Forex Trading Continued...

Online Forex Trading can be done through a multitude of forex brokers, such as FXCM, Oanda, Gain Capital, and FX Solutions but you should read this entire page before choosing which broker you want to trade with. As explained above, the benefit of forex trading through a forex brokerage firm is that you can trade much more money than you actually have on deposit, up to 200 times and up to 400 times in some cases! This is done by opening a margin account with the forex broker. Margin is what they call your funds on deposit, which the broker holds as collateral for your trades. The broker then loans you up to 200 times your deposit to trade foreign currency, which is done 100% electronically from the comfort of your home over the internet or by placing a quick phone call to your forex broker. There are many forex brokers to choose from and you should choose one carefully, which we will go over in the paragraphs below. The best part is that you can practice currency trading without risking a dime of your own money through a Demo trading account, which looks and feels just like a real currency trading account, except you're trading play currency instead of real currency.

Before Opening a Forex Demo Account....

Before you open a Forex Demo account for currency exchange trading, you should first do some market research and decide which forex broker you would like to do your live currency trading through. Even though you won't be trading any real currency through a forex demo trading account, you don't want to spend the time and energy getting comfortable trading on a paticular broker's forex trading platform unless that's the forex broker you will be trading real currency through. For this reason, you must first decide which forex broker you would like to trade currency through and there are quite a few forex brokers to choose from, but hopefully the information on this page will narrow it down a bit. Later on we will go over some forex brokers you should avoid but for now, we will focus on what you should be looking for.

When choosing the best forex broker for you, many forex traders merely look at the dealer's spread fees, the price difference between the Bid and Ask price (or the Buy and Sell price). Since most forex brokers don't charge any trade commissions, most of their income is generated through the spread, which usually varies from 2-5 pips. This translates to approximately $2 to $5 per $10,000 in trade volume. However, while most novice forex traders will merely look at the spread fees that a particular forex broker will charge, they neglect the more important things like "is the Forex Broker regulated?", "What is the Forex Broker's financial strength?" "How many lawsuits has the broker been involved in?" and so on. Perhaps one of the least important things is the broker's actual fees, unless you have a trading style that makes many forex trades per day.

Whether you're shopping for a forex broker or just looking to open a free forex demo account, here are some very important things you should be looking for in your research. I have listed them below in the order of importance (based on my personal opinion and experience)...

1. Forex Broker's Financial Strength
2. Forex Broker's Lawsuits (most settle out of court to keep their CFTC/NFA record clean)
3. Is the Broker a registered member of the NFA and regulated by the CFTC?
4. Forex Broker's Ethics
5. Forex Trading Spreads, Fees, and Commissions
6. User-Friendliness of their Forex Trading Platform (or Forex Demo Account)
7. Forex Broker Financial Strength

While these are all important, the forex broker's financial strength is definitely the most important as the ultimate risk is the broker's failure as a company, which can result in a total loss of your funds. You see, forex brokerage firms are not banks. They are merely companies that hold other people's money combined into a single company bank account. While investors' funds are not co-mingled with the broker's own money and operating capital, it is mixed with every other traders' funds. Since forex brokers can be holding many millions in investor capital, and a single bank account is only FDIC insured up to $100,000, this means the remaining funds beyond $100,000 are not insured and are technically at the mercy of the broker holding the funds. While being CFTC/NFA regulated adds some protection and indirectly enforces proper business ethics, it does not guarantee that the broker will not go bankrupt. For this reason, I have put Financial Strength at the top of the list and this is also why FXCM (Forex Capital Markets) is my recommended forex broker of choice.

Continued on my website about Forex Trading

Additional Topic Related to Forex Trading:

Automated Forex Trading
FREE Forex Trading Training Course
Forex Brokerage Firms & Forex Trading Platforms
Forex Charts
Forex Fundamental Analysis & Economic News Releases
Technical Analysis
Technical Indicators
Fibonacci Analysis
Elliot Wave Theory
Candlestick Chart Analysis
Money Management
Trading Psychology