Top forex brokers requirements

Posted by samuelperth on March 15th, 2013

An extensive research should be done beforehand by anyone that wishes to become a forex trader, and carefully choosing among the forex brokers should be a top priority. Whether a choice is successful or not can be visible even from the beginning, in the efficiency of the customer service and training that the broker provides. Top forex brokers will do their best to inform you about the variety of forex trading instruments and strategies existent and to answer all your questions.

Choosing a currency pair for trading purposes is an important part of the process, but to make this work, you must also be aware of the forex trading instruments and the rules that govern them. Many retail traders will find it much easier to use the Exchange Traded Funds (ETFs) or Exchange Traded Notes (ETNs) for trading currencies indirectly, due to high liquidity and low expense ratios. In both cases the spreads are higher since they trade on stock exchange and are not as liquid as the currencies on which they’re based; therefore stockbrokers will provide lower leverage than forex brokers.

The forex instruments are the spot, forward, futures, swaps and options. The spot refers to both an institutional and a retail transaction whose rate of exchange is agreed upon at the date of the contract, meaning that everything is both and sold at present times. The forward is a trader’s obligation to buy or sell a specific currency pair with a fixed price at a future date established in the contract. The forward is not very common in the retail trading market. The swap can be classified in two major categories – forex swap or currency swap – and it’s the pillar of all forex transactions. The forex swaps are used especially by financial institutions and forex brokers while the currency swaps are preferable for parties located in different countries. The futures are similar to forex forwards with the exception of being traded through centralized exchanges. The rare forex options are exactly this – a trader’s choice to buy or sell.

Top forex brokers should put at your disposal training resources depending on the trading strategy that you chose, either one based on a fundamental analysis or a technical analysis. Also, when deciding to become engaged in the forex market, according to your personality type, you can be a trader or an investor. If you have a more impulsive nature, and you are keen on risk taking and fast-paced markets, than you are certainly a trader. Respectively, if you don’t plan to spend all nights in front of a computer and have a more patient nature, waiting for long term actions to unfold, then you are an investor.

For identifying currency trends and forecasting their direction, forex brokers rely on two types of financial analysis: technical and fundamental. Top forex brokers that practice solely technical analysis spend hours scrutinizing charts, with large profit goals in mind and short-term quantitative measurements. Their leverage is 10 times greater and they are indifferent to a trend’s direction. Contrary to this, the fundamental analysis concerns itself with every set of variables that causes changes in currency value. It’s much akin to the buy-and-hold strategy practiced by many stock investors. However, the forex market is denominated primarily by aggressive, risk-taking traders, and technical analysis is their weapon of choice.

When choosing among forex brokers you should bear in mind that top forex brokers will take on the responsibility of keeping you informed with everything you need to know about the forex instruments, analysis and strategies.