When venturing into the investing world of foreign currency exchange, there are a lot of roads that are available, plus with the popularity of electronic trading accounts, investing online has never been cheaper or easier. But, you run the risk of easily making a bad investment if you aren’t familiar with rules for foreign currency exchanges, nor familiar with what to look for when considering making an investment.
A Forex broker will help you to navigate these tricky transactions so that you make as many gains as possible, and they’re also capable of getting you the best rates, despite what you might see advertised online through consumer-direct brokers. But, you’ll want to be sure to pick someone who is not only competent, but licensed with the right agencies. Make sure that whichever broker you choose, they are registered with the National Futures Association (NFA) and the U.S. Commodity Futures Trading Commission (CFTC). The NFA establishes guidelines, programs, and services that protect the integrity of the Forex market, as well as that of traders and investors. It also helps members keep on top of their regulatory responsibilities. The CFTC is an independent U.S. government agency that regulates the commodity futures and options markets. The CFTC also seeks to shield market users and the public at large from fraud and abusive practices as they relate to commodity and financial futures sales, as well as make sure that the market remains competitive and financially-sound.
In addition, you’ll want to find out what kind of account details your broker offers. You’ll want to know what kind of leverage or margin your broker offers, as the amount offered really is a loan extension. But, these kinds of account features, if used, can also mean larger losses for the trader. You’ll want to find out what kind of commission or spread your broker charges, and whether it is charged at a fixed or variable rate. That can affect how much money you end up making when you sell a currency pair. Brokers also sometimes add pips, or a minimum unit of price charge, to their fees. Find out how large your initial deposit has to be in order to open your account, and how easy (or hard) it is to deposit and withdraw funds from your accounts, and whether or not your broker charges fees for either type of transaction.
Your broker might also only offer a few currency pairs. Part of your investing plan should include choosing the pairs you would like to invest in, in advance. So you’ll want to make sure that whichever broker you choose, you’ll have access to the pairs that you’re interested in. Most brokers offer the “major” pairs, which are the U.S. dollar and Japanese yen (USD/JPY), the U.S. Dollar and the Euro (USD/EUR), the U.S. dollar and the Swiss franc (USD/CHF), and the U.S. Dollar and the British pound (USD/GBP). Your broker will likely offer more than those options, but you should find out in advance if they offer the currencies you want to trade, before opening an account.
Find out what hours your broker keeps, or what kind of support services their firm supplies. The Forex market is open all day, every day, and you should find out in advance when you’ll be able to reach someone, or what kind of live help they might offer.