How to Pick a Forex Broker

Choosing the right Forex broker is the first, most important step in getting involved in Forex trading, especially if you are new to it. The three things you need from a broker are: experience, reputation and successful track record. Of course those are not the only qualities you want them to have but they are an excellent starting point.

How to find a Forex broker
The smartest way to find a Forex broker is to contact your local licensing authority which licenses brokers to be in business. You definitely don't want to be dealing with someone who approaches you with amazing promises of success and fortune. Start cautiously; don't allow yourself to be taken advantage of because you are inexperienced.

Reputation
Make up a short list of three companies or brokers you are considering doing business with. Then research them: online, via word of mouth and by contacting the governing authorities to find out if there are any complaints against them. Ask other traders about the brokers you're interested in. Ask friends and associates who have dealt in Forex trading if they can recommend someone reputable. Determine how easy they are to do business with by first communicating with their customer service desk.

Your protection
You need a Forex broker who has enough safeguards in place to protect their customers. Find out if they are regulated and if so, by whom. What protection is available to you via the regulatory organization? Are their clients' funds covered against fraud and bankruptcy?

Free trial
Many Forex brokers offer the opportunity to trial trading on the currencies market for free. You use 'play money' but it gives you the chance to see how the system works and how you would have profited or lost if you were using your own, actual money. Some provide training videos or free visits from actual Forex brokers to guide you through. The service the broker or company provides you during the free trial should indicate how they will treat you once you become a customer and it will also show you the way they operate.

What do they offer?
Supposing they are all reputable and trustworthy, most Forex brokers offer the same in terms of tools. Some charge more or less in processing fees. Some provide trading advice for free whilst others offer the simulated trading as described above, with practice money of $50,000. A good Forex broker will be able to give you some basic lessons in online trading or might provide trading via email or via a DVD. There should also be a 24-hour facility for customer service.

Online Forex trading
If you are going to practice online Forex trading, your Forex broker must have a fully secure trading environment to protect your personal details as well as the money you invest.

Costs
The Forex broker you choose should be upfront about costs. There should be no hidden costs and they may also offer special frequent trading terms. Full transparency of how your broker operates is essential and if you ask questions about costs, returns or require other information, you'll want to be sure you will be given clear and honest answers.

Compare Forex brokers
A good way to compare Forex brokers before you actually start trading with them is to take advantage of their free trials and see which one you prefer using. Some websites also have comparison charts between larger broker firms so you can see, at a glance, the services offered and the differences in the way they operate.

International or local?
Ideally, you should select a Forex broker that is local to you. That way, your broker is regulated by the same authorities that will be able to help you if something goes wrong. Also, an offshore broker will be dealing with transactions with you in their local currency and this can affect your returns.

Trading platform
Arguably the most important thing to consider when selecting a Forex broker is their trading platform, the pairs of currencies offered, the difference between the bid/ask prices and the spread (difference between bid and asking price). By opening practice accounts with 3 brokers, you'll be able to gauge which is the best for you.

Remember, a Forex broker is the person who will stand between you and success or failure. Don't set yourself up for failure before you even begin, by choosing someone who appears disreputable or dishonest. Research your shortlisted brokers and definitely try out the practice accounts to ensure you know how they operate before spending anything.



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