Choose The Right Forex Broker (Part II). Helpful Things to Remember

Discover Forex Magic Machine.When choosing the right forex broker, you should find from the broker what are the spread size and its dependence on the contract size? Spread is the difference between the bid and the ask price given at any moment on the trading terminal. The smaller the spread size, the better it is for the trader. Spread is your cost of trading.Develop your own Forex Trading System.

Many forex brokers charge spread up to 5 pips under steady market conditions. Spread up to 5 pips is reasonable. It should be acceptable. Some brokers will offer spreads lower than 5 pips if you trade contracts of $500,000 or more.

ECNs (Electronic Communications Networks) offer spreads of 1-2 pips maximum. But they require initial deposit of $10,000. If you have this much money, then it’s better to open an account with an ECN. The rates offered by ECNs are interbank. They are far better than most of the retail brokers.

You should look at the additional service like analytical, data, news, quotes, graphics and such offered by the forex broker. Online forex trading is quite popular now. You can monitor currency market movements by following current real time prices, graphics and even news on your laptop or PC monitor.

Does the forex broker provide trading software? Does the trading software come with the opportunity to manipulate, modify, and customize graphics? Can you do technical analysis using indicators and draw trend lines with support and resistance lines on it? If so, this can save substantial money. It will eliminate the necessity of buying an expensive market quote service and analytical and charting software for conducting technical analysis.

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Does the broker charge commissions and other payments and dues? The most reputable forex dealers and forex brokers charge no transaction fees from their clients. Reputable dealers when transferring an open position to the following day execute the rollover operation in accordance with the current LIBOR rates. The rollover is reflected in your daily statement.

Depending on the currency pair and the direction in which the position was opened at the moment of its transfer the next day, the client could actually win as the result of the transfer. A certain interest would be added to his account just for holding the position for more than one day.

Sometimes you as a trader will hold two opposite positions overnight. For example, you may have executed USD/CHF transaction for the total of $400,000 buy and $200,000 sell. The net long position of USD/CHF amounting to $200,000 should be transferred to the next day. The corresponding interest deposited or charged to the trader’s account accordingly.

Most forex brokers do not bother with these calculations. They charge the client interest for holding the position overnight regardless. Many brokers will charge interest for practically non existent positions. You as a new trader may not know these facts. You need to choose you forex broker after due diligence.

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