Most traders desiring to carry out trading activities do so through a forex broker. Acting as a negotiator between a buyer and a seller, a forex broker enables the buying and selling of currencies for the typical trader. When searching to trade the forex market, it is important to be aware of which brokers are reputable and realistic. The number of forex broker scams is astonishing. A forex broker who is reputable has mandates and procedures or services that protect the moral values of the forex market.
Reputable brokers provide protection from deceptive, scheming and abusive activities associated with selling commodities. Reputable forex brokers are registered members of Futures Commission Merchant and Retail Exchange Dealers (CFTC) and with the National Futures Association (NFA). A potential trader cannot rely on how professional a website appears. It does not insinuate or assure a reputable broker. Reputable brokers will list their (CFTC) and (NFA) membership association on their website pages and in its “About Us” tab. Traders can also research the regulatory entities of countries that are not within the United States.
Opening an account with a broker located in a country that has minimal regulatory compliance and weak enforcement poses a greater risk. A trader dealing with a regulated broker has the recourse to contact proper jurisdiction and file a grievance to attempt resolution should a problem with the broker occur. Regional or municipal brokers may permit a trader’s attendance at trading conferences and discussion groups that help in learning trading principles.
The interval at which a broker’s business was established adds credibility of the broker’s competence and resilience. All brokers start as new businesses, but those brokers with few or more years of establishment are less likely to be here-today-gone-tomorrow brokers that scheme fraudulently, or administer their business poorly.
Reputable forex brokers accept U.S. customers. Many international brokers choose to discontinue service to the U.S. due to stipulations that they register and comply with new CFTC leverage regulations. Leverage is financing a business’s resources with the use of a debt amount. A business with substantially greater debt than equity is evaluated as being exceedingly leveraged. The leverage limit for major currency retail customers of the U.S. is 50:1 and minor currencies are restricted at 20:1. Reduced ratios of leverage are designed to safeguard businesses and customers from unwarranted and considerable losses stemming from excessive leveraging.
Navigating the Murky World of Forex Brokers
Financial marketplaces are perceived as places where fortunes are made and lost. The Forex market deals with the buying and selling of one nation’s currency against that of another nation’s currency. It is always a differential exchange between the two currencies, which will increase or decrease in value, just like the investors Forex account.
Can a Small Investor Make Money in the Forex Marketplace?
Yes, money can be made by the small investor, but first the spread (broker’s commission) must be taken care of. It is the price of doing business in many financial markets.
Can a Person with Experience in Stocks and Bonds Translate that Experience to Forex?
Yes, while Forex is a different type of market, it follows many of the rules of the better established markets (stocks and bonds).
Is the Size of the Forex Broker a Good Indicator of an Honest Broker?
There are many players in the Forex marketplace and yes size and years in business are good indications of a broker’s success.
What is the Best Way to Start Trading Forex?
All Forex brokers offer practice accounts to prospective customers. The individual can use these practice accounts just like live accounts and learn the process of trading Forex without risking real money. It is essential that each individual investor understand the workings of a Forex brokers platform. The individual must be prepared to reload the program after crashes and to modify the platform to give signals when a buy or sell order is indicated. Once the individual is fully comfortable with the broker’s platform, it is time to begin trading the practice account. Brokers will offer large sums and leverages to anyone opening a practice account but it is best to practice with an amount and a leverage that will, eventually, be used to trade live.
Is Education in Forex Available from Brokers?
There is a great deal of information and education available from the various brokers, and the individual investor is advised to take advantage of as much education as he or she can handle. There are countless books and Ebooks written on the subject, but, unfortunately, there is much misinformation by “gurus” who will explain Forex secrets to anyone who pays for a program. These programs vary from a monthly to a one time charge and should be avoided by the individual until he or she has read many of the books and Ebooks available.
Are There Times of the Day or Night When the Forex Markets Have Greater Activity?
Because Forex is a world market, its hours are around the clock and different markets begin and amp up the Forex volume. Presently the London Forex market is the largest market and it begins at a normal business time in the United Kingdom, which is the middle of the night for those traders in the states. Some investors wake up to trade the London hours, while others rely on trading during the day and evening. There are those traders who trade the Asian or European markets. It is a curse and a blessing that the hours of the Forex market are continuous from Sunday afternoon until Friday at quitting time.
Can a Person Trade Forex in Their Spare Time?
Yes and no. A person can return from a full day’s work, and turn on their computer to access the Forex markets and practice trading, but when real dollars are at stake, the pressure becomes too great to only trade on this schedule.
Is Trading Forex an Easy Way to Make Money?
No, no, no. Forex like all investment markets are difficult at best. Trading Forex is a market for those who want to take a leveraged position, hold it for a short time, usually one week or less, take their profit and, then, find another position.
Is There a Simple Way to Make Money Consistently in Forex?
Actually there is a way. It is a bit complicated but with understanding and by adhering to a mathematical formula a small income can be had by taking positions in Forex pairs where the interest rate differential between the two currencies is taken into account.