Currency Trading Basics: Finding a Forex Broker

Choosing a forex broker for your currency trading adventures

When you begin trading forex, it is vital that you have a broker. Forex brokers are also known as market makers. Market makers take on some of the risk in the transaction, even as they help you make trades. The market maker has its own inventories of currency (or other investments in other markets), so once an order is placed, the market maker can sell from its own inventory or get an offsetting order within seconds. In currency trading, all reputable brokers are markets makers.

Because forex trading is so risky, it is important to find a forex broker that can help you make the most of your money. GFT’s Kathy Lien points this out on Investopedia about finding a forex broker:

In order to ensure that the money you are sending will be safe and that you have a jurisdiction to appeal to in the event of a bankruptcy, you want to find a large market maker that is regulated in at least one or two major countries.

Things to consider when selecting a forex broker

There are some important considerations that go into choosing a forex broker. Here are some questions to ask yourself about potential market makers:

Where is the forex broker incorporated? Your best bet is someone who is located in the U.S. or the U.K.
Where is the forex broker regulated? In the U.S., the futures commission merchants (FCM) regulates the currency market makers.
Is the forex broker well capitalized? Check with the FCM to get an idea of the company’s financials. Capital requirements are stringent with the FCM, so you want to make sure that the market maker is transparent and solvent.
Is there 24 hour support from the forex broker?
What kind of forex trading tools are offered?

A number of forex brokers offer their own trading platforms and research tools. It is important to try them out, maybe opening a free forex trading practice account with a market maker or two to find which you are most comfortable with.

In the end, you have to choose a forex broker that is right for you, and who is reputable and offers support and forex trading tools that fit your style and your needs.