1. Financial stability of your broker
Always make sure your broker has a capital base of at least $7 million USD or £5 million GBP. It should also be registered in the UK, USA, a European Union country, Switzerland, Australia or Japan with the appropriate statutory body. In the UK it's the Financial Services Authority and in the USA it's both the US Commodity Futures Trading Commission and the National Futures Association.
2. Your broker's status
All brokers are either FCM (Futures Commission Merchant) or ECN (Electronic Communication) Broker. It's often difficult to determine which, as most brokers don't seem to think it important. Always choose an ECN broker. Such a broker won't have its own dealing desk, but will pass all trades on to the market, as he is supposed to. ECN brokers also tend to have the best spreads and prices, and have no restrictions on trading or hedging. FCM brokers can have their own dealing desks, and often fail to pass trades on to the market, instead matching one client up against another or, failing that, betting against the client. They can then distort the prices on their platform to make it easier for the client to be stopped out and lose his money.
3.Check the costs
Most brokers have their charges set out clearly on their web site. Check these carefully and compare one against another. Some brokers have "roll-over" fees when one accounting period ends and the next one starts.
4. Pressure to start trading with real money
Nearly all brokers offer a "demo" account to get started in forex. Use this for as long as it takes until you're thoroughly familiar with trading. You're bound to make many mistakes and misjudgments in forex - even experienced traders make losing trades regularly. Make sure you lose all the money you're bound to lose on a demo account and not a real one.
Many brokers boast of how much leverage their accounts allow. Some even go as high as 1:400. This is frankly crazy, even for a hardened trader. You, as a beginner, are bound to lose all your money if you fall for this. It doesn't matter so much on a demo account, of course, but even then you should treat the money as real, or you won't really learn. Once you are making steady, if small, profits on a demo account, you can open a real one, but even then start small, trading only $1 or £1, as the case may be, per point.
5. Reliability of your broker
Search the name of your prospective broker on the forums to see if anyone has been having any problems with web site uptime or difficulties in getting telephone support. Check this also with the broker before you open an account.
6. The broker's trading platform
This should be uncluttered and easy to understand at a glance. You should be able to choose the currency pairing and whether to go long or short with one click. Stop loss and limit orders should be easy and fast to enter. If the platform is either MetaTrader 4 or myForex there should be no problem. The charts should be easy to read, even if you have up to four on your monitor at once. There should be at least a fully customisable Simple Moving Average indicator.
Finally, if you find you're not really suited to forex trading (and probably most people aren't) then consider using a system other than spread betting, and instead trade shares, indices, commodities and options. These don't have the volatility of forex, and you don't need to sit in front of your monitor all day.
Philip Gegan is a retired UK lawyer who has studied the financial
markets since 1991. You too can make profits such as 70% in less than
a week on gold at http://www.onlinefinancialtrading.com
Article Source: http://www.articledashboard.com/Article/Selecting-a-Currency-Trading-Account---6-Checkpoints/922329
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