In a previous article, Parkway Australia shared with investors What is forex Trading?
There are many ways to invest in foreign exchange, but if you know how to trade and choose the right broker for you, more than half the success will be achieved!
So how do you choose?
As mentioned in the previous article, individual investors can conduct individual foreign exchange transactions through banks, or they can entrust foreign exchange brokers or dealers with contracts and pay a certain percentage of commission.
For individual foreign exchange traders, they should get to know the banks that agent foreign exchange trading business. Currently, there are six banks that support this business, namely, Gong, Nong, Zhong, CCB, Jiao and Zhao, so as to understand the preferential policies of trading, make choices based on exchange rate changes and complete corresponding transactions.
For investors who support contract trading, they need to choose a reliable foreign exchange broker to complete the investment transaction. Then how to judge the quality of the dealer and make a choice?
1. Reference market reputation Brand reputation is crucial for any dealer. It mainly refers to the introduction and rating of this platform by authoritative institutions, including the evaluation and feedback of customers, whether there are fraudulent transactions and cheating behaviors, etc., to prevent being cheated.
2. Platform regulator Check the regulatory bodies of brokers, generally choose the brokers regulated by NFA in the United States, FCA (formerly FSA) in the United Kingdom, ASIC in Australia and Switzerland, to find out what bank the funds are stored in, whether the deposit account is offshore, and whether the clients’ funds account is separate from the operating funds of the company.
In terms of legal supervision, the current NFA regulation in the United States only protects American customers, while the Australian regulation does not protect overseas customers. The FCA regulation in the United Kingdom and the Swiss regulation have deposit insurance guarantee and are relatively trustworthy.
3. Trading Patterns of Brokers In the forex margin industry, there are two main types of dealers.
Dealing Desks and No Dealing Desks.
The over-the-counter trading mode is also known as market maker, while the trader-free mode can be divided into STP (Straignt Through Processing) and ECN+STP (electronic communication network + through-processing).
Electronic Communication Network + Straight Through Processing).
4. Platform point spread first needs the size of the focus difference, and what is the point spread of common currency pairs? Under the same conditions, low point spread means lower transaction cost, it is recommended to choose the low point spread platform, followed by floating point spread or fixed point spread. Floating point spread may be larger in news events, and fixed point spread is generally higher than floating point spread.
5. Is there any trade slip point? Slip point refers to the difference between the point of placing an order and the point of final transaction. For example, if you click to buy USD/CAD at 200.00, the result is a transaction at 200.10, resulting in a slip point, which is quite disadvantage.Slip point may be network delay, market fluctuations, or intentional manipulation by irregular traders.
Any platform will have this problem, which should be based on the fundamental explanation of the cause of the slip point, the stability of platform software, the stability of server, etc. If the slip point is occasional or major market slip point, it is acceptable. If the slip point is frequent, it is mostly caused by unfair trading of brokers.
6. Margin and leverage Foreign exchange trading in the market is basically trading on margin. Generally speaking, it is best to keep your margin ratio above 100%.
There is no commission in ordinary accounts, and the cost paid by traders is the spread. Even if the market does not fluctuate, the traders’ funds are reduced to some extent. Except for some special accounts, such as ECN accounts, the spread is very low, and it is difficult for traders to make profits from the spread, so they have to charge commissions to the traders of ECN accounts.
For individuals or novice investors who lack experience in trading and platform selection, it is generally recommended to choose well-known platforms in the industry or industry veterans such as BCR Australia.
The most important thing is to find a broker that suits your trading habits and meets your trading needs.
