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Basic Broker Deals

How good is their help desk?

Jenny wants to know because she's going to be spending a lot of time on the phone asking questions. She's always felt better when she knows she has support.

A good forex broker has a good help-desk; they have twenty-four hour phone and or chat support because the market's open at all hours.

Help desks can be tricky, especially if they're out-sourced overseas. Some people in foreign countries may speak perfectly good English, but not have the background to understand the questions you're trying to ask.

Jenny grabbed the list of brokers, and gave all of their help desks a call, just to see what kind of service she was going to get. Even with the possibility that they'd treat her better before she joined than after, it's a really good way to get a feel for how good their customer service is.

It's possible you may get the sales staff, who are often better natured than the support staff, but even so if you get bad service here, it's a sign to go with another broker.

Once you've found a forex broker that meets those standards it's time to take a good look at the contract. As always, read the fine print. Obsess over it if necessary. The major points are important, but if anything's going to reach out and bite you, it's going to be in the fine print.

Still, there are things you have to check in the big print too before
you sign on the dotted line. These are the basic features of every agreement that you have to know before you can make an informed decision.

[hidepost]Basics of the Deal:

• How much will it cost?

How many pips does the broker take on each trade? In other words, what's the difference between the buying and selling rate for a given currency pair. The closer those rates are together, the quicker you're going to go into profit, because the sell price has to rise above your buy price before you can make money. So the first few pips go to the broker. The lower the spread, the easier it is for you to make money.

• What can I trade?

Not all forex brokers offer trades in all currency pairs, and you don't necessarily need one that does. At a minimum a good broker should deal with the major currencies, or at least the top seven of them-- which is all but the Kiwi.  Just like rates, this is something you need to know before you sign the agreement.

• How much do I have to trade?

Different brokers have different minimum trades. Some may let you trade "micro" lots of 1,000 units, some "mini" lots of 10,000, and some may hold out for full standard lots of 100,000 units. Others may let you trade "odd lots" which as the name implies are made up of fractions of the amounts mentioned above.

• How much leverage will you give me?

Leverage is related to margin, which we'll go into more detail on later.  In simplest terms this is finding out how much, or how little, of the amount you're trading do you have to put up front. The more leverage you've got, the more profit you can make, and the smaller the proportionate loss it will take to wipe you out.

• When can I trade?

You should already know this from when they offer customer support, but it's an important question to answer. Most brokers are open 24 hours a day 6 days a week so you can trade during the hours of the major markets: New York, London and Tokyo. If a broker doesn't offer continuous trading from 5:00PM EST on Sunday through 4:00PM EST on Friday you're going to lose out to those traders whose brokers do.

• What about rollover and interest?

When you hold currency from one day to another, there's interest involved.  It's all based on the currency with the higher interest rate in the pair.  If you sell the currency with the higher rate, you pay rollover, if you're  buying it, you earn interest. If you're using a lot of leverage a broker  may not pay interest, but they'll always charge rollover if it accrues.

Those are the questions the Cash family asked, and you should ask the same ones too.

Continue to Forex Broker Summary Now...

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