Currency trading platforms are an important link between the individual trader and the currency exchange market. There are two types of trading platforms:
Client based platforms are downloaded onto the currency trader’s computer, while web based platforms operate using javascript on the brokers web page. The advantage of the web based currency trading platform is it can be used on any computer with internet access. The disadvantage is it is usually slower than the client based software.
There is no cookie cutter currency platform right for everybody. The trading platform usually come with a broker. When picking a currency trading broker a trader should ask himself these questions:
Is this broker trustworthy?
The internet is full of Forex platform reviews with the authors complaining of unscrupulous brokers. They deposit money in their brokerage account to find that the links to withdraw the money are dead, the fax number to send a written request has been disconnected, and there is no working telephone number on the website.
The best way to avoid this is to check to see if the broker is registered with the Futures Commission Merchant and overseen by the Commodity Futures Trading Commission. This is very important.
How effective is their currency trading platform?
Try out the currency platform provided by the currency broker. Is it simple to use accurate, and the charts readable? A currency trading platform that does not update the prices fast and accurately is completely useless.
What are the costs of trading with this currency broker?
Some brokers may offer great incentives to new arrivals, IF they deposit $10000. Others may be geared toward the beginner trader.
The main cost of trading with a broker is the spread. The spread is how most currency trading brokers make their money.
Ex.
Forexbroker charges a spread of 98.95/99.00 on ¥.
The trader uses $100 to by ¥9895.
Then immediately sells ¥9895 back for $95
The trade cost $5.
Spreads are calculated in pips.
The final charge to consider when choosing a Forex broker is the rollover charge. These are the charges that occur when a trade is postponed to the next trading day. They are based on the overnight interest rate of the country’s currencies being traded.
Foreign Exchange trading costs are kept low because of the size of the market.
What is leverage and margin?
Margin is stock equity placed as collateral on a loan given by the currency trading broker. This provides leverage for the investor to increase the profits made during trading. Some brokers offer up to 250:1 margins ( Every $1=$250). Margin trading may be required because of the currency buying requirements of the forex market.
Using margin trading is a great way to make huge profits, however if failed is a great way to accrue huge debts. A broker has the right to sell a margin investment to prevent further losses. If the investment plummets the broker may sell it and prevent any chance of recouping the loss.
Demo trading, DO IT!
Do not lose all your money! Before depositing real money into any Forex account an aspiring trader should demo trade for 3-6 months and develop a successful strategy.