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Online Forex Broker | Know Your Broker before You Decide Anything


Click Here to Open An Account At The Best Online Forex BrokerAn online forex broker is firms that provide traders with access to an online trading platform that allow them to buy and sell foreign currencies. A trader use these brokers to access the 24 hours forex market.

These brokers are usually compensated through the bid-ask spread of a currency pair. For example: EUR/USD bid price is 1.4613 and ask price is 1.4616. If a trader makes entry to the market at that time he can either buy at price 1.4616 (ask) or sell at price 1.4613 (bid). In this case the spread is 4616-4613=3 pips.

An online forex broker will apply different spread for different currencies, so make sure you check this information on their website, especially the currency pair that you have interest in. Common currency pairs such as EUR/USD, GBP/USD, or EUR/CHF usually have low spread; about 2-4 pips. However, other currency pairs such as EUR/CAD, GBP/CAD, or GBP/NZD have spread from 6-17 pips.

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Although most of forex brokers make their incomes through spread, there are also brokers that charge commission fee per trade in addition to their profit from spread. This fee is charged per lot. One lot equal to 10,000 units of currency; for example: 10,000 units are equal to USD 10,000; EUR 10,000; GBP 10,000; etc.

So, do you need $10,000 in order to enter forex trading? No; the current forex market is using leverage system. A 200:1 leverage means that you only have to deposit 10,000 / 200 = $50 in order to trade 10,000 units or one lot. In other words, if you use a forex broker that charges $40 per lot, you will see $40 missing from your profit each time you trade.

When you decide to use an online forex broker, you will gain access to their online trading platform. These platform will give you access to live price, chart, news, put take profit or stop loss order, execute a trade, and various other resources to support your everyday trading. Based on experience, not every trader are comfortable with certain trading platform, so it is a wise decision to open a practice account first and test the trading platform for a period of time. I suggest you try a few trading platforms at once and see which one fit you the best. Remember to pay attention to how quick the platform executes your order.

Opening a practice account has other uses too. If you are an experienced trader and have certain strategies, you might want to test if the platform supports it or not; for example: hedging.

Hedge a trade is have buy and sell trades in the same currency open simultaneously. It can be used by a trader to lock his loss position.

Example: a trader buy EUR at 1.4815, then the price dropped to 1.4785. Instead of closing the lose trade, he sell EUR for 1.4785 and thus lock the loss at 30 pips. Then he waits the market movements and hopes to avoid loss by closing the two positions at the right price. This strategy is very risky and most traders will just go for the stop loss order.

So here are what to check on an online forex broker:

1. How they gain their compensation; is it through spread? Is it through spread and commission fees? Check the spread for your preferable currency pairs and if they charge commission, check the commission rate per lot.

2. Check the trading platform; make sure it suit you, provide various resources for your trading, execute order quickly, and doesn’t go down too often.

3. If you have particular strategies that not commonly used, check if the trading platform supports the strategies or not.

4. If you are planning to use Forex Robot, ask them first whether they allow forex robot or not. You can do this quickly by utilizing the live chat feature.

The next step to check from an online forex broker is their trading account, read the guide at Currency Trading Account.

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