There are good places and bad places that beginners can do Forex trading. These good places are known to have a lower deposit which is great for new retail traders. Since the market participates with the biggest financial institutions and organizations in the world, an ordinary retail trader might find it hard to settle and obtain the success they ever dreamed of.
For instance, there is a minimum contract size that is being required which can be very hard to obtain by the single retail trader. This is where a contract for difference (CFD) comes in. To participate in this highly expensive market, you may use CFDs and leverage.
What is Contract for Difference (CFD)?
It is a process of buying a currency pair at a much smaller volume. For instance, you need to invest $100,000 to take a standard lot of EUR/USD. But this huge money is totally impossible for small retail traders. But don’t fret. There is still a way to join the market and this is thru buying a portion of the whole lot size by using leverage.
For example, you are willing to put $1000 into your trading account and take 1:100 leverage. This way, your trading account will be like $100,000 (1000×100). This paves the way for retail traders into joining the market even with a minimum deposit of $1000.
The Best Places To Trade
You cannot casually pick a retail broker without checking its background first. The first thing that you need to consider when choosing a broker is its license and personality. Currently, there are different kinds of brokers to choose from. There are brokers suited for beginners and there are others that are highly recommended for professional traders.
ECN and STP Broker
Electric Communication Network (ECN) is a type of broker wherein all transactions take place only with the direct liquidity provider. As for brokers, they only act as a bridge between the liquidity provider and the trader. It also has commission charges.
One good thing about this broker is that it doesn’t manipulate the price. This means that the trader will have the same price as that of the over-the-counter market. The only downside with this broker is that they are hard to find. Some brokers claim to be ECN brokers but they are actually not. Therefore, if you want to trade with only the best and the most qualified ECN brokers, then you must check their license or if they are regulated by any government agency.
Market Maker Broker
They are the liquidity providers and not connected with any banks. But there is a risk involved in Market Maker Broker. They actually take trades against traders. By the time you lose, these brokers break again but when you make a profit, your broker gains nothing.
Moreover, there are Market Marker brokers who show false candles mainly to eat the profit of the trader. So, if you are someone who focuses more on the consistent growth of your account then this broker might not be the best option for you. But if you are still at the starting level and want to familiarize yourself with the market, then you can take on Market Maker brokers as they only require a very small deposit to do Forex trading.