Reviews of a brokerage by its clients will tell you a lot about the company. Due to the 24/5 nature of Forex you want to find a brokerage that will assist you whenever you need it. A good brokerage will have support available at any time. Speaking live and direct with a person can be far more productive than dealing with an automated response. Making sure that the brokerage is easy to deal with and are happy to assist you with any problems you may have is important. Generally, a call to the brokerage will give you an idea of the way a company will handle client queries. Wait times, and the representatives ability to answer questions regarding company details, are things that should be considered.
Usually, a brokerage will offer a variety of account types, suitable for different traders depending on how often you trade, how much you trade, etc. Finding one that suits your needs is important, as you wont want to be restricted, nor will you want to be paying for more than you need.
Leverage: Forex Brokerages will offer their clients leverage to help them make the most of their capital. Currency pairs move in very small increments and therefore large position sizes must be taken to make trading worthwhile. Brokerages offer anywhere from 1:1 to over 1:500, allowing you to take larger positions with a smaller deposit in your account. Leverage of say 1:500 will allow you to purchase $500 worth of currency while only using $1 out of your account. This gives you 500 times as much profit and loss and must be used very carefully.
Margin: Margin relates to the amount of money that must remain in your account to keep your position(s) open. Having a larger margin will ensure more safety for both you and the brokerage. It is very important to maintain a high level of risk management, and an independent financial advisor should be consulted if you are unsure about your investment strategy.
Commissions and spreads: Each broker will set different rates for commissions and spreads, depending on things like liquidity and how often the currency pair is traded. Spreads generally widen with currency pairs that are not traded as often, and major pairs usually have low spreads due to their high liquidity. Some brokerages will advertise no commissions, however, are more likely to have wider spreads. Different account types can mean different commission rates and spreads.
Deposits and Withdrawals: The first thing you will need to do is make an initial deposit. This can be as low as $1 for a micro-account, and over $2000 for more institutional level accounts. Deposits and withdrawals should be made very easy and are usually executed within a few days at the most. Make sure that there are no issues with deposits and withdrawals, this trust can come from regulations and customer reviews. There may be a small fee for each withdrawal.
There are two main types of brokerages. Dealing Desk (DD) and Straight-Through Processing (STP). They differ in the way that they execute trades. The DD will act as a market maker between the client and the Liquidity Providers(LPs). When you trade with a DD you are trading within that market rather than directly with the global market. This can cause a conflict of interest for the brokerage, as Forex is a zero-sum game when the client makes money the brokerage will lose money. An STP, on the other hand, will execute your orders directly in the global market with the brokerages LPs. This means that they can provide the best bid and ask prices based on the prices offered by their LPs. As your trades not executed within an artificial market, there is no need for the brokerage to interfere with your trades.
When placing your money in a brokerage you need to make sure that you can trust them. Regulatory bodies vary from country to country, and their standards will vary as well. Understanding the quality of the regulatory body in your country will help you to decide whether putting your money in a brokerage there is a good idea or not. Regulatory compliance is a strict process and requires constant monitoring for the brokerage, therefore those that do comply with national standards will make their regulation easy to find. A regulation from a suitable financial body will be proudly presented by a brokerage and if you cannot find any signs of one, then you should move on with your search.
The trading platform that you choose to use is your gateway to the market. As such, you need to make sure that whichever platform you choose suits your needs. Most platforms will have a variety of functions designed to help you analyse data and make decisions to help you in your trading. A clear buy and sell button is a very simple, but important tool, during trading you need to know that you can execute your orders whenever you see fit. An unnecessarily complicated interface may look impressive but can lead to costly mistakes if it is not utilised well. Another consideration is the customisability of the platform. Tuning a platform to your needs and conveniences allows you to feel comfortable when trading and can enhance your performance using Expert Advisors (EAs), trading options, alerts and strategy builders.