1. Reputation This may seem like an obvious place to start but surprisingly this is quite often overlooked in people’s quest for profits. A simple place to start is to check out several Forex forums to see what other traders have said about their experiences with brokers and this will help you to get a good idea of the general user experience as well as details about the level of service and support you are likely to get from particular brokers and probably most importantly, payments.

2. Foundation and legitimacy Most Forex brokerages are usually either associated with or are part of a bank or large financial organization but with the rising number of online Forex brokers there are a number of checks concerning their foundation that should be made. Brokerages that are associated with large financial organizations or banks are not only backed up by funds from their Forex trading but also have other income streams and investments which means they don’t have all their eggs in one financial basket. Having fund insurance against fraud or bankruptcy is good to have as this means you aren’t relying just on being paid from their backup investments which might otherwise mean a longer wait for your money should they be experiencing any financial difficulties. Are they registered with the appropriate regulatory organizations? Legitimate Forex brokers should be registered with the Futures Commission Merchant (FCM) and regulated by the Commodity Futures Trading Commission (CFTC) Note: It is also worthwhile checking out any parent company’s website for any financial information that can assure you that your funds are covered and secure.

3. Execution Quite simply this is how they conduct their business. There are two main business models that Forex brokers use, Electronic Communication Network, (ECN), and Market Maker. The ECN model is one where a Forex Broker provides a marketplace for Market Makers, traders and banks to enter their competing bids and offers into this trading platform and have them filled by liquidity providers. All trades made in this environment are made in the name of the ECN broker which means that your trades are all performed completely anonymously. The Market Maker model provides pricing and liquidity for a particular currency pair and then stands ready to buy or sell that currency at the quoted price. A market maker takes the opposite side of whatever your trade is and has the option of either holding that position fully or to partially offset it with other market traders in order to manage their aggregate exposure to their clients. Other aspects of the Forex brokers’ execution of their business are: Do they use automatic execution for trades? If they do not have this as part of their model then how fast is their average order execution? How much are you allowed to trade without having to request a quote? Do they offset client trades?

4. Trading Platforms Forex trading is a rapidly moving environment and it pays to have a home computer that can keep up with the processing involved because time lag could mean you are not trading on the latest figures. If your current computer is not as up to date as you would like it to be and you are not in a position to bring it up to a faster processing specification or replace it with a faster workstation, then it is worth considering only using Forex Brokers that operate the ECN platform because this software requires less processing power to run at full speed as it is simpler software Some Forex brokers have restrictions on the number of currency pairs you can trade so check how many of these you are allowed to trade. Get used to the trading platforms and the features they have, such as one click trading, mobile trading, orders types and other features. The best way to do this is to sign up for a Demo account as these use the same software you would use with a live trading account. These accounts are free and if you are considering several Forex brokers then why not try them out with a demo account to see which one you prefer?

5. Account Size If you are starting out you aren’t going to go gungo-ho and open large live trading accounts that have high minimum trades, but having said that you might want to increase your amounts later and so need some flexibility. Ascertain what the minimum trade size is as well as whether or not you can adjust the standard lot traded. Unsurprisingly the minimum account opening balance a broker requires is important in deciding which broker to use. It is also very worth checking whether or not unused equity will earn you interest.

6. Spread The spread is the difference between the ask price (the price you buy currency at) and the bid price (the price you sell it at). These are quoted in pips. An example of this is: If you are trading the currency pair US dollars and Euros you might see a spread like this, 1.2700/05, the spread is the difference between 1.2700 and 1.2705, or 5 pips. In order to make the most from your trades you need to know the brokers spread so find out if they use a fixed or variable spread? How tight is the spread? Is the spread larger for small accounts? Note: Fixed or variable? This choice depends on your trading pattern. If you make trades only or mostly influenced by news announcements–when markets tend to be volatile–you might be better off with fixed spreads. Although this is only if the quality of execution is good. Some brokers have different spreads for different clients. Clients with larger accounts or that make larger trades can receive tighter spreads. Clients that are referred by an introducing broker might receive wider spreads so as to cover the costs of the referral. Other brokers though might offer everyone the same spread regardless of whom they are or the size of their account. It can be difficult to determine a company’s spread policy so the best way to find out is to try various brokers, or talk to other traders who have, and of course check out the forums.

7. Slippage Slippage is the time between when your order is placed and the transaction is completed, so find out how much slippage can be expected for fast and normal moving markets.

8. Commissions This is probably the simplest thing to find out. Check your prospective Forex broker’s commissions to see if they are built into the spread, as with most Market Makers, or if they charge a separate commission.

9. Margin The margin is the amount of deposit required to either open or maintain a trade position. Margins are either “free” or “used”. A used margin is the amount which is being used to maintain a position that is open, and a free margin is the amount that is available to open a new trade position. Check what the broker’s margin requirement is. Is this margin the same for both standard and mini accounts? Does the margin change for different currency groups or change for different days of the week?

10. Rollover Policy Rolling over will either accrue you interest or cost you interest depending on whether you bought a currency with a higher interest rate or sold a currency with a higher interest rate. Check the broker’s conditions or requirements regarding earning rollover interest. There may be a minimum margin requirement before can earn interest on overnight positions so make sure you know your position

(Rewrites, adds analyst comment.)

By Patrick McGroarty
Of DOW JONES NEWSWIRES

BERLIN (Dow Jones)–German industrial production fell 1.8% in October from the previous month, an unexpected drop that suggests the recovery in output will proceed only moderately, the Economics Ministry said Tuesday.

Despite the decline, driven by weak production in the energy and construction sectors, “the trend for industrial production continues to be aligned distinctly upward,” the ministry said.

But it predicted that production increases in the fourth quarter are likely to be more modest than before.

Economists in a Dow Jones Newswires survey had forecast an October production increase of 1.0% on the month, in seasonally adjusted terms.

The October drop is an abrupt shift from an upwardly revised 3.1% monthly increase in September, driven by the manufacturing sector.

Manufacturing orders also fell unexpectedly in October, data from the ministry showed Monday, by 2.1% from the previous month. The drop, after seven months of increasing orders, was led by weakness in the auto industry.

Analysts said the order and output figures didn’t discredit broader signs of recovery, but suggested the pace will be slow and uneven.

“With a worsening labor market and the ongoing credit crunch, setbacks are almost pre-assigned,” said Carzten Brzeski, an economist with ING in Brussels.

Germany’s economy is expected to contract around 5% in 2009, government officials have forecast, its worst performance in 60 years.

The crisis is evident in annual figures for industrial output and insolvency. Production fell 12.4% in October in workday-adjusted terms and 12.1% in unadjusted terms, the ministry said.

And earlier Tuesday, Germany’s statistical office said insolvencies were up 17.4% in September on the year, accelerating from August’s 12.3% increase. It also predicted a 16% annual rise in insolvencies for 2009 as a whole.

The government has fought the slump with EUR80 billion in fiscal stimulus. An additional package of EUR8.5 billion in tax relief for 2010 is moving through parliament.

In addition, Chancellor Angela Merkel wants to extend a short-shift work program that has been credited with restricting unemployment.

Industrial output in October was weakest in the energy sector, falling 3.4% on the month after a 0.3% increase in September.

Construction output fell 2.4% in October, less than the 2.7% decline in September.

Manufacturing output also declined in October by 1.6% in seasonally adjusted terms, a sharp reversal after a 3.7% monthly increase in September.

Production of capital goods–equipment used in the manufacturing process–swung to a 3.5% decrease in October after a 6.6% increase in September.

Consumer goods production also dropped in October, by 1.9%, after 2.7% growth in September.

Growth in the output of intermediate goods, meanwhile, slowed to 0.6% on the month after a rise of 1.2% in September.

Average industrial production for the September to October period rose 3.0% from July-August.

The ecPulse.com analysis team comments: “It generally inclined versus the dollar from its lowest at 1.4779 to trade again around 1.4845 areas, yet we can see that the pair failed in trading above 1.4867 pressured by the 1.4860 resistance which we did not see any hourly closing above it; therefore, despite the gains the euro managed to acquire today the general trend remains to the downside as far as trading is stable below the resilience of the 1.4905 resistance.”

A risk aversion wave started in the Middle East combined with a new positive sentiment towards the interest rate outlook in the U.S. is fueling the greenback’s appeal in trading markets in a way it hasn’t been for months, and the dollar may advance further if such sentiment gains confidence among traders.

EUR/USD traded at 1.4806 as of 11:15 GMT from an opening rate of 1.4877 yesterday. AUD/USD traded at 0.9084 from 0.9136.

Australian Dollar AUD 76.2 77.2

Bahrain Dinar BHD 219.7 222

Canadian Dollar CAD 78.1 79.1

China Yuan CNY 12 13.5

Danish Krone DKK 16.7 17.1

Euro EUR 124.6 125.6

Hong Kong Dollar HKD 10.65 10.85

Indian Rupee INR 1.7 1.8

Japanese Yen JPY 0.94 0.95

Kuwaiti Dinar KWD 286.25 289

Malaysian Ringgit MYR 23 24.5

NewZealand $ NZD 59.55 60.55

Norwegians Krone NOK 14.75 15.05

Omani Riyal OMR 215.25 218

Qatari Riyal QAR 22.75 22.95

Saudi Riyal SAR 22 22.2

Singapore Dollar SGD 59.6 60.6

Swedish Korona SEK 12.05 12.35

Swiss Franc CHF 82.8 83.8

Thai Bhat THB 2.4 2.6

U.A.E Dirham AED 22.56 22.76

UK Pound Sterling GBP 136.8 137.8

Asia maintains the risk-on momentum with gold hitting new highs
Tonight’s ADP employment report may set the tone into Friday

MAJOR HEADLINES – PREVIOUS SESSION

US Nov. ISM Manufacturing out at 53.6 vs. 55.0 expected and 557 prior
US Nov. ISM Prices Paid out at 55.0 vs. 65.0 expected and 65.0 prior
US Oct. Construction Spending out at flat m/m vs. -0.5% expected and revised -1.6% prior
US Oct. Pending Home Sales out at +3.7% m/m vs. -1.0% expected and revised +6.0% prior
US Weekly ABC Consumer Confidence out at -45 vs. -47 prior
US Nov. Total Vehicle Sales out at 10.92m vs. 10.50m expected and 10.45m prior
JP Nov. Monetary Base out at +3.8% y/y vs. +4.4% prior

The high correlation between EUR/USD and EUR/GBP is likely to weigh on the Euro, says Rudolph: “EUR/USD remains capped by its 1.50 resistance area and should fall back to the 1.4754/39 region (55 day ma and uptrend), because of the high correlation between it and EUR/GBP, the latter is also expected to slide further towards the 61.8% Fibonacci retracement of the June-to-October advance at .8787.”