Dealing with a broker is a great way to get your Forex investments off to a good start, but you also need to ensure that you know what you are getting into when you put your investments into their hands. There are certain questions that you can ask to make sure you are headed in the right direction, and they are all fairly straightforward.
What Does Their Pricing Look Like?
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When it comes to pricing in the Forex market, not everyone gets the same deal. As the experts at XE put it;
Because the Forex market is an over-the-counter market with no centralized exchange, not everyone receives access to the same prices or quality of execution. Institutions with the largest trade volume and the most solid financials have access to better prices and execution.
This is why so many people opt to trade through larger brokers; because they are the ones that offer the best pricing. If you are being treated like a small fish in a big sea, you might end up losing out because your broker either doesn’t take you seriously or can’t afford to get you great pricing; you can avoid all of that with an insightful question into their pricing.
Who Will Execute Your Orders?
Before you start placing orders, you will want to know who is going to be executing them. When you have access to a dealing desk, this basically means that it is your broker that will be pricing and executing all of the orders that you place. Because of this, the spread itself will usually remain fixed, and you will most likely have restrictions placed on the orders based on economic events, or the news.
When there isn’t a dealing desk available, this usually means that the orders will be executed by banks, and you’ll most likely find different streams of pricing working their way through the brokerage. You will most likely not have any trade restrictions put on your orders, although this will depend on the broker through which you are going to be making these trades.
What Do You Need From a Broker?
One of the most important questions that you will need to ask as you go about searching for a great broker is actually one that needs to be directed at yourself, instead of the brokerage. This question is simple; what do you actually require from your broker? Are you new to the world of Forex or do you simply need someone who will execute your trades? Do you want to learn from the professional or are you seeking out someone who is a lot more hands off? The contributors of Vantage Point Trading put it this way;
Consider your resources, trading style and how you move your money around.
You might not find the perfect fit on your first go, but over time you will learn how to weed out those brokers who can’t really do much for you and start gravitating towards those that can.
Does The Broker Allow Scalp Trading?
While this isn’t the case with all brokers, there are some that simply do not allow scalp trading; this basically occurs when individuals move quickly in and out of the market to make incredibly small gains. If you want to ensure that you will be able to trade in this manner, just email your broker and inquire about this before you open up your demo account. If you have another style of trading and you find that you aren’t really interested in this option, you don’t really have to look into this.
What Kind of Customer Support Is Provided?
There are plenty of people who sign up for broker accounts only to find out that the moment they try to contact their broker, they can’t get hold of them. In the Forex market, this can be disastrous because you need to make decisions and act very quickly to make money in this field. If your broker tells you that they are quick to answer your calls, be sure to test out this theory before committing to taking on their services. If a broker offers a live chat or telephone support option, utilize these services to inquire about opening an account; this should give you an idea about how long they take to answer your calls, as well as how much they know about this process.
What Type Of Account Should You Open?
Before you can actually open up an account, you will most likely want to decide whether to open up a standard, mini or micro account. Knowing the differences between these accounts will help you make a firm decision about which one will suit your needs best. The pros at Forex Op have this recommendation to make;
Unless you have a very large amount to invest, I strongly recommend starting with either a micro or mini account. These can normally be opened with as little as 50 dollars and are ideal for learning.
It is always a good idea to thoroughly test your skills within this market before you begin setting out to make money; after all, you aren’t gambling, you are in this industry to learn the strategies that will help you succeed.
A Self-Trading or Managed Account?
Another important question that you will need to ask before opening an account is whether you are looking to open a self-trading or managed account, and there are some key differences between these two options that might just make a big difference to how you experience this market.
Many people tend to begin their Forex careers with a self-trading account because it allows them the chance to have full control over their money. Managed accounts, on the other hand, are uncommon because they require a lot more money to establish. These are run by investment professionals, which mean that you’ll most likely have someone watching over your trades day and night. If you don’t have the funding for this type of account, however, you might want to opt for the latter.
Asking the right questions can put you on the right foot with regards to your trades, so be sure to consider this as you go about making those all important decisions with regards to opening your first account.
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