Of course, the first consideration when selecting a forex broker involves determining whether or not your funds will be secure in the broker's hands.

Sending your money to an online forex broker based in less well regulated places like the Bahamas or Panama may not be in your best interests, for example since you would have considerably less legal recourse in case a problem arises.

Choose a Reputable Broker

Avoid putting your funds at risk of loss from fraud by picking a good and reputable retail forex broker before you begin to trade. Basically, avoiding forex brokers with a dubious base of operations - such as Panama, for example - will help narrow down the search for a reputable broker considerably.

Furthermore, be aware that opening an account with a forex broker who has taken the trouble to register with any of the above regulatory agencies - while a good idea - will still not guarantee that the company is legitimate or that your trading funds are safe.

Nevertheless, by having a regulatory agency involved, a certain amount of recourse exists for a broker's clients if the company goes belly up or other problems develop that put the return of your trading funds at risk.

Essential Services a Forex Broker Should Provide

Basically, a qualified forex broker will provide a reliable trading platform, 24 hour customer support during forex trading hours, charting and technical analysis tools, access to quality forex news and commentary, competent order execution, competitive dealing spreads and a wide choice of currency pairs to trade.

Brokers offering any less than the above should not even be considered in the selection of a forex broker since traders now have plenty of online retail forex brokers to choose from.

Performing research into your broker before beginning to trade with them can literally save you thousands of dollars, so finding the right broker should be a top priority for you when setting up your forex trading business.

Brokers and Dealing Spreads

Remember, forex brokers usually charge a commission on deals by taking part of the bid offer spread, so the tighter their spreads, the more money the trader saves which can make a big difference for active traders.

Brokers that fail to answer questions or that put you on hold when you try to call in are best avoided. Also, if the broker is known for giving requotes, then they should also be avoided since this is a problem which can really cost traders money over the long term.

Withdrawals and Deposits

Make sure that the forex broker's withdrawal and deposit policies agree with you. Some brokers charge exorbitant fees for bank or wire transfers, while some will even take PayPal.

Also, some brokers can make you wait an agonizingly long time to withdraw your funds. Make sure its clear before you give them your money.

Beware Unusual Trading Rules

Beware of forex brokers with arcane trading rules, such as giving you a minimum time to hold a position.

Also, some questionable brokers specify that you cannot "pip hunt" when trading through them. "Pip hunting" describes any quick profit short-term trading strategy such as scalping.

Such a broker might allow the client to make substantial profits which it then confiscates on the basis of the violation of their "pip hunting" rule.

Avoid Brokers That Requote

This involves the broker re-quoting the market after you have entered an order, moving the market away from your order in most cases.

Some brokers use this ploy constantly against their clients to line their pockets at their client's expense. Make sure the broker you select has a no-requote policy.

Risk Statement: Trading Foreign Exchange on margin carries a high level of risk and may not be suitable for all investors. The possibility exists that you could lose more than your initial deposit. The high degree of leverage can work against you as well as for you.