Prior to choosing a Forex broker to work with, it is first necessary to understand that terminology used in trading, the types of accounts available, and the way that the broker will manage your trade orders.
You can visit the most popular sites offering online Forex brokers reviews to gain a stronger insight into the capabilities of various broker. Below you will learn more about the basics of Forex trade concepts.
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Account Type: It is important to confirm whether or not your broker will offer a variety of account sizes. These could range from Standard, Mini or Micro accounts – Forex trades in fixed sized units, also known as lots.
The amount of lots that an account trades in depends on the size of the account. The standard lot is 100,000 units of currency, whereas the Micro account trades in multiples of 1000 lots. It is believed that smaller accounts offer greater control as they allow for a more refined trade.
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Broker-managed or Self-trading: Most new traders will start their trading venture with a self-managed trading account. This type of account offers complete control over fund allocations, however, at much greater risk for those traders with minimal trading knowledge.
Broker managed accounts, on the other hand, means turning over complete control of funds to a broker. Managed broker accounts are well suited for traders with large investments available.
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Broker type: Unlike the traditional stock market, there are no centralized exchanges in Forex, therefore different brokers have different models for managing client trades.
Those brokers who make the market for their clients are known as “market makers”. And straight through brokers act just as a conventional broker might by passing trade orders off to a dealer for execution, for a fee of course. ECN brokers, on the other hand, allow their clients to create their own market by trading amongst themselves.
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Trade Copy: You will want to verify whether or not your broker provides auto trading services. If you prefer to take more of a hands-off approach to trading, these are the types of systems you will look out for.
Should you prefer to utilize 3rd party Forex signals, you will require finding a broker who allows these services. Most do, however, keep an eye out for restrictions on what type of signal is permitted.
