Forex is short for “foreign exchange market” and this is where currencies are traded, which is a very important activity because currency exchange needs to happen so that foreign trade and business can take place.
Whenever you want to buy something from another country, like wine from Chile and cheese from France or South Africa, you or the company you use will have to pay for those things in the currency of the country. This means that the importer has to exchange the equivalent amount of U.S. dollars into the country’s currency. The same thing happens when you’re planning a trip to foreign lands! Tourists have to exchange currencies in order to do anything during their vacation.
Now, you can imagine that the need to exchange currencies is a constant one, so this is why Forex is the largest, most liquid financial market in the whole world. It is so big, that even the stock market looks small in its presence; with an average value of $2,000 billion dollars per day. Of course, this is such a fast-paced market that its total volume changes constantly.
Among all of the talk to hear about Forex, you might have heard that it’s a unique marketplace. Why? Because it’s not central; every exchange is done electronically and over-the-counter style. So there’s no centralized exchange because all transactions happen via computer networks between a wide array of traders around the world.
Forex is open 24 hours a day, five and a half days a week, and currencies are traded worldwide in almost every time zone. Trading occurs, of course, in the major financial centers of the world; London, Frankfurt, New York, Tokyo, Zurich, Hong Kong, Paris, Singapore, and Sydney. This means that when the trading day ends in the U.S., it begins once again in Hong Kong and Tokyo. So the market is always buzzing with activity and the price quotes are constantly changing.
Finding your Broker and Trading Platform
Now that we’ve covered what the Forex market is all about, it’s time to take a look at brokers and trading platforms because they’re the most important tools for traders, and it’s one of the key decisions you’ll have to make; especially when you’re starting out.
Let’s start with brokers. A broker is simply a person or a firm that charges a commission for making buy and sell orders at the request of an investor. The job of the broker is basically to be an intermediary between the buyer and the seller, and that’s exactly why they’re so important. They bring investors and sellers together, so if you make a bad choice and you trust the wrong person or firm, your money will be on the line.
On the other hand, a trading platform is a software that facilitates the management of market positions for investors and traders. These platforms are offered by brokers for free or at a discount in exchange for maintaining a funded account or making a certain number of trades per month. The trading platform is basically what allows investors and traders to trade and monitor their accounts.
The online trading platform is also an important decision you’ll have to make as a trader because you’ll want to have access to as many useful tools as you can. That will depend entirely on the trading platform you choose to operate from; so, if you’re a beginner, you’ll want to go with a trading platform that’s not only easy to operate and that has all of the tools you’ll need, but also a platform that increases your knowledge and allows you to further understand the workings of the Forex market.
Broker Legitimacy, no scam!
When it’s time to choose a broker, there are several things that you need to keep an eye on so you can test the legitimacy that they offer. I want to explain each one so you can keep in mind each time you’re thinking about using one broker or another:
Do your research
- Take your time and get as much information about the broker of your choice as you possibly can before making a decision. This is no easy task and it will take you some time depending on the popularity of the broker firm for Forex trading, but it’s necessary. Take everything into account and look at all of the information and reviews with a critical eye.
Terms & Conditions
- I know no one reads Terms & Conditions, but when it comes to brokers this is also a very useful thing to do. Terms & Conditions provides basically all of the information you’ll need about the company. The better the redacted it is, the more reliable the broker. If Terms & Conditions are poorly explained, they’re not clear enough or they’re difficult to find, then you should be careful.
Poor customer support
- Legitimate brokers take customer support very seriously because they understand that it’s in their best interest to maintain their clients well-informed. After all, they won’t have anything to hide and they’ll be prepared to offer assistance because they know what they’re doing. Scam brokers usually have very poor or virtually nonexistent customer support services, so it’s definitely something you should keep an eye on.
- Beware of the brokers who are always on your back for you to invest! You should pay close attention to the way a broker handles your personal data. When a broker is insistent about offering you additional services that you didn’t request or signed up for, you might be dealing with something called “cold calling”, which is when brokers offer huge profits if you join their platform.
- Another thing to which you need to pay close attention to is the importance that a broker places on personal and financial information. The SSL certificate is a great way to identify scam brokers. Check out the web address of the broker; if there’s a small green padlock and HTTPs in front of it, it means the connection is insecure and this is a big red flag when it comes to your data.
- Domain age: Another great way to figure out if you’re dealing with a scam broker is checking the longevity of the domain. A legitimate broker will not invest in a domain for less than a year simply because their interest is to build a long-term business, so make sure you check that out as well.
Over the top offers
- One thing you have to understand is that everything a broker offers you should be clearly explained inside the platform. If a brokerage firm offers you huge deals that seem too good to be true but you can’t find any information to support them, you should tread lightly. Beware of unclear information, unrealistic offers, and useless customer support.
- Having a license is always a plus when it comes to brokerage firms to invest in the Forex market, but it shouldn’t be the only standard. Sometimes you’ll find brokers that don’t have a license and they’re still safe, reliable, trustworthy, and long-standing. Of course, registration provides extra safety and it should not be dismissed, but reputation is also an important aspect to keep in mind.
Scam brokers will definitely reject and overall ignore your requests for withdrawal. If this is the case with your broker, it’s time to move on. A scam broker will either deny your requests, ignore your calls and e-mails, and/or attempt to persuade you to keep investing instead of withdrawing. We’ve all seen “The Wolf of Wall Street”, right?
Disclaimer and risk warning
Online trading has a lot of risks. Be aware that you might lose all your money.
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