About FOREX Brokers Most FOREX traders use a broker to handle their buy/sell transactions. What exactly is a broker? Strictly speaking, a broker is an individual or a company that buys and sells contracts according to the investor's decisions. Brokers earn money by charging a commission or a fee for their services. A FOREX broker needs to be associated with a large financial institution such as a bank in order to provide the money necessary for margin trading. In the United States a Forex broker is registered as a Futures Commission Merchant (FCM) with the Commodity Futures Trading Commission (CFTC) as protection against fraud and abusive trade practices. Before trading any FOREX contracts you need to set up an account with a FOREX broker. You may feel overwhelmed by the large number of brokers who offer their services online. Deciding on a broker requires a little bit of digging on your part, but the time you spend will give you insight into the services that are available and fees charged by various brokers. The best advertising is "word of mouth" advertising, and this is just as valid in FOREX trading as it is for any other type of business. Talk to friends and associates to see who they are dealing with and find if they have any complaints or problems in dealing with a particular broker. You could try selecting a few online brokers and contact their online help desks to see how quickly they respond to questions and whether or not they answer inquiries to your satisfaction. Remember, however, that pre sales service may be better than after sales service. This can be true for any online business, not just FOREX brokers. Customer satisfaction and safety are just part of the story. You want to find a broker who executes orders quickly and with minimum slippage. All online brokers should offer automatic execution and have a clear policy regarding slippage. They should be able to tell you how much slippage can be expected in both normal and fast moving markets. Next you want to know the costs involved. What is the spread? Is spread fixed or variable according to the type of account? Are mini accounts subject to wider spreads? Are there any other fees/charges? Smaller spreads mean more profit for the trader, but there may be a trade off between spread and service. Look at the big picture before deciding to go with a particular broker. Margin accounts are the lifeblood of FOREX trading, so be sure you understand the broker's margin terms before setting up an account. You need to know the margin requirements and how margin is calculated. Does margin change according to the currency traded? Is it the same every day of the week? Some brokers may offer different margins for mini and standard accounts. Trading software is very important for online FOREX trading. Get a feel for the options that are available by trying out a demo account at a few online brokers. Above all, you are looking for reliability and the ability to perform well in a fast moving market. The software should offer automatic trading and may have special features such as trailing stops and trading from the chart. Some features may only be available at an extra cost, so be sure you understand what your trading requirements are and how much the broker charges to provide them. Other information to find out about includes the broker's policy regarding minimum account balances, interest payments on account balances, which currencies can be traded and whether or not non standard sized lots can be traded. You should also find out whether clients' funds are insured and the extent of that insurance coverage.