Broker Selection Process

• No broker/dealer is perfect. Having no centralized exchange makes the selection process very important; the total number of distinct platforms is now well over 100! • Start with at least three prospects so you may do comparables and perhaps negotiate if you are opening a larger account (typically over $25,000). • Ask for references with whom you can speak on the telephone. • Check the regulatory agencies in the country in which the broker resides if the broker/dealer is regulated. • Go to the various FOREX discussion groups on the Internet. Look for information on that broker. Ask questions, too. But be careful—the person answering you may be the broker or one of the broker’s “representatives.” • Requoting. This is the major complaint against online brokers. It occurs when the trading platform does not give you the quote you select on the screen, but something else, not as good—perhaps as much as 10 pips difference. You’re not likely to find an online broker who doesn’t requote occasionally, but beware brokers who requote often, especially when you are winning! Requoting is a very much discussed topic today in the FOREX community. Because there is no centralized exchange it is going to happen from time to time. When reviewing the requoting of a broker/dealer it is important to ask 1) How often does it occur? and 2) When does it occur? If requoting happens in fast-moving markets, it’s probably the nature of the beast. If it happens whenever you have a big winning trade, beware. • Review all of the broker’s paperwork (typically downloadable from the broker’s site). Compare it to others for wording, terms, and so on. • Send a list of email questions to each of your initial prospects—this is to get answers and to test for responsiveness. • Call the broker’s telephone number to see if voice contact is reliable. The authors would not personally deal with a broker who does not offer a voice backup or customer service support line. • Compare especially: account minimums, costs (pip spreads), the handling of account withdrawals (time period), and margin. Pips vary from currency pair to currency pair, the most popular having the lowest spread; two pips for the EUR/USD pair is not uncommon. Some dealers may charge a small “lot fee” that can add up quickly, so be sure to ask if a dealer has such a fee and what it is. Get hard copy printouts of everything.