Next, I’ll discuss the different brokers and platforms available. Before anything else, I would strongly suggest that you choose one of the more established, well-known brokers. Trust me on this!

The retail forex industry is still relatively young and it does not have the same regulations and rules to follow as a lot of other traded financial instruments. This is mainly due to the fact that there are no central exchanges involved. But having said this, a lot of governments are beginning to formulate rules and regulations that do give forex traders better protection. But be warned, there are still dodgy brokers out there who will rip you off in a heartbeat. I certainly don’t want to scare anyone off, but please stay well-informed and choose wisely.

Another suggestion is that you do not place all of your funds into one broker, especially if you have a considerable amount. What I am talking about here, is if you had say $100,000 to trade, I wouldn’t be depositing all of this with the one broker. I would either spread it amongst two or more brokers, or keep funds in reserve and only deposit them with your broker if they were required.

Many traders also like to keep their hard-earned cash in their own country and I can understand this, and again it is just a perceived safety measure. Personally, I do not have a problem dealing with overseas brokers. My past experiences have produced no problems at all transferring funds either way, so I am quite content to use overseas based brokers.

Not all broker trading platforms are the same and this is where it gets interesting. Every platform appears to have its pros and cons. You have to find something you are comfortable with. One of the most popular forex trading platforms is Metatrader, or more commonly referred to as MT4. This platform is used by a variety of brokers. How this works, is that you would go to your chosen broker’s website, sign up with them, and then download the MT4 software from their site. Here you can either select demo or live trading or both. You can find out more about MT4 by doing a simple google search. I personally find the MT4 platform one of the best, especially for the charts. It is quite incredible what you can do with this platform.

Being an Aussie, I use GoTrader or Pepperstone for my MT4 platform and I am quite happy with both of them. The beauty of the MT4 platform is its popularity and the ability to write your own computer code to design your own custom indicators or expert advisors. There are even dedicated forums and groups that just discuss this platform. Most trading platforms come with a variety of standard charting indicators. Things like Moving Averages, MACD, RSI, Bollinger Bands, Fibonacci Retracement, etc. With MT4, you can even design your own custom indicators and download them direct to your trading platform, and then onto your charts.

Don’t worry if this sounds a little confusing at the moment as it does become clearer as you become more familiar with the platform. You don’t need these custom indicators to trade, and if you are interested in trying them out, there are plenty of savvy traders who have already done all the hard work and made them freely available online. I personally follow a few experienced traders on eBay and purchase their indicators directly on there. They will then share a link where I can directly download all the indicators.

I’ve also mentioned expert advisors, commonly known as ‘EAs’ or ‘Trading Robots’. This is a software program that is loaded onto your platform and then onto selected charts. A fully automated EA, once activated, will go to work to identify trades that fit its trading criteria, open a trade without human involvement, manage the trade without human involvement and eventually close the trade without human involvement. It all sounds too easy, doesn’t it! Again, you can design your own or let someone else do it for you. They are not as freely available as custom indicators, but they certainly are becoming more popular in the past few years.

MT4 is not the only platform you can use to customize indicators and trading systems, but it is by far the most popular. I have used CMS Forex and their VT Platform in the past, and they too have an excellent charting package. NinjaTrader is also another very popular platform used by many traders.

There are plenty of other good brokers around. One of my favourites is Oanda. It does have a web-based platform available as well as their MT4 platform. The web-based platform doesn’t require any software to be downloaded, which means you can access this platform from any computer that is Java equipped. Oanda is a very popular and reliable platform which offers very low spreads and is very simple to use. There is also another big advantage using Oanda with regards to trade position size, and it is one of the reasons I like them so much. They have also been around for a few years now and there are rarely any negative comments about them. I would definitely recommend Oanda as a broker and platform for beginner traders.

As stated earlier, there is no central exchange for forex trading, therefore pricing on different currency pairs can vary at times between the different brokers. Normally all the good brokers will be within one or two pips of each other, which really isn’t an issue. However, every now and then there will be a price spike on one broker’s charts but not others. Too bad if you had an order set around where the price spiked, whether it be a buy/sell order or a stop loss. These types of fluctuations normally happen on the not so popular broker platforms. If you stick with a decent broker, you will avoid these types of problems. I normally run two platforms together and can see the differing prices, but as they are two reputable brokers, there is rarely an issue with price discrepancies.

I mentioned the term the ‘spread’ earlier, which is the difference between the bid and the ask prices. Back then, the spread on the EUR and JPY was 3 pips, and the other major pairs ranged from 4-5 pips, and this was happily accepted by all. Nowadays, it is not uncommon to get spreads on the EUR and JPY of 1 pip or less, and the other majors, for less than 3 pips.  This is true of a few of the 2nd tier pairs and crosses as well. The spread is your cost of doing business. For you to make any profit, you must first make up the spread.

For example, if you bought the USD/CHF at 1.0774 and you had a 3 pip spread, then the price would have to rise to 1.0777 before you are in a break even position. Remember you buy at the ask price and sell on the bid price. So in this case, when you bought, the quote would have been 1.0771 / 1.0774. It then has to look like this before you can get out at breakeven 1.0774 / 1.0777, which is a 3 pip increase in price.

Some brokers maintain the same spread, though a little higher during all market hours, whilst other brokers may vary the spread depending on the volatility at the time. What is volatility? It can be when the market is very quiet, like when the market opens early in the week, or after hours at the end of the US session before the Asian session has cranked up. It can also refer to when there is very high volume, normally in anticipation of a major news release. This is where some brokers can really widen their spreads. They don’t stay wide for long, but it can be 5 minutes or so. Most reputable brokers do this, and the spreads can go out to 20 pips on the volatile pairs like the GBP/USD. This is not good if you are scalping or have a really tight stop or other orders close to the current price. Something you have to be aware of.

You will find that if the spreads stay constant, then there is normally a trade off somewhere else. In the case of CMS, their spreads remained constant but during the very volatile times, you would have difficulty placing orders or stops close to the current market price. A few years ago, just before any major news release, traders would place a buy order and a sell order close to either side of the current price just a few seconds before, hoping to cash in on a big price spike one way or the other. One order would be filled and they would cancel the other, looking for a decent run in the original direction. Brokers didn’t like this and put practices in place like I have discussed to prevent this – a bit like the casinos banning card counters, even though it is not technically illegal, it was giving the card counters an edge. So, the casinos changed their rules to take away that edge from the punters. Brokers do the same sometimes.

Then we have the problem of requotes and slippage. This should not really be an issue with forex trading if you stick with the reputable brokers, but it can and sometimes does happen. Keep in mind, there can be times of very high volatility, where you just won’t be filled at a price you may have elected. This is the same for all types of trading. This is also where Demo trading can give you a false sense of security, as demo platforms will always fill trades or orders at those specified levels as it is only a computer program working on numbers, not the real market conditions. You may end up with a perfect trade fill on a Demo account but there may have been a 10 pip slippage on the same trade in a Live account. It does happen.

Generally, the popular brokers are becoming much more reliable (and honest) these days. It wasn’t that long ago, that they were a little inconsistent and traders did have problems that were plastered all over forums, therefore affecting certain broker’s reputations. This doesn’t seem to be such an issue nowadays though. But once again, I would suggest you do your own due diligence by getting out there into google or reddit and checking things out.