Fx Online Trading - Things to Look Out for

By: Harold Hsu

FX online trading has been growing in popularity in the past few years. With the rise of the number of people accessing the internet every year, it is inevitable that more and more people are looking to trade currencies on the internet. As such, the traditional method of calling of your broker to enter a trade is slowly becoming obsolete.

Of course, the convenience and ease-of-use of most online Forex trading platforms these days are what attracts so many people to become interested in learning how to trade online. However, even though there are numerous benefits of FX online trading, you will do well to take note of its potential pitfalls as well.

Be Careful About Choosing Your Broker

Unlike the stock and futures trading markets, there is no central trading exchange that caters to the Forex market. In other words, there is no single governing authority that protects the interest of retail Forex traders all around the world.

This has encouraged the setting up of a number of poorly managed trading houses and brokerages that quickly close down at the first sign of trouble. Many such 'scam' brokerages have come and gone, unfortunately taking their clients' money with them as they disappear into thin air.

If you're interested in FX online trading, I would highly suggest that you sign up with a broker (or trading house) that is NFA registered.

Find Out The Pip Spreads That Are Charged

Although the trading houses and brokerages in the Forex market don't claim to charge a commission fee, the reality is that you will still be charged a fee nonetheless. The fees that you pay will be included in the 'spread' that you pay for each completed buy and sell order. This is to say that every time you buy and sell a currency pair, you will be charged a fee in the form of the 'spread'.

Different brokers charge different spreads on the same currency pair, so it's a good idea for you to familiarize yourself with the type of spread that you will be incurring. This is especially important if you plan to be a scalper. A small difference of one or two pips can eventually cost you a lot of money if you enter into multiple trades in a single day.

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