investors who trade FOREX or stocks use a broker. A broker is an individual
or a company, who buys and sells stocks according to the investor's
wishes. Brokers earn money by collecting commissions or fees for their
services, before setting up an account with a FOREX broker you will need
to do some investigations:
1-You should check that a broker is registered as a Futures
Commission Merchant (FCM) with the Commodity Futures Trading Commission
(CFTC) as protection against fraud or abusive trade practices.
FOREX broker also needs to be associated with a financial institution,
such as a bank in order to provide funds for margin trading.
the right FOREX broker for you will take some work on your part. There
are brokers who charge a flat fee and some that charge commission. It
may be a good idea to talk with friends and business associates about
their brokers. You may get some good leads, and you're certain to hear
who to stay away from. There is nothing like word of mouth advertising.
4-If you are thinking of investing online, you could choose
several online brokers and contact their help desks. Seeing how quickly
they respond to your questions could be key in how they will respond to
their customers needs. If you don't get a speedy reply and a
satisfactory answer to your question you certainly wouldn't want to
trust them with your business. Just be aware that as in other types of
businesses, pre sales service might be better than after sales service.
5-Before you choose an online broker get a copy of their online
demo account. What features are included? Is the software reliable? Does
it offer automatic trading? Are there extra software features that cost
6- How quickly will these brokers execute your buy/sell orders?
What is their policy on slippage? What are the transaction fees? What is
the spread, fixed or variable? What are the margin requirements and how
are they calculated? Does the margin change with currency traded? Is it
the same for mini accounts and standard accounts?
Don't forget to ask about minimum account balances and interest payments
on account balances. Make sure that your funds will be insured.
Beware Of The Typical Forex Trading Scam
very easy for new Forex trading investors to get taken in by some sort
of Forex scam or another. This can include just about any idea under the
sun that scammers can come up with. Usually the realm of Forex scams can
include, software and e-books that ‘guarantee’ a profit in the Forex
market, general false advertising, and even those with
fake sites that just take your money and disappear.
The nature of the currency market tends to leave new investors
vulnerable to such scams, simply because it fluctuates a lot and little
is known about the market by the general population. It’s up to
investors to educate themselves on Forex trading, just as they would
before making any other investment if they expect to do well. This
includes being aware of common scams. In 2001 the US Commodity Futures
Trading Commission (CFTC) released nine tips investors in the Forex
market should keep in mind when looking for a broker:
• Stay Away From Opportunities That are Too Good To Be True
• Avoid Any Company that Predicts or Guarantees Large Profits
• Stay Away From Companies That Promise Little or No Financial Risk
• Be Wary of Trading on Margin Unless You Know What That Means
• Be Wary of Those Claiming To Trade in the "Interbank Market" because
• Be Wary of Sending or Transferring Cash on the Internet, By Mail or
• Scams Often Target Members of Ethnic Minorities
• Get the Company's Performance Track Record
• Anyone Who Won't Give You Their Background Isn’t Worth the Risk
Many Forex scams, as is common with other types of scams, rely on
getting dollar signs to appear in their victims eyes in order to pull
off the scam. If at any point in the decision making process you start
to feel yourself getting overly excited by the prospect of making what
seems like easy money, then set your plans aside for the time being and
come back to them later. You’ll be much calmer and in a better position
to decide if the broker or deal you are interested in is really worth
One of the most common scams simply involves selling a product or system
online that will ‘guaranteed’ make you profits in Forex trading. Be
careful of online advertisements for these products, after all most of
them contain information about the Forex market that you can obtain by
reading any other book on Forex trading. It will give you information on
the Forex market if you are doing research, but it probably won’t give
you the guaranteed secret to success.