Forex trading is very popular in Australia, but most people tend to select their broker through recommendations by friends or family. While this can be a good place to start, there may be other brokers who will work much better for you than the ones that are recommended. Plus, keep in mind that many brokers offer sign-up bonuses for those who recommend others to use their services, so they may have ulterior motives when they make their recommendations.
So, to find the right forex broker for your needs, the first place to start is creating a guideline for who can best fulfil your particular needs when it comes to this type of trading.
Fees are the way that most Forex brokers make their money. So, it’s not surprising that the fees for this type of service are higher than most other types of investments. There are set fees for commodities, shares, and equities for every trade. However, the inclusion of leverage means that Forex brokers will generally charge higher fees because more of their money is at risk.
It may seem like a small difference at first, but you will need to understand the two basic types of fees that Forex brokers will charge.
Commissions: You may find that some brokers will charge both a commission and a spread depending on certain factors. The commission is based on the amount of the trade and may be combined with the spread which will be added to the fee itself. The purpose is basically to protect the broker so that they are still making a profit under most circumstances.
Spreads: These can be variable or fixed with traders preferring the fixed more often than not. This is because they understand what to expect from the start. Variable spreads can tighten over time. Basically, a Forex trader will appreciate variable spreads when they tighten and fixed spreads when they get wider over time.
You will want to check out the fee structure of different Forex traders and brokers so that you can get the one that offers the best performance for the least amount of money from your pocket. This will depend in large part about how much you are willing to trade at any given time.
In order to make any real money in the Forex market, you will need leverage. This is because leverage allows you to make better trades with more money compared to your original deposit. In Australia, the top levels for Forex brokers are 500:1 which means that for every dollar you put up on your own, there are $500 to increase your overall standing.
When you consider the advantages of having that type of leverage, you can make the most out of your decisions when it comes to trading. The higher the leverage, the greater the profit potential, so you should start by looking at brokers who can offer from 200:1 up to 500:1 for your investments.
Although the number of scams from Forex brokers has been reduced in recent years, it pays to keep in mind that you want to use the services of traders who follow the rules and regulations. This means checking on a broker’s past if possible. This is because most of the trouble came from rogue brokers or unregulated traders that took advantage of this relatively new trading format. So, you’ll want to start with brokers approved by the Australian Commission that oversees Forex trading. One clue is that all deposit funds must be placed within a trust account in Australia. Placing your funds overseas is not recommended.
When it comes to Forex trading or most types of investments, there will always be some risk involved. Even the best can make trades which go bad or even have a series of trades not produce the profit that is expected. The biggest risk when it comes to Forex trading is slippage when a quick and large movement of currency pairs coincides with events such as when interest rate hikes are announced. Such news can mean that profits go up or down considerably because of an unexpected announcement or event.
One aspect that will help control risk are Forex brokers who offer guaranteed stops so that any loss will at least be a limited one. There are those who have slippage built into their risk, but how much will vary depending on the broker. Factors such as how fast is your interface, connection, and API will come into play so that you can stop a slippage before its gets worse. So, if you are not very savvy when it comes to the technology, then you might want to consider brokers who offer slippage protections that are built into their services.
You should look around at the many different platforms available, including the ones which are popular and have a stellar record of service. Naturally, you can also listen to friends and family who recommend Forex brokers, but they should also follow the rules and regulations along with being recommended by the commission.
Keep in mind that Forex trading is very competitive, so do not be surprised if you get a number of recommendations by those who may receive bonuses for getting you on board. That is not necessarily a bad thing, but it is something that you will need to take into account. Plus, you may see sign-on bonuses for your first trade or deposit which can be enticing, but you will need to look at what you pay for your next trade as the one that will be standard.
The more you compare, the better off you will be when making your final decision. So, be sure that you take the time to do the proper research and not make a hasty decision. By taking these factors into account, you can select the best Forex broker for your particular needs. Keep in mind all four factors while making your decision so you can choose the right one.
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