Forex Brokers

FOREX has become the most recent online buzzword. You cannot search any financial site on the internet without seeing an advertisement for FOREX trading. In fact, the trend to solicit forex traders has been rising for a few years now, but it is still increasing by leaps and bounds. And, while the term itself may sound very mysterious and even foreboding for the everyday person, the truth is that FOREX just means "foreign exchange". It is the buying and selling of currencies.

The basic goal behind forex trading is to make a profit on the exchange of money. Because this is a cash market, it is the most liquid, and is the biggest market with estimates in the trillions of dollars exchanged daily. And, it is a market in which anyone can participate, regardless of how small or large. Understandably, banks have traditionally been major players in the forex market, but now individuals can dabble as a hobby, or earn their livings in the trade. As a result, there are plenty of forex brokers.

Also known as FX, forex trading is not done on one specific exchange. It is considered over-the-counter, but is usually based around important financial hubs like Zürich, Paris, New York, London, Tokyo, Hong Kong, Sydney and Singapore. Exchanges can be made on many countries' currencies, and unlike the stock market which closes everyday, forex trading can be conducted twenty-four hours a day. Each currency is given a symbol for trading. The predominant dollar is the USD, with other popular currencies such as the Euro, Japanese Yen, Swiss Franc, and Great Britain Pound. In order for individuals to make their trades, forex brokers are required. The brokers execute the buy and sell orders, and generally take a commission based on the bid-ask spread. That is the differential between the buying price (bid) and the selling price (ask).

When choosing a forex broker, it is a good idea to verify the credentials first. In the US, brokers are members of the National Futures Association (NFA), a self-regulatory agency, and are registered with the US Commodity Futures Trading Commission (CFTC), a governmental body. Each broker is issued a number which should be displayed, but do not just accept that the information on the website is accurate. Verify it first before opening an account and depositing any money.

Another feature that is important when starting in the forex market is whether or not the brokerage has an online "practice account". This is crucial because you need to understand the trading platform or the software the company uses. You want to be able to practice first before losing your money unnecessarily. In addition, you should know whether the company offers 24-7 support, and whether the online support is a real person or virtual attendant with standard FAQ answers. Moreover, before opening an account, understand how forex brokers earn their money. You want to know how the commissions are collected, as well as your total costs or expenses.

Finally, before choosing a forex broker, be sure the brokerage offers the trade you wish to make. Because you are dealing in currencies, you obviously need to exchange or move one currency into another. That is called a "pair". Make sure the brokerage offers your specific trading pair.