For traders who are new to currency trading, it can be quite a confusing experience, not least because everything seems to be FREE!! If you have come from a stock or share trading background, you will be very familiar with all the costs associated with each trade. Firstly there is the cost of receiving the data via a data feed. For realtime data this can be expensive, then there is the brokerage cost of each trade both to open and close, then there is a spread, and finally stamp duty ( a UK evil!!) Anyone trying to day trade is on a hiding to nothing!

In the world of Forex, few of these costs exist. Realtime data is provided free of charge, either by the brokerage, or by one of the many good sites such as fxstreet. There is no commission to pay on a trade, nor is there any stamp duty. The only cost of the trade is the spread - the difference between the bid and the ask. Once a trade has absorbed this spread you are in profit. So how does the broker make his or her money, and do they want you to win or lose?

Go to any chat room or forum, and it is full of on-line members bemoaning there lot, and blaming the broker for everything from widening spreads to entering trades late, or even fixing prices! Virtually all of these are rubbish, and sadly it is awlays these people who refuse to accept that there is only one person to blame - themselves! I ignore them and would advise you to do the same - stay away from these so-called forums - they are bad news and will only colur your judgement or make you feel as though every broker in the world is against you. They are not, I can assure you.

The broker makes his or her money from the spread on the trade - that’s it short and simple. Do they want you to be succesful - ofcourse they do, but knowing full well that on balance there will be more losers than winners. Brokers need active clients to ensure that they are making money on the spreads - if eveyone lost they would have no clients left and go out of business. One of the great temptations in currency trading is to scalp trade. Some brokerages offer a 1 pip to 1.5 pip spread on major crosses such as the EUR/USD - what could be easier than to recoup this and move into profit - try it on a demo account with a stop loss in place - it’s not as easy as it sounds!!

One of the other great complaints that you often read about in the forums, is the widening of spreads by brokers, on major news announcements. Well ofcourse they do, so would you if you were runnning a brokerage. On the first Friday of every month, the NFP ( Non Farm Payroll ) news hits the markets at 1.30 pm ( UK time ). Markets become extremely volatile for some hours afterwards, and prices can move very fast indeed. It would be pretty stupid to be offering the same tight spreads at such a volatile time, and yet many traders try to ‘trade the news’, hoping for a very fast profit. Whilst this is possible to do, you have to accept that the rules change whilst you are doing it! The spreads on a major cross pair may open to 10 or 12 pips or maybe even more. The idiots who complain, moan about how unfair it all is and the brokers are against them - total rubbish. if you are going to trade this way, just understand the rules and don’t complain if you lose.

So, in summary, I do not believe most of the rubbish that is said and written about forex brokers - there are both good and bad as in any other business. They are there to make a profit and the main profits come from the spreads, so they want to keep customers trading. I use Oanda and FXSol - both without any problems whatsoever. Of the two I would say that Oanda is better for tighter spreads, interest on the account, and second by second interest payments. Their charting however is poor and always a source of complaint, but as there are always other sources for charts this is not a major problem. FXSol is really easy for the beginner - very, very simple order entry and trade management, and they were my first account. They currently only offer 20 pairs ( which is fine for a beginner ), and their charting is OK, having recently added Accucharts. Their spreads are generally wider than Oanda. As a long term trader I do not have this obsession with spreads that most traders do - to me the odd pip here or there is of no consequence whatsoever. Far more important is the underlying stability of the company - just remember, brokers can go bust just like any other company so check them out carefully.