Forex Brokers

In the forex market, there are two types of forex brokers that offer speculative trading opportunities to the individual trader: retail brokers and market makers. Retail traders (individuals like you and me) make up a very small fraction of the forex market and may only participate indirectly through a retail broker, a market maker or a bank.

Retail brokers are typically controlled and regulated by the CFTC (Commodity Futures Trading Commision) and the NFA (National Futures Association). The retail forex market is not a highly regulated market like the stock market is. However, both the NFA and CFTC are starting to impose more strict requirements as retail forex trading becomes more popular.

Foreign exchange brokerage firms make money by trading currency. By trading one currency for another currency that is expected to increase in value, brokers (like traders) benefit from an increase in the value of their money when they make a good trade. They also make money on the spread, which is the difference between the bid price and the ask price of a currency pair, when they process retail trades.

It is not widely known that retail brokers and market makers typically trade against their clients and frequently take the other side of their trades. This can create a potential conflict of interest and contribute to some of the negative experiences some forex traders have had.

A move toward NDD (No Dealing Desk) and STP (Straight Through Processing) is helping to resolve these concerns and restore confidence in retail brokers. But care must still be taken when choosing a forex brokerage firm to ensure that you're trading in a fair environment and that your money is safe.

For a comprehensive look at broker ratings and reviews for 2008 and 2009, click on the link below:

Rating the Forex Brokers

Once you've taken a look at the ratings and reviews you should have a few choices that interest you. Choosing a broker to trade with is the next step. For more information on how to go about choosing the right broker for your needs, click on the link below:

How to Choose a Forex Broker

After reading this article several years ago, and following their process, I chose Oanda Corporation as my brokerage firm. I still use Oanda today because it provides me with exactly what I need to trade based on my style of trading. It's a straight forward platform that offers simple charting and order placement functionality, low leverage, reasonable spreads and the ability to trade "micro" lots.

I've also tried using the Metatrader Platform offered by many brokers for trading, but never got as comfortable with the interface as I am with Oanda.