Find the right Forex broker
Trading with foreign currencies is possible only through a Forex broker. It’s the interface between you – the private trader – and the foreign exchange market. With the diversity of suppliers, choosing the right broker can be a challenge, especially for beginners. Which makes all the more important to know what should be considered in a Forex broker comparison.
The following points will help you find the best broker for your individual business needs as well as your strategy.
Two men sitting at the laptop discussing investments ahead of trading software
Photo: Successful trading also means choosing the right broker.
A good Forex broker is characterized by a nice selection of tradable assets. As a rule, it should have 50 or more currency pairs offer, sometimes:
Major currency pairs or majors
In the case of so-called majors, the US dollar is still on one side – like a bargaining chip or a price currency. As the name suggests, they are the most frequently traded pairs on the foreign exchange market. In general, the major currencies have the lowest spread and the highest liquidity. The most traded pair is USD / EUR, with a daily trading volume of 30% of the total foreign exchange market.
Pairs of secondary currencies or minorities
Currency pairs that do not contain the US dollar are called miners. They come from the three main currencies alongside the US dollar: The UK pound, euro and yen.
Pairs of exotic currencies consist of a large currency and any other currency of a smaller emerging or strong economy such as Singapore, Hong Kong or a European country outside the eurozone.
As these markets lack liquidity, transaction costs are often higher for exotic currency pairs. That is why they are also trading less frequently than primary and secondary currency pairs. Nevertheless, they are indispensable as an instrument if, for example, there is little movement in majors and minorities, and at the same time, volatility is very high, especially in exotic species.
Forex trading leverage
Leverage plays a vital role in foreign currency trading. In this case, the broker will provide you with additional capital that you can invest in the trade. With a leverage of 1:50, you invest an additional $ 50 in capital on a dollar of your own game. This increases your chances of higher profits, but also the risk if you make a loss. For some brokers, the leverage is 01:50 in maximum. Other Forex brokers, in contrast, offer significantly higher levers: FX expects leverage of 1: 200, FX, a leverage of 1: 400 can be used for Forex trading. With the FX provider, the highest leverage in the European space can serve – there is a maximum of 1: 888.
Additional: Stocks, CFDs and Options
Of course, the strengths offered by a good Forex broker are not limited to currency. Popular investment instruments also include stocks – the classic among commercial transactions -, Forex CFDs and Contracts for Difference, as well as options. Which form of trading ultimately do you choose is entirely up to your individual choice: do you prefer lower returns and higher security, or would you be one of the traders who prefer higher returns but also accept a higher risk?