Brokers play an important role in forex trading as they are the crucial link between the individual you the retail trader and the forex market. Individual investors cannot trade in forex directly via the interbank market, so this is where the broker comes in.

Brokers work to make profits for themselves by providing individual investors an opportunity to speculate in the volatile forex market.

The primary method brokers make money is by the spread, which is the difference between the Bid and Ask price for a currency pair.

The second method a broker typically profits from is charging commissions, but this is generally specific to the type of account, and many do not have them.

The actual size of the spread charged by brokers varies, so it is critical you get a broker which has both good consistent spreads and quick execution during fast markets.

Key factors to understand when looking for broker

- Capitalization Level or Overall Size

A larger broker with higher capitalization has the ability to offer you better spreads and execution because they have better liquidity.

- Registered in Their Host Country

Always choose a broker that is regulated to offer forex trading in your country.

- Customer Service

should be 24hrs during while the market is open, such as phone, chat and email service.

Some other things to consider regarding a broker are:

The initial deposit requirement. This is highly important for new investors who wish to start with small amounts.

Spreads should be competitive and consistent, regardless of speed of the market or when you execute your trades.

The level of leverage offered by a broker and the related margin requirements also need to be considered while choosing a broker. General leverage sufficient for forex trading is 50:1 or 100:1.

The number of currency pairs available.

Always avoid brokers who offer or guarantee extremely high returns.

Prefer brokers who have educational content regarding their platform in case you have technical questions on how to use it.

Deposit and Withdrawal process. This should be relatively easy, and the money should be held in segregated accounts at Tier 1 banks.

Once you have chosen your broker, you need to open a forex account. This requires you to provide some personal details like your name, address, age, date of birth, citizenship details, employment status etc.

An investor also needs to provide some information about his employment, income and net worth while providing the necessary documents to support this information.

Another factor which can help you choose a broker is the user reviews.

The number of currency pairs that are available for trading. This is important because several brokers trade in only a few currency pairs. So an investor needs to check whether the currency pair in which he is interested in is being offered by a particular broker.

Always avoid brokers who offer or guarantee extremely high returns.

Prefer brokers who are willing to teach you the basics of the forex market besides guiding you in your forex trading decisions, at least in your initial trading days. So choose a broker whose website provides you the neces sary information about forex trading.

The ease of depositing and getting back your money from your forex trading account with a broker is another crucial factor. Choose a broker who has put in place easy to use fund deposit and withdrawal systems and avoid brokers who have a track record of delaying payments.

The quality of customer services offered by a broker is also important. An investor can check the efficiency of such services by making some calls to the broker’s office and seeking answers to some queries. The responsive ness of the broker’s staff will provide you an idea about the quality of services being offered.