Foreign Exchange Broker
Posted on February 9th, 2009 by Tom Flora under Foreign Exchange Broker.
How To Choose A Foreign Exchange Broker
When dealing in foreign exchange, your choice of broker is very important. I would like to be your referring broker. First, let me explain why you should think before choosing a foreign exchange broker. The job of the foreign exchange broker is to facilitate the trade that you want to make. If you want to be sure to get in and out at the price on your charts, then a fixed price spread is for you. Choose a foreign exchange broker that will take the other side of your trade. If you want floating spreads that are often tighter between the bid and the ask price, then chose a foreign exchange broker that offers straight through processing. This type of foreign exchange broker will allow different banks to either buy from you or sell to you.
You may buy from one bank but later sell to another. This type of foreign exchange broker has less interest in weather you make money or not. Remember, the fixed spread foreign exchange broker has an interest since they often take the other side of your trade. Have you noticed the disclaimer on certain foreign exchange broker websites? It says to the effect, be careful of taking trading advise from us because we are on the other side of the trade. In other words if you lose 200 bucks on a trade then we made 200 bucks.
To be sure though, it is in the best interests of the foreign exchange broker for you and me to trade a long time and not blow up our accounts. Often the broker will take the other side of your trade only for a little while then pass it off to a larger bank. So once you are down on your trade by say, 10 to 12 pips, then they hedge it and lock in their profits. Keep in mind that the foreign exchange broker is entitled to make a profit also or they would not be able to stay in business. They are taking a risk also.
Now back to my second point of why I would like to be your foreign exchange broker. Actually, I would like to be your referring agent to the broker. I do represent a few different clearing houses. Once we get past the decision of the best foreign exchange broker for your trading preferences, then we have service issues to deal with from time to time. For example, what happens when your stop is not honored? It has happened to me before. Technology is not infallible. As your referring agent, I can help put the pressure on the foreign exchange broker to make it right. Also what happens when you need help with the new account documents or when you would like some advice on a trade? I am the go-to guy and in most cases it does not cost you anything. Your spread is the same. Either the foreign exchange broker gets the whole spread or if you put my name (Tom Flora) down as your referring agent, then I get a very small portion of the spread from the foreign exchange broker. So in essence, I can help you at no cost to you. Please send me an email if you have any questions on this.
Thank You
Tom Flora
Risk Warning