Finding a Forex broker is perhaps the most challenging aspect involved in setting up an online trading business in the foreign exchange currency market (FOREX).
Most people considering trading Forex already possess a computer or other device for connecting to the Internet and an Internet connection.
Trading software and trading strategies are available from a multitude of sources, and in many cases, free to use providing that the trader has established a relationship with the provider of software and strategies.
Assuming that the trader processes true risk capital with which to speculate on currency prices, all that remains to be acquired is a Forex broker. There are literally thousands of Forex brokers who inhabit all levels of currency exchange market access between the trader and the Forex market. Weeding this huge list of brokers down to a manageable size takes a little time, more than a little patience, and a willingness to carefully scrutinize what factors of the decision are most important to any particular trader.
Fortunately, since the Forex market for the individual retail trader is a direct offspring of the modern technology that has made the Internet such a pervasive influence on everyone’s life, this same resource can supply valuable information with regard to the strengths and weaknesses of any individual Forex broker.
Forex broker review sites are almost equal in number to actual Forex brokers. Remember that people who offer broker reviews on the sites sometimes have an ax to grind. It is also possible to encounter reviews that are placed solely to attract clients to a broker. Don’t rely entirely on one review site to make a decision.
Equally, or perhaps even more valuable, would be the recommendations and opinions of a family member or other personal acquaintance that is already trading Forex.
Now that the need for diligence and attention to detail in the decision regarding choosing a Forex broker has been established, let’s briefly examine the two main types of brokers.
The first is the Market Maker Broker
This type of broker can supply essentially instantaneous order execution because when a trader takes a position on a currency pair, the broker automatically takes the opposite position.
To some, this represents a conflict of interest, as the broker is actually trading in opposition to the client, but it is important to know that the broker in all probability has many clients, some of whom are of the opposite opinion regarding the direction of currency prices. In effect, it is one client speculating against another. As long as the selected market maker broker is sufficiently capitalized that the transactions of one trader do not represent a monetary threat to the broker, it is possible to receive equitable treatment from a market maker.
The other type of broker is the Electronic Clearing Network (ECN) Broker
Many traders feel that this type of broker has lower trading costs, since an ECN acts solely as a matching service between traders and had absolutely no vested interest in the outcome of any currency exchange transaction.
For thorough details regarding these two broker types, visit Lu. We also have many other free resources for someone wishing to investigate the feasibility a Forex trading.