Selecting A Right Forex Broker – A Dynamic Activity

Whether you are a retail or small institutional forex trader, most of us need certainly to trade through a forex brokerage firm. The bigger you are the closer you go on to the major market participants – banks, mutual funds, hedge funds, large investment firms. They use up about 75% of the forex market capitalization. Some banks might be brokers themselves. The residual 25% are individual traders as if you and me, and small trading firms.

Selecting the right forex broker isn’t a static activity. It’s an energetic one according to more than one of the following factors:

-Regulated or non-regulated us forex brokers list.

-What stage of your trading career you are in. You trade for your own money or manage other people’s money as well.

-Amount of your trading capital.

-Services of a particular forex broker that address your needs for trading.

-Tax implications if you open trading account with a broker domiciled in U.S. or U.K. or Switzerland or tax haven countries like Hong Kong, Singapore, British Virgin Island, Bermuda, Cyprus, so on.

-Changes of the industry regulations. For example, a new leverage of 50:1 (the old one was 100:1) imposed on U.S. based forex brokers effective on October 18, 2010 has impacted on traders having accounts with them.

Unlike the stock and commodity markets, the forex market is loosely regulated. Regulation is voluntary rather compulsory. Brokers that decide to be regulated hopefully luring in more clients opening accounts with them. Having your fund deposited in a controlled forex broker certainly enhances the opportunity of your fund safety. Details of this problem are discussed in the section’Safety of Your Funds ‘.

If you’ve just started out or are exploring a forex trading career, there are lots of choices of brokerage firms available for you personally today. Your objective in this stage is probably to try the water. You could deposit several hundred or thousand dollars. This is a relatively small amount of trading capital. However, whenever you progress along with your trading career, tens of thousands as well as hundreds of thousands or millions dollars are large amounts of money, your most concern is the safety of your fund.

On the other front, some individual traders and trading firms are involved about minimizing tax expenses, they may decide to open accounts with a particular country domiciled broker for the tax purposes. At this time in time, U.K and Switzerland based brokers are probably popular choices because these countries are tax havens in addition to having well established regulatory bodies for the forex market. Other Caribbean tax haven countries like Anguilla, Bahamas, Barbados, Bermuda, British Virgin Islands, Cyprus, etc; Panama, the Russian Federation, Costa Rica, might lack such well estabished regulatory bodies. At this time of writing, some forex brokers establishing offices in Hong Kong and Singapore are on the rise to offer clients with better regulatory reputation and tax advantage.

Due to the recent collapses of large and well established financial giants like Lehman Brothers (U.S.), Northern Rock (U.K), Kaupthing, Glitnir, Landsbanki (Iceland), and other smaller financial institutions throughout the world, have had implications on other financial markets including forex. One of many evidences is that, in October 2010, the National Futures Association (NFA) in U.S. imposed new leverage rates of 50:1 for major currency pairs and 20:1 to the cross ones from the typical 100:1 to retail clients from all forex brokers domiciled in U.S., while brokers outside U.S. have no impact from the changes. By saying that, it doesn’t mean either a positive or negative news, this will depend on who discusses it! For a minority of winning traders it doesn’t matter too much as there are always better opportunities arising from the changes, while nearly all losers keeps complaining about the changes.

Successful traders consider their brokers as a risk point within their trading systems. So they understand the rules of the overall game and do everything they could to minimize the risks related to the brokers.

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