The forex industry has much less oversight than other markets, so it is possible to end up doing business with a less-than-reputable forex broker. Due to concerns about the safety of deposits and the overall integrity of a broker, forex traders should only open an account with a firm that is a member of the National Futures Association (NFA) and is registered with the U.S. Commodity Futures Trading Commission (CFTC) as a futures commission merchant. Each country outside the United States has its own regulatory body with which legitimate forex brokers should be registered.
Traders should also research each broker’s account offerings, including leverage amounts, commissions and spreads, initial deposits, and account funding and withdrawal policies. A helpful customer service representative should have all this information and be able to answer any questions regarding the firm’s services and policies.
Use a Practice Account
Nearly all trading platforms come with a practice account, sometimes called a simulated account or demo account. These accounts allow traders to place hypothetical trades without a funded account. Perhaps the most important benefit of a practice account is that it allows a trader to become adept at order-entry techniques.
Few things are as damaging to a trading account (and a trader’s confidence) as pushing the wrong button when opening or exiting a position. It is not uncommon, for example, for a new trader to accidentally add to a losing position instead of closing the trade. Multiple errors in order entry can lead to large, unprotected losing trades. Aside from the devastating financial implications, this situation is incredibly stressful. Practice makes perfect: Experiment with order entries before placing real money on the line.
Keep Charts Clean
Once a forex trader opens an account, it may be tempting to take advantage of all the technical analysis tools offered by the trading platform. While many of these indicators are well-suited to the forex markets, it is important to remember to keep analysis techniques to a minimum in order for them to be effective. Using multiples of the same types of indicators, such as two volatility indicators or two oscillators, for example, can become redundant and can even give opposing signals. This should be avoided.
Any analysis technique that is not regularly used to enhance trading performance should be removed from the chart. In addition to the tools that are applied to the chart, pay attention to the overall look of the workspace. The chosen colors, fonts, and types of price bars (line, candle bar, range bar, etc.) should create an easy-to-read-and-interpret chart, allowing the trader to more effectively respond to changing market conditions.