How to Find a Forex Broker That Won't Rip You Off

Before you start trading Forex, you're going to need one thing.  Surprisingly, it isn't knowledge of the market itself, foreign currencies, stock market experience, or anything like that.  It's a broker.  This is the guy or the company that is going to buy and sell your orders depending on how you dictate them; essentially, the middle-man.

What is a forex broker? 

Simply put, a broker is an individual or service that buys/sells orders as determined by the trader.  Brokers earn money by charging service fees.  Picking a good one requires a little research, but this is important so you don't choose a disreputable or too-expensive broker.

Things to think about when picking a broker

1. Is it regulated? 

Find out what regulatory agencies your prospective forex broker is registered with.  Because the forex market is "unregulated", regulation is often reactive - which means there's no security for you money until after it's all been sucked away. 

In the U.S., brokers should be registered with the CFTC (Commodity Futures Trading Commission) and be a member of the NFA.  These companies exist to protect the public against all kinds of scammy stuff like manipulation and abusive trade policies - and of course, fraud.  Use them to protect yourself.

2. Does the broker use an online platform?

Trading software is very important because ordering systems make up the backbone of trading platforms.  Being able to trade over the internet makes Forex very easy, so it's not a bad idea to try a demo account at different online brokers.  Their layouts should include: 

• options to view real-time currency exchange rates
• account balance summary with unrealized/realized profit and loss, margin locked, and margin available
• client or web-based programs to let you trade on the broker's website or on your own computer

An important note: Don't even bother forex trading if you don't have a high speed internet connection.  Forex moves fast, and you need information to travel in split seconds.  Dial-up doesn't work for forex, period.

3. Good customer service?

This is probably the most important factor in choosing a broker.  Brokers should offer 24/7 support, as forex is a 24-hour market.  If you can't contact the firm or individual by phone, email, chat or other methods, don't bother.  A good way to test customer support is to pick several online brokers and contact the help desks, so you can gauge the intelligence and experience of the reps.  If you don't get speedy replies and solid answers to your questions, don't trust them with your business.