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How to Choose a Forex Broker

Here are the five main factors that you need to consider when choosing a Forex broker!

choose forex broker

1. Pick a regulated and secure Forex broker

Trust is the most important currency of all and that’s even more true when it comes to a giving your hard earned money to someone you don’t know. How can you make sure that they won’t trick you in some way? Is there someone reputable that you can ask?

When it comes to Forex brokers your best bet is to find one that is officially regulated. Regulators are usually national organizations attached to government that oversee the activities of financial companies, banks, funds and brokers.

Here’s a list of the most prominent ones. Brokers from other countries also try to get licenses from them:

  • U.S.: National Futures Association Association (NFA) and Commodity Futures Trading Commission (CFTC)
  • UK: Financial Conduct Authority (FCA)
  • Germany: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFIN)
  • Canada: Autorité des marchés financiers (AMF)
  • Australia: Australian Securities and Investment Commission (ASIC)
  • France: Autorité des marchés financiers (AMF)
  • Switzerland: Swiss Federal Banking Commission (SFBC)

2. Check the full list of account details

There is a long list of things that cost money when it comes to trading and your account type and details all have to be taken into consideration. Here’s the complete list of factors that you’d better check before making that deposit to your Forex broker and plunging into the highs and lows of the markets:

  • Costs for deposit & withdrawal – are they fixed sums or a percentage of what goes in and out
  • Minimum deposit and positions – there are different interpretations but usually smaller minimums are better because they allow you to risk less and have more trades
  • Leverage and margin – more is less, your leverage is just like a loan. Margins are critical too because they can shorten your number of trades and pull you down into a negative balance.
  • Commissions – although they are getting lower and lower, it’s still important to know how much you pay to open and/or close a position.
  • Spread – the difference between the buy and sell price is how many brokers get most of their money. They can be fixed or floating and high or low – go for fixed and low but keep in mind all other costs.
  • Overnight costs – apart from several exceptions, almost all brokers charge an amount for keeping a position open until the next day. This erodes winning positions and can be the difference between a winning and losing trade.

3. Be sure if your Forex broker wins when you lose

Brokers can be divided into two types: Dealing Desk and No Dealing Desk. The first (also called a market maker) tries to match your trade with someone who has taken the opposite direction but if that isn’t possible they fill in. They usually have higher spreads and are more prone to slippage (delays in quotes) as well as requotes that don’t match the real market and can be used to push a position into a loss.

No Dealing Desk brokers, also called ECN or STP brokers, connect you with the real international currency market. They also profit from the spread and from commissions for every trade but spreads are generally lower.

4. Know what platform the broker is offering

This is the car that you’ll be using to drive on the forex market highway. Choose wisely between the different trading platforms offered by brokers because it will limit and enhance your results.

Evaluate what the Forex broker has to offer – is it their own proprietary platform or one from a dedicated platform company like Metatrader, cTrader and Ninja Trader. Everyone has their own criteria about what is most important but the variables here are the number and type of instruments available for trading (some might offer cryptocurrencies while others don’t), the chart types and indicators can vary in number and appearance and the mobile versions can be good or bad.

5. Customer Service

Last but not least, because there will come a moment when you have to ask a question or will want to know more details about something and a good customer service that is client-oriented can make the difference. Find reviews of how helpful the Forex broker’s client facing people are and take that into consideration when making your final assessment of where to deposit and trade.

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