Forex Brokers and Beyond

In recent years, the forex market has emerged as a popular investment vehicle for investors. As demand has flourished, top currency brokers, such as FXCM and Oanda, have established platforms for online forex trading.

Here are some key aspects to consider when selecting a broker.

Regulatory Matters

Well-established and reputable brokers will either be members of or be regulated by the appropriate industry organizations. For instance, FXCM is a registered Futures Commission Merchant and a member of the National Futures Association. Brokers that are regulated offer greater transparency in their dealings and hold themselves to a higher standard of performance.

Account Maintenance

A key benefit of forex trading is the availability of leverage that allows investors to trade with small amounts of capital. At FXCM a new account can be opened with $50 and traders can use leverage amounts of 100:1 in their trading.

Trading Platform

The platform technology is the mechanism that opens up the trader to the global forex market. The technology and the customer interface have a significant impact on the trading experience and even on trading performance. FXCM offers a variety of platforms (Web-based, mobile and desktop) as well as more advanced third party platforms like Metrader 4. All platforms offer such benefits as charting and one-click trading. However, the more sophisticated platforms provide added features like automated trading, the use of pre-loaded strategies and the use of custom indicators.

Spreads and Commissions

Brokers make money from the spread between bid and ask. Spreads vary according to the currency pair being traded, with spreads being lower on more popular pairs like EUR USD. At FXCM spreads can be as low as 1.3 pips. FXCM offers traders a choice of transacting with a dealing desk or no dealing desk (variable spreads). The challenge with the latter option is that spreads can widen during periods of news or heightened fluctuation in the market.

Other factors to consider include customer service features, the ease of withdrawing money and the availability of tradable currency pairs. The top currency brokers seek ways to differentiate themselves. For instance, OANDA offers trading in more exotic currencies such as the peso, yuan and rupee. The limitation with a broker like FXCM is that it solely offers forex trading.

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