Does Your Forex Broker Make The Grade? Must Ask Questions For Any Forex Broker

by | Feb 27, 2015 | Business

When it comes to forex brokers, there are more than a few to choose from; however, they are not all created equal. When it comes down to your money, you need to be certain that the broker you use is able to meet your expectations. You have every right to ask questions, and to Compare Forex Brokers prior to making your decision.

Why does size matter?

When it comes to forex, size definitely manners. Since the forex market is a type of over-the-counter market, offering no type of centralized exchange, not everyone will receive access to the same prices or the quality of trade execution. Institutions that have the biggest trade volume and the best financials will have access to the better execution and prices. When you find a bigger broker, they will be able to pass on these advantages of their size, better execution and prices, to you.

Who will execute the orders?

Not all of the forex brokers will quote rates the same way, some of the options include:

A dealing desk: This means that the forex broker is creating the pricing and then executing the orders.

No dealing desk: this will mean that multiple banks are streaming competing prices through the forex broker, so that your orders will be executed by the actual banks.

What type of spread is used?

There are a number of options when it comes to the spread:

Fractional Pip Pricing: The majority of major currency pairs will be quoted to four decimal places, which means a pip will usually equal .0001, which is one basis point. Most brokers will round the price to the nearest pip, but others now offer fractional pip-pricing. This adds another decimal, which means spreads are typically accurate and tighter.

Scalping the Market: There are some traders that prefer a short term scalping strategy, which will involve placement of the orders in the spread. In order for this method to be profitable, the market maker has to lose, which is why some brokers do not allow this. This is a risky strategy.

When you evaluate the methods that are used by various forex brokers, you will be able to find one that meets your investing goals. Taking the time to consider the things here will allow even those new to forex to find a quality broker who will look out for your best interests.

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