Most
investors who trade FOREX or stocks use a broker. A
broker is an individual or a company, who buys and sells
stocks according to the investor's wishes. Brokers earn
money by collecting commissions or fees for their
services, before setting up an account with a FOREX
broker you will need to do some investigations:
1-You should check that a broker is
registered as a Futures Commission Merchant (FCM) with
the Commodity Futures Trading Commission (CFTC) as
protection against fraud or abusive trade practices.
2-A
FOREX broker also needs to be associated with a
financial institution, such as a bank in order to
provide funds for margin trading.
3-Picking
the right FOREX broker for you will take some work on
your part. There are brokers who charge a flat fee and
some that charge commission. It may be a good idea to
talk with friends and business associates about their
brokers. You may get some good leads, and you're certain
to hear who to stay away from. There is nothing like
word of mouth advertising.
4-If you are
thinking of investing online, you could choose several
online brokers and contact their help desks. Seeing how
quickly they respond to your questions could be key in
how they will respond to their customers needs. If you
don't get a speedy reply and a satisfactory answer to
your question you certainly wouldn't want to trust them
with your business. Just be aware that as in other types
of businesses, pre sales service might be better than
after sales service.
5-Before you choose
an online broker get a copy of their online demo
account. What features are included? Is the software
reliable? Does it offer automatic trading? Are there
extra software features that cost more?
6-
How quickly will these brokers execute your buy/sell
orders? What is their policy on slippage? What are the
transaction fees? What is the spread, fixed or variable?
What are the margin requirements and how are they
calculated? Does the margin change with currency traded?
Is it the same for mini accounts and standard
accounts?
Don't forget to ask about minimum
account balances and interest payments on account
balances. Make sure that your funds will be
insured.
Beware
Of The Typical Forex Trading Scam
It’s
very easy for new Forex trading investors to get taken
in by some sort of Forex scam or another. This can
include just about any idea under the sun that scammers
can come up with. Usually the realm of Forex scams can
include, software and e-books that ‘guarantee’ a profit
in the Forex market, general false advertising, and even
those with fake sites that just take your money and
disappear.
The nature of the currency market
tends to leave new investors vulnerable to such scams,
simply because it fluctuates a lot and little is known
about the market by the general population. It’s up to
investors to educate themselves on Forex trading, just
as they would before making any other investment if they
expect to do well. This includes being aware of common
scams. In 2001 the US Commodity Futures Trading
Commission (CFTC) released nine tips investors in the
Forex market should keep in mind when looking for a
broker:
• Stay Away From Opportunities That are
Too Good To Be True
• Avoid Any Company that Predicts
or Guarantees Large Profits
• Stay Away From
Companies That Promise Little or No Financial Risk
•
Be Wary of Trading on Margin Unless You Know What That
Means
• Be Wary of Those Claiming To Trade in the
"Interbank Market" because Its ‘Safer’
• Be Wary of
Sending or Transferring Cash on the Internet, By Mail or
Otherwise
• Scams Often Target Members of Ethnic
Minorities
• Get the Company's Performance Track
Record
• Anyone Who Won't Give You Their Background
Isn’t Worth the Risk
Many Forex scams, as is
common with other types of scams, rely on getting dollar
signs to appear in their victims eyes in order to pull
off the scam. If at any point in the decision making
process you start to feel yourself getting overly
excited by the prospect of making what seems like easy
money, then set your plans aside for the time being and
come back to them later. You’ll be much calmer and in a
better position to decide if the broker or deal you are
interested in is really worth it.
One of the most
common scams simply involves selling a product or system
online that will ‘guaranteed’ make you profits in Forex
trading. Be careful of online advertisements for these
products, after all most of them contain information
about the Forex market that you can obtain by reading
any other book on Forex trading. It will give you
information on the Forex market if you are doing
research, but it probably won’t give you the guaranteed
secret to success.