Finance Sorell

Archive for April, 2011

It is one of the most talked-about advantages of trading on the Forex-the commission-free trades! Unfortunately, while we would all like to think that Forex brokers are just out there executing trades for the fun of it, the simple truth is that everyone needs to make money-even the brokers. While they may not charge a traditional commission, brokers on the Forex still make their money whenever trades take place. Brokers actually are compensated in a number of ways, including:

? Buying/Selling Currencies

? Earned interest on deposited funds

? Converting and holding currencies

? Rollover fees

It is in the buying and selling of currencies that brokers make the majority of their money. They make this money in something known as the “spread”, or the difference between the asking and bidding price of the currency pair. The “ask” is the price a retail Forex trader would pay for a position. The “bid” price refers to the amount that an investor could then sell the position at.

The smallest unit of measure in Forex trading is known as a pip and it is equal to .0001 (except for the Japanese Yen, which is .01). The difference between the ask and bid price is typically only 3 or 4 pips and this is what the broker makes when buying and selling currencies.

A broker is actually a middleman and never actually charges anyone directly. Instead, a broker purchases a position from a larger investment institution and then sells it to the retail Forex trader while pocketing the difference between the two amounts. For instance, a broker might set the “ask” price at 1.250 and the “bid” price at 1.246. If the investor were to sell the position immediately, then the most they could sell it for would be the “bid” price of 1.246-or a loss of 4 pips. Since the typical Forex transaction is conducted in $100,000 lots, that means that the broker made $40 in that currency exchange.

The spread will vary depending on the broker and the currencies being traded. Typically, the spread averages between 3-5 pips. Unfortunately, brokers are necessary tools in the Forex trading game if for no other reason than the sheer size of the transactions. There is approximately 1.8 trillion dollars exchanging hands on the Forex every day and these transactions are conducted in $100,000 “lots” (there are also $10,000 mini-lots and even micro-lots). Thus, it is typical for Forex transactions to be highly leveraged with most traders only putting up $1,000 (or 1/100) in capital.

Forex brokers will tend to be partners or somehow associated with investment banks and similar institutions. These “backers” actually guarantee the loans used to leverage Forex trades-and without them-none of us could trade on the currencies markets unless we were willing to risk more than the 1% demanded by most brokers.

Yes, the brokers do make money when investors trade on the Forex but they do provide a genuine service. Just be careful to avoid trading too often because although the pips are small-they can disappear quickly especially when investors try to compensate for a loss by turning around and investing before doing their homework. Therefore, be wary of any Forex broker that advocates any form of “day trading” or the like-it’s a very, very dangerous strategy to use in the most volatile and fluid market the world has ever known!

Traders and investors are turning to online brokers as opposed to full service brokerage firms. As the internet continues to improve its speeds and reliability more and more traders are moving to online firms. Since the trading industry depends on super speeds for its survival performing buying and selling transactions over the internet are sometimes much faster than those performed over the telephone.

Most online brokers provide a robust software platform for their clients to use in order to execute their orders and do some comparative analysis on market trends and global news. Traders and investors are finding it easier to use online brokers than ever before. The platforms are easier and more intuitive and there are many frequently asked questions available to help new and experience traders with even the most difficult definitions and explanations of how the exchange and markets function.

Financial statements are being offered online for traders and investors to see real time accurate information on their accounts, trading and transactions. These reports also include trending analysis, charts and other helpful information that will allow traders and investors to make better trading decisions. Online brokers are becoming close to a full service brokerage firm and most now include telephone support and service in the event their software platform or the internet has issues of any kind.

Experience and new traders alike are finding that buying and selling stocks through an online broker is easy and cost effective. They are also reliable and available for transactions twenty four hours a day, six days per week. These are the types of things you need to make sure you review and consider before opening a trading account.

Once you have examined all the various fees, charges and other requirements or terms and conditions then it is time for you to sign up and begin buying and selling stocks and options on the market with your new online broker. You will find that they are less expensive but just as robust in services as some full service brokerage firm.

For the Best Online Brokers comparisons, reviews and resources visit http://www.yourbrokerguide.com.

When you are trying to decide the best online brokers for you, first determine your priorities and what type of investor you are. Other items to consider when you are choosing the best online brokers are commissions, fee structures, balance requirements and customer service.

E*TRADE is an inexpensive option for best online brokers for active traders who are experienced and don’t need a lot of technical advice. You will need a minimum of $1,000.00 to open an account with E*TRADE. There is a $12.99 fee for both market and limit orders. Also, you are required to pay $40.00 per quarter to use their services.

Fidelity’s commission fee for both limit and market orders is $19.95. The minimum amount of funds to open an online account with Fidelity is $2,500.00. There is no quarterly or annual fee to use Fidelity’s services. This is the best online brokers for investors with a higher net worth who likes all the frills of a full service broker. Because Fidelity is considered a full service broker they provide a wide range of investment tools and calculators and are rated extremely high for customer service.

Scottrade only charges $7.00 per market and limit orders. The minimum opening balance is only $500.00. This is one of the best online brokers for being inexpensive. Because they are inexpensive they don’t offer a lot of technical or research support, you are basically on your own. Scottrade does not charge a quarterly or annual fee. Scottrade does charge an additional fee of 0.5% of the total principal in addition to the $7.00 flat commission fee.

Charles Schwab might be considered by some as the pioneer in the discount broker world, but they are definitely not the cheapest of the best online brokers. Charles Schwab charges $19.95 for both limit and market orders and they also charge an additional $0.015 for all shares over 1,000. You will be charged a $45.00 per quarter service fee to use their brokerage services. You also need to be aware that if you purchase more than 5,000 shares, Charles Schwab will charge you $0.003 for every additional share.

TD Ameritrade was formed when TD Waterhouse and Ameritrade merged. TD Waterhouse was acquired by Ameritrade in 2005 and charges a flat fee of $9.99 for per trade for any amount of shares. There is no minimum account opening amount. According to current investors, TD Ameritrade rates very high for customer support and research tools in the best online broker’s area.

Sharebuilder is one of the best online brokers for new investors. They provide a wide range of investment strategy support. Sharebuilder has no minimum opening account balance requirement. With Sharebuilder you can also set up automatic investments for buying and selling stocks online for only $4.00 per trade. Regular limit or market orders will cost you $15.95 each. As a side note, Sharebuilder is part of ING Direct.

Firstrade is a relatively unknown broker as far as best online brokers. It appears as if they charge $6.95 for market and limit order commissions with no quarterly or annual fees. Firstrade does not have a minimum opening funding requirement. However, as with most discount brokers you will receive little or no technical support.

Vanguard is considered more of a full service broker like Fidelity and Charles Schwab. Because you will receive additional services you will pay more than you would if you choose a discount broker as your best online brokers. Vanguard is going to charge you $25.00 per market or limit order trade. You will also have to pay a $30.00 annual service fee. The opening balance for Vanguard is $3,000.00.

This is only a small sampling of the best online brokers. Each online broker has different requirements for opening account balances, quarterly or annual fees and commission structures. You will need to decide which broker is going to fit your needs and goals.