Your guide to choosing Forex online broking firm
Foreign Exchange also known as forex, is the market in which currencies are traded. Currency trade has been around for many centuries even millennia, in fact it won’t be wrong to say that it is as old as money and trading. The international forex market is huge; in fact, it is the biggest market in the world in terms of volume of trading. Currency trading is vital for international businesses and forex trading is very useful for companies that import or export products and services.
What are Forex online broking firms?
Previously, only large international financial institutions were allowed to trade currencies, but with the introduction of online forex broking firms or forex trading platforms, individuals are also given an opportunity to invest and increase their capital by trading currencies. Basically, a forex broking firm is a company which presents a platform for individuals who like to get involved in speculative trading of currencies. This type of forex trading, where people are able to trade via a platform is also known as ‘retail forex trading’;this term distinguishes it from the more traditional type of forex trading. Even though it appeared only about 2 decades ago, online forex trading is now a huge market and according to recent reports the daily trading turnover in 2016 was over $280 billion. There are many forex broking firms that provide forex trading services to people all over the world.
How to choosea forex online broking firm?
There are dozens of forex brokers that operate online. Choosing the best online forex broker, is not always easy, especially as almost every forex broker seems to be the best. But, don’t worry; thankfully there are ways to determine which forex broking firm is reliable and trustworthy.
- Licensing
The legal aspect is foremost here. You certainly can’t trust a forex broker which is not licensed and regulated. Even if their offer is tempting and everything looks fine, you shouldn’t trust a company that lacks apt certification. Different countries have different standards and legislation which are applied to forex brokers and their services. So, firstly make sure that the broking firm is licensed and completely legal.
- Currency pairs
There are several currencies in the world, but not all of them have the same reputation and not all of them are traded equally. Normally, the American dollar is one of the most popular currencies. Other highly traded currencies include:
- Euro (€) – EUR
- Pound sterling (£) – GBP
- Australian dollar ($) – AUD
- New Zealand dollar ($) – NZD
- Canadian dollar ($) – CAD
- Swiss franc (Fr) – CHF
- Japanese Yen (¥) – JPY
A pair consisted of USD and one of the currencies listed above is called a major. The majors are the most commonly traded pairs and these pairs make 85% of the total forex trading on the market. When other lower-rated currencies are typically paired with the USD, this type of pair is called a minor. When a lower-rated currency is paired with currency other than the US dollar, that pair is termed as currency cross or a cross.
The number of currency pairs that are offered by a broking firm is one of the important criteria for deciding the reputation of the firm. Firms that provide a huge number of currency pairs should be given preference over ones that provide fewer pairs.
- Leverage and Lot Size
Leverage in forex trading isused as a way to provide higher profits which result from the changes in the exchange rates of the two respectively paired currencies.It can also be described as a loan provided by the broker to the investor. The leverage may vary; it can be 50:1, 100:1 or even 200:1. Higher leverage gives you a chance to earn more money through trading, but it also means taking larger risks.
In forex trading you don’t actually buy currency units, you actually invest in the expected fluctuations of how two currencies are paired against each other, the traders actually trade larger unit blocks called lot sizes. A lot size is the number of currency units which are traded. When looking for a forex broking firm choose a firm that provides a variety of lot sizes.
- Market spread
Forex brokers in general don’t charge any fees, however they make their profits through the market spread. The difference between the bid and ask position is called as spread. Higher spread allows a broker to make bigger profits, but they are less favorable for the traders. The spread percentage is very important, and if you are looking for a forex broking firm, you must choose one that provides lower spreads.
- Trading platforms
Forex broking firms may provide different types of trading platforms, downloadable, web-based and mobile trading platforms. It all comes down to what is more convenient for you as a trader. It is wise to look for a forex broker that provides variety of platformsfor traders. Make sure the platforms are user-friendly and easier to use.
Top forex online broking firms:
OANDA Corporation
FOREX.com
TradeKing Forex
TradeStation Group
Fortex Capital Marketing (FXCM)
So, when looking for a forex online broking firm keep the above mentioned points in mind and choose the best broker to ensure great trading experience.