Forex Brokers – Choosing a Broker to Start Trading With
And What To Look For in Your Broker Selection
Choosing which broker to trade is one of the most important decisions you have to make before you start trading Forex.
There are so many different choices out there so this process will be time-consuming, but finding yourself a good broker that suits your needs will protect you from any major headaches in the future.
Lucky for you we have the perfect guide for helping you to choose the right Forex broker for you, what to look for when choosing a broker and a range of in-depth independent reviews.
Before you begin your search, you should know how to compare Forex brokers. This guide will walk you through exactly what you need to look for, what is the difference between each broker and why it matters.
Security and Regulation
The first and most important qualification is the security of your money-investment. Probably you wouldn’t want to hand over hundreds or thousands of euros to a company which you can’t trust. Therefore, you should check to see if your broker of choice is registered with any regulating authorities. However, just because it writes on their website that they are regulated doesn’t make it so. To be 100% sure and safe, you should check the websites of the regulating bodies themselves. It is also important for forex brokers to be well-capitalized.
Here is the list of countries with their corresponding regulatory agencies:
- 🇦🇺 Australia: Australian Securities and Investment Commission (ASIC)
- 🇬🇧 United Kingdom: Financial Services Authority (FSA)
- 🇺🇸 United States: National Futures Association (NFA), Commodity Futures Trading Commission (CFTC)
- 🇨🇭 Switzerland: Association Romande des Intermédiaires Financiers (ARIF), Swiss Federal Banking Commission (SFBC)
Minimum Deposit and Trade Sizes
Some brokers require a minimum deposit of $10.000 (or equivalent) in order to open an account. There are also brokers which allow you to open an account with as little as $10.
Money-Risk management is an important aspect of any type of investment so minimum trading size is another subject to pay attention, especially for smaller accounts.
Spreads and Commissions
Usually, forex brokers offer commission-free trading. Brokers make their money on the spread (The difference between the bid and offer prices). Since spreads affect your profit we can say that the tighter the spread, the better for you. For example, consider that you are trading 1 mini lot (10.000units or 0,1 lots) USD/JPY and the spread your broker offers you is 3 pips. This means you are paying $3 per trade. If you trade 3 times/day that means roughly $9/day, $180/month, $2.160/year. If you instead had a broker that offers you 1 pip spread then you would be paying $1 per trade, $3/day, $60/month, $720/year. As you can see there is a huge difference.
Some forex brokers allow you to trade only major pairs, such as EUR/USD, GBP/USD, USD/CAD, USD/CHF, AUD/USD, USD/JPY etc.
Some brokers give you more flexibility as they have a much wider range of tradable instruments (Gold, Silver, Oil, CFDs etc) in addition to the major currency pairs.
Variety of Instruments
Some forex brokers allow you to trade only major pairs (such as EUR/USD, GBP/USD, USD/CAD, USD/CHF, AUD/USD, USD/JPY etc). Some brokers give you more flexibility as they have a much wider range of tradable instruments (Gold, Silver, Oil, CFDs etc) in addition to the major currency pairs.
Before you open a live account or during trading, you may have plenty of questions to ask. Therefore, It is very important that your broker has very good customer service (and after-sales support). Do not hesitate to contact them. Ask everything you can, if you can find it you’re guaranteed to find it on our website or ask via our chat service.
Tips for Choosing a Broker
Choosing a broker is not an easy task especially for beginners as they mostly don’t know which online broker is best and one wrong decision can move you away from exciting new income opportunities.
Beginners even don’t know what to look for when choosing a broker. In this guide, we tried to help traders how to choose a broker and what is the best brokerage account for beginners.
The online broker should align with your investing style and charge the least amount of money for the services. The broker should offer a high-quality platform with several tools and trading instruments. The educational material along with payment methods and margin interest is among the key factors that investors look for when choosing a broker.
It’s also vital to understand that there are two types of brokers: full-service brokers and discount brokers. The full-service brokers do much of the research for the investors and offer recommendations and individual advice. Discount broker, on the other hand, only provides a trading platform; the investor takes his own investing decisions.
How to Choose a Broker?
It’s crucial to understand your investment needs before selecting any brokerage platform. Understanding your needs means what are your investing goals and where you stand in the learning curve.
1: Understanding your investing needs
The investing needs of beginners are significantly different compared to the investing needs of advanced investors. Beginners always prioritize features like easy access to support staff, demo trading accounts, basic educational resources, and comprehensive glossaries. The beginners also require the recommendation of experts and analysts combined with fundamental and technical data to start trading.
Meanwhile, advanced investors always have different requirements than beginners when choosing a broker. Advanced investors look for the quality of trading platform that includes advanced charting capabilities, the ability to trade derivatives, conditional order options and spreads.
2. Regulation and Trust
Once you understand your trading requirements, the investors are suggested to look for only regulated brokers that are complying with regulators’ policies. This is important because with the emergence of the online trading platform the number of spams is also increasing at a robust pace. The investor should also review the feedback of other investors about that platform.
3. Fee and Costs
Fee and costs play a key role in your overall returns. Therefore, it’s important for investors to know what they are paying against brokerage services. Some investors like to use a platform that offers cheap brokerage services while others like to pay some premium if the broker is offering innovative trading tool. However, paying as low as possible in fee and cost is the best way to enhance the returns.
Besides the trade execution fee, there are several other fees and hidden costs that you need to look for when choosing a broker. For instance, some brokers require traders to maintain a minimum balance of $500 to $1,000 to begin trading. Deposit and withdrawal fees can also make a big difference in your overall returns. Some brokers also charge annual or monthly account maintenance fee; the investors should also review the trade commission percentage when selecting a broker account.
4. Trading Platform
The trading platform plays a big role in enhancing returns and trade executions. This is because the trading platform is a trader’s window to the market; this is the place where the investors buy or sell stocks and other securities. Traders always like robust, secure and powerful trading platforms with enticing trading tools and features.
The majority of brokers offer proprietary trading platforms. The investors can gauge the trading platform by using the demo accounts before using real money. Experts say proprietary trading platforms offer a bunch of options and features that can make a big difference in trading experience.
Some platforms like MetaTrader 4 use third-party trading platforms. These types of platforms offer a range of features such as market orders, automated trading, and advanced charting tools.
The brokers should also offer mobile trading apps along with web-based platforms in a current environment. This is crucial because with mobile apps you can easily manage trades wherever you are. Some apps permit investors to use charting tools and other key features through their mobile apps.
The web-based trading platforms are gaining popularity over the past couple of years because you can access the platform from any computer with a web browser.
Investors always like to get real-time quotes directly from the trading platform instead of moving to another website. Vanguard’s web-based platform, for example, provides real-time data in its Ticker Profile pages, but it requires manual refreshing. The option of customized watch lists and alerts are important for advanced investors.
Types of orders are essential when it comes to choosing a broker. This is why experts suggest investors go through the motions of placing a trade and take a look at what types of orders are offered. The majority of platforms offer stop-limit orders. Some platforms also offer trailing stop orders or market-on-close orders.
Indeed, some platform permits investors to place an order that can be executed at any time during trading hours or good-until-cancelled. Other orders types include fill or kill and Immediate or cancel. Some platforms permit investors to trade the post and pre-market sessions.
5. Payment Methods
Deposit and withdrawal options are significantly important because traders always like to make instant transactions based on the environment. The way you can deposit and withdraw funds varies with each broker. You need to look at the payment options and security measures before choosing any broker for trading. The most popular methods include:
• Credit/debit cards
• Bank wires
• Digital wallets e.g. Skrill, Neteller, Webmoney, Sofort, GiroPay, PayPal, China UnionPay, etc.
6. Customer Service
Traders always have a lot of questions that they want to be answered before depositing money. In fact, traders always try to reach the customer support team for various types of quires such as payments, trade execution, and orders. Some brokers offer live customer support while others take a few days to answer the queries. To decline the pressure on the customer support team, the majority of brokers have established a frequently asked question segment – where they try to answer all the general questions related to the platform, its features, and tools.
7. Markets Offered
The number of markets offered by the broker is crucial when it comes to choosing the best broker. The majority of brokers now a day permit investors to trade various types of assets including, stocks, bonds, indices, commodities, and currencies. However, the difference between each broker is based on the number of instruments in each asset class. Make sure that all of your favorite stocks are covered by the broker if you are planning to play with stocks. Similarly, forex and ETF investors should also first check their targeted assets before selecting a trading platform.
8. Other Benefits
There are several types of perks that brokers offer to their clients. These benefits include research and educational material along with low commissions during the promotional period. Webinars and e-books are among the perks that brokers offer to traders.
9. Charting Feature
Once you inspected all the above key factors, it’s time to dive deeper into the platform. Charts are among the most important feature for advanced and even new investors. Some platforms offer technical indicators and charts and permit investors to access key data. The technical indicators include relative strength index, simple moving averages, MACD, Bollinger Bands, and stochastics.
Begin the Application Process
Once you are done with the broker’s selection process, you need to create an account to start trading. Below are the types of information brokers mostly require for account opening:
What You Need to Open a Brokerage Account
Make sure you have the following details handy when you’re ready to start the process:
• Date of birth
• Social security number (or taxpayer identification number)
• Telephone number
• E-Mail Address
• Driver’s license, passport information, or other government-issued identification
• Employment status and occupation
• Annual income
• Net Worth
While brokers collect almost the same information that is described above, they may differ based on the design from one site to another. The entire process will not take more than 15 minutes if have you all the required information.
Once you created an account, you are required to fund your account to begin trading. The minimum account balance requirement varies from broker to broker. We have already described the payment methods above in detail. Some brokers permit traders to create a regular monthly cash transfer from checking to a brokerage.