I am in search of a suitable online forex broker recently. Though I have already signed up with one because of the extensive free trading education that it provides I still need one that suits my trading style. Through my relentless search, I have come up with some criteria which I feel that everybody can reference to when choosing a forex broker for themselves.

Our money must be safe! - What is more important than this? Especially for some of us who sign up with overseas brokers. Our funds have to be wired overseas. I think we have to be quite concern about our money not by our side. What should we look out for?

• Net excess capital > Net capital requirement. In fact, in the excess of US$20-30 million is the best. Download the latest financial data of the brokers. Check the column headers for “Net excess capital” and “Net capital requirement”. Also see this article for more ways to verify the financial health of the brokers.
• Currency depreciation. 3 years back, I deposited my trading funds with a US broker in US dollars at an exchange rate of 1.6. Now the exchange rate has dropped to 1.3. A S$10,000  (my local currency) trading fund became S$8,125. I lost S$1,875 without even trading! How scary is that!!? How to get around this?
  • If this has already happened, continue to trade in US dollars and hope your winnings will cover your currency depreciation and at the same time, hope that US dollar will strengthen eventually.
  • Find a broker that allows you to keep your money with them in your local currency. Currency conversion will only be done when the trade is made.
  • Hedge against currency rate fluctuations. Easier said than done for me. Hedging is a whole big subject by itself.

(to be continued…)