Choosing a Forex Broker

Choosing a good Forex broker can be as complicated. Here are some tips to keep in mind to make your research easier.

In the U.S., any worthwhile Forex broker will be registered as a Futures Commercial Merchant (FCM) with the CFTC (Commodities Futures Trading Commission).

Forex accounts are not FDIC insured, so you can’t expect the government to reimburse you if the market turns sharply downward. Large institutions, with capital to withstand downturns and en masse withdrawals are crucial to your financial peace of mind.

Forex is a 24 hours a day business so whether your broker resides in the same country or not, you want one who will pick up the phone when you call – anytime.

Regardless of the Internet it is still a phone heavy business. Getting a broker on the phone at anytime can mean the difference between profit and loss.

Research the firm's spreads. A spread is the difference between the bid and ask price - what the broker pays to buy versus the amount they sell a currency for.

Some brokers offer fixed spreads on all trades, which gives predictability. But that may not suit your trading style or budget, since they tend to be larger than variable spreads.

Any broker offers a standard account to a qualified client. Standard accounts trade currency in standard lots of 100,000 units. You can't buy 100 euros for $150, you have to buy 100,000 euros.

Since that's a very large investment brokers offer leverage. In other words you put in, say 1% of the total, the broker puts up the rest. That has huge profit (or loss) potential, but it entails significant risk. So be aware of a broker's margin call policy.

Many brokers offer some form of 'mini' account. They trade in smaller units, e.g., 10,000. This lowers the investment required from, say $2,500 to only $250.

Forex is very complex so you'll want a broker with software that provides you with lots of technical and fundamental analysis information at your fingertips.

Make sure they offer a trial account and that you can make paper or test trades. Very important if you are new.

For more Forex tips grab your free report 10 Reasons Why You Must Consider Online Forex Trading including a section on selecting a Forex Broker see The Futures Charts