Choosing a Forex Broker
Some people do not care about the broker in which they trade. But after seeing what happened with REFCO, it is important to be aware of the service you choose.
What should I consider when selecting one?
There are several things to consider:
Spread: The difference between buying and selling price. The most common is around 3 points (0.0003 USD), a broker of this kind is Marketiva:
Some other brokers are able to offer about 1.5 points spread. Oanda is one of them www.fxtrade.oanda.com
Slippage: It is really important to know the slippage of a broker, and it is impossible to know, unless you open an account or performing a deep research. The slippage is a price movement after you close or open a position so the price you saw on the screen is not the one where you wanted to close it. Oanda has instant executions, it only has problems when there are news, but it is strange to be trading in a press release, Marketiva has also very little slippage. These are the two brokers that I have been using for over 3 years.
Regulation: This is very important. REFCO was not properly regulated. You must choose a broker with a strong regulation of the NFA or any other respected regulatory entity.
“Marketiva Corporation is a financial service provider incorporated as an international business corporation in British Virgin Islands with registration number IBC CAP. 291 Reg. ? 646819. Marketiva Corporation is under jurisdiction of the Financial Services Commission (FSC) and conforms with its regulations and internationally accepted supervisory and regulatory standards.”
“OANDA is a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) and is a member of the National Futures Association (NFA ID # 0325821).
As you can see, these two are well regulated.
Minimum to open an account: in some cases, this is really important if you want to start with little money. Oanda and Marketiva offer this option, you can start with just one dollar, of course that the benefits are not important, but lets at least have the feel of trading real money
Trading Platform: Although you can get multiple platforms for free trade: it is better if the broker used by you to trade offers a good platform. Personally, I use some complex systems not included in most platforms, such as Ichimoku and Fibonacci. The platform I use to analyze the market is MetaTrader one of the best known platforms, although the brokers that I use does not operate on this platform. Marketiva has a serious lack of analysis tools. Oanda platform is really horrible, the only major advantage is that it is easy to handle. Therefore, you can always choose a broker that is easy to operate and analyze on another platform, if you don´t find a broker that has a suitable platform for you. Always free accounts can be opened and demo trade on these platforms so you can see which one best suits your trading preferences.
Instruments that operate: not all brokers offer the same instruments, some of them offer foreign currency (but not the pairs that you might want to trade, others may offer instruments more diversified, and so on. So this is important to look before opening an account which instruments are we going to trade, and which broker has those, and if it has a good spread on those instruments. I personally like to operate only in the pair EUR / USD and Au and Ag (Silver and Gold), both Marketiva and Oanda offer this possibility, and many other instruments that I do not operate.
Plan your trade, trade your plan.