What to consider when choosing a Forex broker?
Tuesday, May 27, 2014
, Posted by Ryanita at 3:57 PM
Kara
I have $5000 and I'm interested in trading forex. What are the best brokers on the internet?
Also when they say minimum trade size micro unit (1k) does that mean I have to buy at least 1000 units which is for instance for a currency (1.05) $1005?
Also what is the lot size? Is that the range of profit/loss? Like instead of gaining $1 for 1 pip gain $10 if I change the lot size?
Thanks
Answer
Wow... you're on your way to an unbelievable surprise.
There are no good Forex Brokers... there are only Forex Brokers that are not as bad as most.
The first thing you want to consider is where is the corporate headquarters (what country?). Assuming you're from the USA... make sure they are licensed in the USA. Do not, for any reason, deal with a Forex Broker not licensed in your home country.
The next thing is to compare the "spread" charges. All these brokers advertise "no commissions".You'd actually be better off with a commission charge than the way they charge (by the spread). Make sure that the pairs that you'll be trading have comparatively smaller spreads than the competition.
No matter what you see on the web (especially from the brokers)... understand that it will take, on average 3-5 years to be profitable in any type of trading. Forex traders usually destroy their account in days, weeks or months.
The free "classes" taught by the brokers are a joke. They concentrate on the least important aspect of trading, which is Technical Analysis. The two fields of study, significantly more important are;
A. Psychology (yours and the markets).
B. Risk Management.
Read 6-12 books on trading and another 2-3 books on Forex Trading before you open a Forex brokerage account.
Good luck!
Wow... you're on your way to an unbelievable surprise.
There are no good Forex Brokers... there are only Forex Brokers that are not as bad as most.
The first thing you want to consider is where is the corporate headquarters (what country?). Assuming you're from the USA... make sure they are licensed in the USA. Do not, for any reason, deal with a Forex Broker not licensed in your home country.
The next thing is to compare the "spread" charges. All these brokers advertise "no commissions".You'd actually be better off with a commission charge than the way they charge (by the spread). Make sure that the pairs that you'll be trading have comparatively smaller spreads than the competition.
No matter what you see on the web (especially from the brokers)... understand that it will take, on average 3-5 years to be profitable in any type of trading. Forex traders usually destroy their account in days, weeks or months.
The free "classes" taught by the brokers are a joke. They concentrate on the least important aspect of trading, which is Technical Analysis. The two fields of study, significantly more important are;
A. Psychology (yours and the markets).
B. Risk Management.
Read 6-12 books on trading and another 2-3 books on Forex Trading before you open a Forex brokerage account.
Good luck!
how much does it cost to trade forex?
Joe
Lets say the EUR/USD is at 1.40000 and i want to buy 100,000 of that currency, would i multiply 1.40000 times 100,000 to get me the price of how much i would have to pay? because if that is true i would need $140,000 to trade this currency and that is way more than what my margin is. can someone explain please.
Answer
No, because with the Forex you get leverage. USA brokers will give you 20:1 leverage I believe. Other countries will give you 200:1 or more leverage. This means you can knock down your estimation by about 200 times. But if that's still too much for your margin, then at that point you simply reduce your Lot size. You don't have to buy 100,000, you can buy 10,000 (which is called a mini lot) or even 1,000 which is a micro lot. If your account balance is $1500 or less, you should deal with micro lots. If your balance is up to 15,000 you should deal with mini lots. Above that you might consider standard lots, which are 100,000.
To be successful with the Forex, you need two things strategy-wise...
1) You need a strategy. They are NOT as hard to come by as people suggest, in fact, you can select from a list of 8000 of them right here: http://tinyurl.com/3tcla4v
2) Then you need good money management. Even with the best strategy, if you trade too large of lots, or you do poor money management (aka impatience, greed, etc) you'll blow your account.
I suggest that you open a demo account at the above link, and add ALL of the top 20 strategies to it, and let the demo run for a month or so. If it does well after a month, you can then weed out any of the strategies that didn't do so well at that point. I suggest following multiple strategies rather than just one, because more strategies = more stability. Any strategy can go bad at any time, no matter how good it's done in the past. But following multiple good strategies means that if several go bad, you're still in the green.
If it does well after a month or two and you are ready to go live, then I highly advise you to NOT put a large amount of money in to start. If you have a lot of money, put it in gradually. Start with around $2000, and then let that go for a month or more. IF it is in the green after a month, then add more money if you wish, and gradually increase the lot sizes as you gradually add more money. Never add money in if it has lost money. In other words, never add money to make up for a loss. If the account has a loss, it must make that loss back on it's OWN, not by YOU adding your own money in! And that takes a lot of patience because some times it can take it a while to make it back, and during that time, you have to wait. So patience is key. But For example, if you have a hundred thousand dollars to put into the Forex, I would say it should take you 6 months to a year to get it all uploaded into the Forex. Because you start with 2k, then let than run a month. And if it does well, then you double it, and let that run another month. And if that also does well, then you double it again, etc. It's much safer that way, because if you do some horrible miscalculation, most likely you'll have the loss early when your account is just $2000, rather than lose your whole $100,000!
Also, be sure to go with a no dealing desk broker, like FXCM. I hope all this info helps. If you have any questions, you are always welcome to private message me anytime. :-)
No, because with the Forex you get leverage. USA brokers will give you 20:1 leverage I believe. Other countries will give you 200:1 or more leverage. This means you can knock down your estimation by about 200 times. But if that's still too much for your margin, then at that point you simply reduce your Lot size. You don't have to buy 100,000, you can buy 10,000 (which is called a mini lot) or even 1,000 which is a micro lot. If your account balance is $1500 or less, you should deal with micro lots. If your balance is up to 15,000 you should deal with mini lots. Above that you might consider standard lots, which are 100,000.
To be successful with the Forex, you need two things strategy-wise...
1) You need a strategy. They are NOT as hard to come by as people suggest, in fact, you can select from a list of 8000 of them right here: http://tinyurl.com/3tcla4v
2) Then you need good money management. Even with the best strategy, if you trade too large of lots, or you do poor money management (aka impatience, greed, etc) you'll blow your account.
I suggest that you open a demo account at the above link, and add ALL of the top 20 strategies to it, and let the demo run for a month or so. If it does well after a month, you can then weed out any of the strategies that didn't do so well at that point. I suggest following multiple strategies rather than just one, because more strategies = more stability. Any strategy can go bad at any time, no matter how good it's done in the past. But following multiple good strategies means that if several go bad, you're still in the green.
If it does well after a month or two and you are ready to go live, then I highly advise you to NOT put a large amount of money in to start. If you have a lot of money, put it in gradually. Start with around $2000, and then let that go for a month or more. IF it is in the green after a month, then add more money if you wish, and gradually increase the lot sizes as you gradually add more money. Never add money in if it has lost money. In other words, never add money to make up for a loss. If the account has a loss, it must make that loss back on it's OWN, not by YOU adding your own money in! And that takes a lot of patience because some times it can take it a while to make it back, and during that time, you have to wait. So patience is key. But For example, if you have a hundred thousand dollars to put into the Forex, I would say it should take you 6 months to a year to get it all uploaded into the Forex. Because you start with 2k, then let than run a month. And if it does well, then you double it, and let that run another month. And if that also does well, then you double it again, etc. It's much safer that way, because if you do some horrible miscalculation, most likely you'll have the loss early when your account is just $2000, rather than lose your whole $100,000!
Also, be sure to go with a no dealing desk broker, like FXCM. I hope all this info helps. If you have any questions, you are always welcome to private message me anytime. :-)
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