strategy on a given market condition. The strategy employed for an abruptly changing market would be much different from the one employed for a stable market. Likewise, there should be different strategies for long-term and short-term goals. The trading system’s strategies should complement yours and are oriented towards your goals.

Your trading system must also go well with your schedule. Certain trading systems such as a day trading system will require you to be online during certain hours of the day. If that is not possible for you, it is wise to develop a long-term trading strategy.

Go for Systems with High Success Rates:

The success rate of your system must be above a certain average. This requirement is only for psychological reasons. There are several traders with low success rates and yet managing to trade profitably. This is because they lose very little even if they are losing often and win big even if they gain seldom. Frequent losses, therefore, are not always bad, but can be devastating for the trader. A trader in a depressed state of mind is prone to making more mistakes and would less likely stick to the plan.

Get Enough Training:

Before you start using a trading system, make sure that you are adequately trained. Make sure you get detailed instructions on how to use the system. A video tutorial would be ideal. Make sure you also get clearly-formatted instructions in text. This will be very useful for quick references when you do not have the time to let the video load
and search for the information you need.

If you do not take enough care in choosing your FOREX trading system, you might regret later. The trading system that suits you best would ensure that you gain well apart from keeping your confidence levels high.