How to choose currency brokers?
For a successful Forex trader a spread as narrow as two or three pips is the recipe for success, because this will enable him to make money even if the market moves just a little into the right direction. Rookies find it more difficult to succeed because they lack the experience and tools to stay profitable, but finding a good currency broker should be a priority for them as well. These brokers represent the link between the client and the foreign currency market and the stronger this link is the better will be for the user.
You could start trading Forex with as little as $100 and thanks to the generous leverage offered by brokers, trade tens of thousands, hence increase your profits. The broker will enable you to place orders and will grant you access to some of the most advanced trading platforms, so that your experience with Forex will be significantly improved. You will still be in complete control regarding the orders you place and the broker will never interfere with your decision, but they will provide you with the instruments you need.
Their compensation doesn’t reside in a fee of commission, but comes from the bid/ask spread, and these are made out of pips. In theory, your broker should limit himself to the profits made from this spread and refrain from taking any action against their clients. You should be aware though that there are certain brokers who are not shy of forsaking ethics and act against you, if this will bring them more profits. Before you choose yours, do a little research and try to learn more about their track record and also determine whether they are Market Makers or Electronic Communications Network Brokers.
Most of the brokers are Market Makers are they will offer the clients a fix spread and present them with the opportunity of trading with or against the broker. This is the root of all problems, because if the broker considers that he will make more money by trading against the clients, he will resort to price irregularities, slippage or reorders. There are many ways in which the Market Maker can trick you if he has the reasons to do it, and profit is always reason enough.
The Electronic Communications Network Brokers will present the clients with a more generous array of quotes and allow him to post his own bid-ask rates. They are never competing against their clients and you can rest assured that they will not take a position against you. All you need to concern yourself with is to benefit of the best spreads, with as little pips as possible.