Every individual investor who wants to dabble in foreign currency trading has to channel his transactions through a broker who has established linkages with the interbank market. It is only through these brokers that the individual investors will be able to access the special rates of exchange the interbank players conduct business with each other.
The interbank market used to be the exclusive turf of the major banks and large financial institutions. They conduct the buying and selling of various currencies among each other through the use of electronic communications networks set up specifically for this purpose. There are two major networks that connect the major interbank players – Reuter’s Dealing 3000 and the EBS or Electronic Broking System owned by ICAP Plc, a UK based company.
Through time, the need to have more liquidity left the interbank players no other option but to open the doors of the interbank currency market to individual investors. The advent of more efficient communication systems and the emergence of retail forex brokers made this possible.
Brokers sprouted like mushrooms all over the globe to serve as the various conduits between the interbank market players and the individual investors. The trading platforms they offered are digitally linked to electronic communications networks of the interbank market; thus, allowing them to offer the same interbank rates to retail forex clients.
Unfortunately, the brokers are not created equal. They differ from each other in many ways - from the buy-sell spreads they offer, the range of leverage they give, to the quality of service and order execution they provide, not to mention the other value added services and tools of the trade they offer to beef up their services. Naturally these are the things you should consider as your basis of comparison when choosing the best broker for you.
Of course you should also consider the customer feedbacks from various online forums but pay particular attention to the negative comments. They should give you an idea of the kind of service they provide. Add some sense of security to your investment by also looking into the registration and affiliation of the broker.
As a rule of the thumb, you should never deal with a broker who is not affiliated with or under the supervision of a bona fide financial regulatory body. For US based investors, make sure your broker is registered with the CFTC and at the same time a member of the NFA. For brokers based in other countries, make sure they are affiliated with a legitimate regulatory body in those countries and not just from any trumped organization in the Cayman Islands. This should give you some peace of mind knowing you have a ‘big brother’ you can run to in case things turn topsy-turvy.
Saturday 18 October 2014
Thursday 9 October 2014
How to Choose the Best Forex Brokers?
Investing in the foreign exchange market is quite tricky. It might cause traders to deal with substantial amounts of losses if they are unable to make the right trading decisions. Because of this, participating in the forex market also involves working with the best experts in the industry. These include forex brokers who are fully aware of how the money market works and the different strategies that a trader can use in generating huge profits. Below are few tips that are ideal for traders who plan on searching for the best broker who can work based on their needs:
1. Assess a Broker's Capital Base
It is crucial to assess the capital base of various brokers since this can help in ensuring a smooth flow in your trading experience. Note that a large capital base also ensures high quality execution of trades and better profits. This also indicates that the brokers have high trading volumes and solid financial backings for their operations. This also means that they are capable of paying earnings to their clients in a prompt manner.
2. Evaluate Their Records
Evaluating the records of various brokers is necessary in assessing their reliability and reputation. This ensures that you will be working with someone who is honest and trustworthy and did not commit any criminal wrongdoings in the past. This will prevent the risk of being mixed up with someone who cuts corners when using your money. Look for someone who deserves your trust.
3. Find Out How the Broker Handles Withdrawals and Deposits
Check out the way your options handle withdrawals and deposits. Note that while some of them offer utmost convenience to their clients by allowing them to deposit or withdraw using Paypal or other convenient financial methods, there are also those who use confusing withdrawal and deposit methods. These confusing processes may be very time-consuming. This is the reason why it is necessary to choose a broker who uses the simplest methods when it comes to depositing and withdrawing money.
4. Research About their Customer Service
Customer service is extremely important when dealing with forex brokers. Make sure to choose someone who can be easily contacted in case there are problems with your trades. Choose a brokerage firm, which provides various means of contact including email, chat and phone. Your broker should also be capable of providing a quick response to your queries. This will prevent the risk of dealing with complicated trading issues that might only ruin your chances of earning huge profits from forex trading.
1. Assess a Broker's Capital Base
It is crucial to assess the capital base of various brokers since this can help in ensuring a smooth flow in your trading experience. Note that a large capital base also ensures high quality execution of trades and better profits. This also indicates that the brokers have high trading volumes and solid financial backings for their operations. This also means that they are capable of paying earnings to their clients in a prompt manner.
2. Evaluate Their Records
Evaluating the records of various brokers is necessary in assessing their reliability and reputation. This ensures that you will be working with someone who is honest and trustworthy and did not commit any criminal wrongdoings in the past. This will prevent the risk of being mixed up with someone who cuts corners when using your money. Look for someone who deserves your trust.
3. Find Out How the Broker Handles Withdrawals and Deposits
Check out the way your options handle withdrawals and deposits. Note that while some of them offer utmost convenience to their clients by allowing them to deposit or withdraw using Paypal or other convenient financial methods, there are also those who use confusing withdrawal and deposit methods. These confusing processes may be very time-consuming. This is the reason why it is necessary to choose a broker who uses the simplest methods when it comes to depositing and withdrawing money.
4. Research About their Customer Service
Customer service is extremely important when dealing with forex brokers. Make sure to choose someone who can be easily contacted in case there are problems with your trades. Choose a brokerage firm, which provides various means of contact including email, chat and phone. Your broker should also be capable of providing a quick response to your queries. This will prevent the risk of dealing with complicated trading issues that might only ruin your chances of earning huge profits from forex trading.
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