Lesson 5 – Details On Choosing Your Forex Broker

AdminBy AdminNov 10, 20170

In Lesson 4 we introduced some features to consider when choosing the broker, but we have postponed this lesson for the more techniques for which we need a more thorough analysis. The characteristics of which I will discuss in this lesson in order to choose the broker that best suit your needs are:

  • The Spread

  • The Rates Rollover

  • Lot Limits Operate

  • Platform Type

  • Financial leverage

Although we will be back many times and for different reasons on this topic, you should familiarize yourself with the spreads right now. In previous lessons we have seen what is the spread that to synthesize we can define it as the difference between the purchase price and the selling price of a given currency pair.

This difference is the gain of the broker, therefore the higher the spread, the more we earn the broker. Obviously, the broker earns more and more we pay, so we need to find a broker who has the minimum spreads, significantly lower.

Now, as the spreads of the “sources of income” provided by the individual operations, the broker will in any case interested in the fact that you as possible operations do, and then do the “rooting” for you. In addition, it should be considered that the more the broker is “populated” by traders, plus gain from individual transactions and thus lower will set the spreads. For this reason, if you choose a “big” broker, you can count on lower spreads.

The Rates Rollover

The Rates Rollover

To explain what are the rollover rates start from the word “rollover” which means “renewal”, or the end of a cycle to the beginning of another. As for the Forex, the rollover is the extension of the settlement date of an open position (eg. Buying position or “long” on EUR / USD).

In Forex all transactions must be closed within 17 hours USA, which is the date of settlement. An operation that remains open after this time will be subject to rollover, the renewal for the next day. This operation is subject to a rate, called rollover rate (positive or negative) that we will see better in an article devoted to it.

Lot Limits To Operate

It presented so it appears very difficult to understand what you’re talking about, but in practice it is really much easier. In practice, when trading markets, including Forex, there are minimum lots on which to negotiate. For lots, means the amount of securities or in this case of currencies. The simpler to explain the actions: for example, if we want to buy Telecom shares with CFD, we can do it with a minimum of 100 shares lot, that we can not buy 50 shares but at least 100. This is the minimum lot size to operate.

Type Platform

Type Platform

The type of platform depends on the type of broker, which is usually specialized in only one type of platform (there are exceptions, such as Markets.com that also manages Top Option). For “type” may be either the great categorization “CFD” as opposed to “Binary Options”, or the type of platform / broker only with regard to the CFD.

For example, in the world there are totally automated platforms, others do not, other mixed. In Forex there are two major types of brokers such as market makers and ECN. A great example of CFD platform is Plus500.

The market maker type brokers create the market (they are market makers, to be precise) so the trades take place between parties operating with the same platform of the broker, in a sort of micro parallel to that of the Forex market.

The type of ECN broker is safer and provides for the acceptance of the order given by the client (you) and the execution if this is possible.

As for leverage, we refer to the lesson dedicated to it.

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