How to Review Forex Brokers

The foreign exchange market, otherwise known as forex, is a decentralized over the counter market where major financial institutions trade trillions of dollars of currencies on a daily basis. The forex market is open from Sunday 6pm EST up until Friday 5pm EST, virtually making it 24 hour trading market. Even though major banks are the big players in this market, with the improvement of internet technology a vehicle has emerged for retail traders to become involved in the exciting world of forex

When entering the world of online currency trading it's important to find the right forex broker. Signing up is the easy part. However, there are factors that one should take into account before opening a forex trading account.

One thing to take into consideration when you decide to review a forex broker is the amount necessary to open an account. It's always advisable to start off with a forex demo trading account. Any reputable forex broker will offer this. Let's say you've just spend weeks forward testing a trading strategy on your demo account and you think it's time to go live. Even then, you want to be careful with your money. The best thing is to find a forex broker that gives you the flexibility to be able to deposit a smaller amount to start off with, until you become more comfortable. There is a major difference between losing 100 pips on a micro account than there is on losing one on a regular lot.

Another thing to look at are the spreads. Even though every forex broker will tell you they are not charging commission, they are making money on the spread, which means they'll allow you to sell or buy a currency for a difference of pips. Sometimes this spread is fixed, other times it is variable. Many forex brokers will give you a smaller spread if it is variable, however when financial news comes out, market conditions can become very volatile, and if you're trading during those times, you will get burned on the spread. I personally prefer fixed spreads since I know how much I'm paying to get into or out of the transaction ahead of time. Usually the closest spreads belong to the EUR/USD pair, which are usually between 2 to 3 pips on average.

One other factor to take a look at are the payment options. How hard is it for you to get your money back? What are the vehicles that forex broker uses to return your money? Is it convenient? There are a plethora of issues to look for when reviewing a forex broker. Including the software, their customer service, and whether they are registered with the appropriate authorities. The key thing is to do your homework ahead of time so then you can focus on the fun part, which is making money through forex trading.