Even the best Forex Broker may not have
Your best interests at heart!

First, you need to understand there are two main risks to your money when you trade Forex... the first is the risk you face of trading away your money due, most often, to poor trading habits. This is the largest risk you face, bar none. The second is the risk you face by taking your money and depositing it into someone else's account.

There are regulations in place in several countries which are intended to protect you, the trader, against unscrupulous operators. If a Forex broker you are considering dealing with isn't able to provide you with proof of their membership within a regulatory body, you should probably move along.

Even if your pending best Forex broker can show this proof, you need to pay close attention to their legal agreement, which you will download to review. The broker will require your signature, indicating you understand and agree to their terms. Be careful... regulatory agencies in some countries, such as Swiss based ones, don't require the broker to provide protection for customer's deposits. Rather, they simply co operate in the international prevention of money laundering. Ensure you fully understand your level of protection before you provide your signature.

Due to the decentralized nature of Forex, the company that appears to be your best Forex broker, may in fact be a small company with little or no financial stability. There is no central exchange at the heart of the Forex market to guarantee transactions. If you are dealing with a financially unstable broker, it is quite possible they won't have the ability to absorb market fluctuations and may themselves go broke.

Something you need to clearly understand, is when you enter a trade, your broker is actually taking the opposing side of the deal! If you make money, they are going to lose money. This is not normally a problem if you are dealing with a major international bank, unless you have a "George Soros" sized account, of course! ;o)

With this in mind, take a look at the "free training" all the brokers provide their clients. They teach you your #1 defense against losses should be a tight "stop loss" on your positions. Due to the volatile nature of this huge market, these tight boundaries are easily hit, which results in your loss. This strategy will eat away at your account, while forcing you to take new trades, from which the broker profits.

Keep Your Cards Close to Your Chest

Brokers encourage you to make frequent trades... an act that puts more commission in their pockets. Don't fall for the "no commission" story they tell you... their dealing spread (buy vs sell price) is exactly that. And the smaller your account is, the greater the impact of that spread on your bottom line. You shouldn't base your best Forex broker decision on this spread. The close stop loss practice will kill you much quicker than a one or two pip difference in the buy/sell prices!

And after all that... test drive their demo accounts. They are all quite similar... quote boards, account monitors, email alerts, current news, charting and usually the ability to display more than enough technical indicators to make your head spin! A note of caution - they are all designed to encourage you to trade ever higher amounts with ever increasing frequency. Don't take the bait! Stick to your strategy. If you don't have a clear strategy, keep your money in your pocket until you do... you'll stand a much better chance of keeping it!

In summary, the greatest risk you will probably face is the risk you pose to yourself of trading away your capital. Even the best Forex broker on the planet won't help you with that... more likely they'll encourage you to keep it up! Check that your would-be best Forex broker is regulated and operates with sufficient resources to minimize the risk of them going broke - ie. stick to the big guys. It's very easy to start a dot-com business and make it look impressive... be sure you know who you are dealing with.

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