How To Choose A Forex Broker
We are often asked which Forex Brokers we would recommend and why? Choosing a Forex Broker or finding the Best Forex Broker to suit your particular needs can be confusing and often even overwhelming, when you are learning how to trade Forex or other financial instruments.
Firstly, we would offer the following 20 or so pointers when choosing a Forex Broker:
- Choose a broker in your own country if possible.
- Ensure that the Forex Broker is registered and fully regulated in your own country e.g. the UK and regulated by the Financial Conduct Authority (FCA). You might want to consider a Forex Broker based in Australia to get around the new ESMA Leverage restrictions.
- Ensure that all client monies are segregated from the Forex Brokers own company money, this will be the case if regulated in the UK.
- Ensure the Forex Broker uses the Electronics Communications Network (ECN) with its’ trading platform. (An automated system that matches buy and sell orders for securities such as Forex. An ECN connects major brokerages and individual traders so that they can trade directly between themselves without going through a middleman).
- Ensure the Forex Broker’s trading platforms offer the relevant charting facilities and tools such as Metatrader 4 or 5 or their own bespoke trading platform if better.
- Do they offer you a Demo account to first check out the trading platform?
- How long is the Broker’s Demo account available for, before being closed? Many brokers only offer a Demo account for 30 days so you then have to re-open one to keep using the Demo platform.
- IMPORTANT: Are the Broker’s charts synced to the New York Close (5pm Eastern Standard Time) on the Daily chart. Many Europe based Brokers have their server set to Central European Time which is always 2 hours ahead of UK time (GMT or BST), if so then their charts are synced into the NY Close. Because CET is 7 hours ahead of EST. So when the New York markets close at 5pm, CET is midnight. The key thing is to make sure the Broker shows 5 Daily candles per week’s trading and NOT 6.
- Do they provide a decent range of financial instruments to trade such as Forex majors, minors, exotics, commodities (such as Gold, Silver and Oil) and Indices (DAX, FTSE, Dow Jones, S&P500 etc, Cryptos)? Do they offer at least a chart of the USD Index and Bonds. Do they offer Futures?
- Do you want a Spread Bet facility or not, remember that when spread betting you are essentially trading against the broker and this also adds a middleman into your trading model. Our view is that whilst Spread Betting can be very profitable and at the time of writing is Tax Free for UK Residents, until you can consistently make your Capital Gains Allowance every year (currently £11,700 in Tax Year 2018-19) then stick with a standard Broker model whilst you learn how to trade Forex. Once you are consistently profitable then that would be the time to consider opening a Spread Betting Account..
- Check out the Spreads/Commissions (if any) offered by the Broker – are they competitive?
- Check out the overnight Swap Rates – are they competitive?
- Do they offer Micro and Mini-Lot trade position sizes as well as Standard Lots? When you eventually start trading a Live account, we recommend you start by trading Micro-lot sizes, where you would be trading cents per pip and the smallest trade size offered would be 10 cents a pip. If you choose to Spread Bet then make sure the Forex Broker offers the facility to trade pence per pip and normally the lowest trade size would be 10p a pip.
- Do they offer a ‘No Negative Balance Guarantee’?
- Does the Forex Broker provide excellent customer support when you need it?
- How easy is it to withdraw your money from any trading accounts you may open or transfer money between multiple accounts?
- If relevant, does your Introducing Broker (IB) provide a consultation service to help you find the most suitable or best Forex broker and do they offer to act on your behalf should there be any problems in the future with the selected broker? It is worth noting that if you go straight to the Forex Broker of your choice, to cut out the IB, then your chosen Forex Broker will take any commission/cash back due to be shared between you and the IB. Using a decent IB will normally get you a better deal.
- Does the Forex Broker provide an online portal to allow you to access your accounts, make deposits and withdrawals and move money between trading accounts etc?
- Does the Forex Broker provide Cash Back based upon your trading volume and /or reduced spreads?
- Nice to have: Does the Forex Broker pay interest on your Trading Account Capital?
- Nice to have: Does the Forex Broker offer decent trading education online and at live events etc?
When taking all the above into account we would recommend the following Forex Brokers that are listed at the website link below because they have been scrutinised and checked, but in no particular order. Plus you can get advice and help to choose the right Forex Broker for you, from the website concerned:
Top Trading Tip: Don’t rush into choosing the first Forex Broker that you come across, spend some quality time doing some research, get advice from a decent Introducing Broker (IB) and make a list of the things that you would need/want and like of a Forex Broker.