Overview of Forex Brokers
Most new traders seem pre-occupied with needing to know who to use for a broker. The short answer is to use any one of the top ten brokers and you will be fine, believe it or not it is not that important. Over the last 5 years most brokers have reduced their spreads, and the retail forex industry has good competition. The top 10 fx brokers are all starting to look about the same, due to years of competition. Worry about finding a solid trading method, not your broker.
Spreads and Quotes
Basically you will buy any pair at the ask price and sell any pair at the bid price. The difference between the two is the spread. We trade 28 pairs at Forexearlywarning.com so the spread is a little more important. The good news is that as more people trade the currency market and trading volumes increase year after year, the spreads are shrinking making the ability to trade 28 pairs possible even more so now than ever. As of right now spreads have dropped so significantly we can safely say it is not an issue at all to trade all 28 pairs, which opens up opportunities for us that other traders simply do not have.
Order Types and Placing Orders
When you trade with Forexearlywarning you will be using market orders, stop orders and partial limit orders. Occasionally you will use limit orders. We will not be using resting orders or entry orders. We will only use hard stops, not trailing stops with this system.
Rollover interest, or swaps, is the amount of interest paid into or deducted from your account balance daily based on the interest rate differential of the two currencies you are trading in each pair. If you hold onto your trades longer the extra interest income can be a great extra source of income into your account.
How To Choose A Broker
The basic guideline is to stick to the top ten largest brokers and to get started with a Meta trader platform. This will facilitate setting up the free trend indicators and price alarms to go with the Forexearlywarning trade plans and alerts. Over time as you evolve from a new trader to a more experienced trader your tastes will likely change and you may decide to use another brokerage platform. Meta trader will provide you with an excellent start and the basic free trend indicators setup with the moving averages across multiple time frames will not change across any charting platform provided by any broker.
All of the top 10 brokers are moving away from deal desks and fixed spreads to variable spreads and near instant executions. This is good for currency traders. Spreads should continue to shrink and competition between brokers will be good for traders. Traders need to be concerned about their trading method, not their broker. A foreign exchange broker will not make you any pips.
Trading In a Brokerage Account
Opening a forex brokerage account is not difficult and money can be easily deposited and withdrawn from your account. You can also open a "demo" account to do demo or paper trades with zero risk to test your trade entry skills prior to opening a live trading account. This is strongly recommended and it is always smart to test your skills and methods/system you are using prior to trading real money and trading live funds.
In a brokerage account you can place market orders, limit orders, and stop orders. It is very similar to buying stocks online. You can also place stop orders to protect profits and limit losses on all trades you place. Orders should be placed in the main trading session where most of the activity and market participation occurs.
Trades can be easily placed through a broker. Orders can be placed with just a few clicks and the broker fills your position. When you close your open trade, the broker closes the position and credits your account with the loss or gain. This can all happen literally within a few seconds.
With Forexearlywarning you will trade 28 currency pairs. Pairs like the EUR/USD and AUD/USD are considered major pairs because they have the USD on one side. There are 7 major pairs and 21 exotic pairs. You can buy or sell any of them and hold your position for additional profits if they are trending up or down.
This short article on brokers will be supplemented by much more detailed information in our intermediate course of 35 forex lessons in Lesson 3.