Posts Tagged ‘forex broker’

A lot of people who develop an interest in currency trading begin by coming up with a trading method and then making a note of the trades it generates to see how they would have performed. This type of trading is referred to as paper trading and is extremely popular with many wannabe traders.

In the world of forex trading, paper trading can be a very fruitful exercise because you can test out your trading strategy without putting any of your trading capital at risk. If they don’t perform as you would have liked, you haven’t lost anything, and you can simply start again with a different strategy.

Similarly if you join a forex broker that enables you to trade with a demo account, you can open and close trades using pretend money. So this enables you to familiarize yourself with your chosen broker’s trading platform, and will be of benefit to you when you begin trading with real money.

The problem associated with paper trading is that it can never truly replicate the feelings and emotions you experience when you are actually putting your own money at risk. When placing trades on paper it is unimportant if they end up going wrong, but when entering real positions your heart will be racing and your trading decisions may not be as rational as before.

There is also the fact that if you simply place your dummy trades down on paper, the results may be misleading because the spreads may be greater when trading for real. In addition your decisions may have turned out to be different when trading with real money.

So the point I want to make is that although paper trading is a good place to start, you be wary of the fact that live trading is a lot more difficult. Even if your system is consistently generating winning trades on paper, it doesn’t necessarily mean that you will achieve the same results when trading with real money.

Not many people generate profits from forex trading straight away, and many people lose a large percentage of their trading capital before they start to develop into a profitable forex trader.

A lot of people are extremely naive when it comes to choosing a forex broker. They will automatically assume that if you deposit money with a broker, then you will have no problems withdrawing that money whenever you need it. Unfortunately this isn’t always the case.

There are thousands of different forex brokers located all around the world but the harsh reality is that a large number of these companies are free of any regulation. Of course you will find that many brokers based in the US or the UK, for example, will be fully regulated, but the ones based in remote offshore locations will probably not be.

So you really do need to be extremely careful when trying to choose a forex broker. In an ideal world you would want to choose one of the established and highly reputable companies in a fully regulated country, although even then your chosen broker may not be completely trustworthy.

For example you may find that when you actually start using their platform to open and close trades during the most volatile periods of the day, they may deliberately widen their spreads in order to try and stop you making some easy money. Similarly if you become a highly profitable trader, you may find that your broker will increasingly hinder your trading by hunting your stop losses and freezing the trading platform when you try and exit your positions.

So although you should always do some thorough research before choosing a forex broker, I don’t think you can ever fully trust your broker.

If you want to learn how to be a successful trader you have to select a reliable forex broker. The broker should be in business for at least 4 years. He should give you as small spreads as possible. For instance EUR/USD spread may be less pip or lower. Also spread must be non-fixed. Because during news releases there are much volatility and brokers with fixed spreads much of the time won’t give you the quote you wanted. Brokers that offer non-fixed spreads at least are honest and show you real bid and ask prices. Also broker should be regulated by NFA(if it is based in United States). A lot of brokers offer some bonus services such as news or charting packages.