With so many forex brokers offering online forex trading to clients around the globe, it can seem overwhelming having to go through all these brokers to see which are the best forex brokers for you. Hopefully this forex broker guide will help you to understand more about the choices available to you and what to look for, so that you can choose a forex broker which meet your individual needs.
Choosing a forex broker
Choosing a forex broker can seem like an even more daunting task if you do not know what you should be looking for.
In this article, we will take look at some of the most important factors that I believe are worth considering when you choose a forex broker.
Regulation
One of the most important things for me when choosing a forex broker is to make sure that they are regulated by a respected authority. I would always look for a top tier regulator such as the Australian Securities and Investment Commission (ASIC), Cyprus Securities and Exchange Commission (CySEC) and the Financial Conduct Authority (FCA) in the United Kingdom.
Using a regulated broker can give peace of mind that they must comply with strict rules and regulations that are put in place to protect traders. Most experts and professional would not trade with an unregulated broker as they do not have the same protection should something go wrong.
Spreads
When you enter a trade on a currency pair, you will need to pay the broker a spread which is the difference between the bid and ask prices. If you use a broker with tight spreads, this can help you to save on trading costs in the long term.
Some trading strategies such as scalping systems, rely on tight spreads. Swing trading strategies where you hold a position for a day or more tend not to be as spread dependant but never the less, a lower spread can help lower your overall costs.
You may also want to consider if your trading strategy requires fixed or variable spreads. Fixed spreads tend to come without a commission charge but are marked up and thus generally tend to be higher than variable spreads which come directly from the interbank market. However, variable spreads will most likely have an additional small commission charge.
Commissions
Most forex brokers will charge a commission for every trade you place with them. The lower the commission, the more you can save in the long term. Some scalping strategies which only aim for a few pips need to be especially aware of the commission charge as it can significantly eat into profits.
There are some brokers who provide commission free trading but it is worth noting that they can often compensate for this by increasing spreads to cover costs. Make sure you shop around for a forex broker that offers a commission that fits within your money management plan.
Trading platforms
Forex brokers provide you with an online trading platform which is where you can place and manage your currency positions. These platforms can vary from broker to broker so it is important to make sure there is a platform available which is convenient for you and has all of the features that your trading style requires.
Most forex brokers will offer the popular MetaTrader platforms for desktop, web and mobile devices. MetaTrader is well known as being intuitive and having an abundance of built-in trading tools. It is used by millions of traders all over the globe and of all experience levels. It is user friendly enough for beginners whilst has enough advanced functionality to satisfy the needs of the more demanding trader. MetaTrader is one of the best forex trading platforms in my opinion.
Trading tools
Whilst the trading platforms tend to have more than enough trading tools for the needs of most retail traders, professionals may require some specific tool. It is important therefore to check that the broker you choose has the tools that you need. This can include FIX API connectivity, sentiment analysis, PAMMs, trading calculators, economic calendars, etc.
Trading instruments
Forex brokers can offer a range of minor, major and exotic currency pairs. Most brokers will offer popular currency pairs such as the EURUSD and GBPUSD. Other more exotic currency pairs such as the USDTRY, USDMXN and EURHUF, may not be available on all brokers.
You should check that the broker has the currency pairs and any other markets that you wish to trade now or in the future. Along with currencies, forex brokers can also support trading on stocks, indices, commodities, precious metals, energies, bonds, cryptocurrencies, ETFs and more.
Educational materials
If you would like to improve your trading skills and knowledge, you should check that the broker has a selection of educational resources. This can include trading guides, tutorial videos, courses, market analysis, webinars and seminars. I always prefer when a brokerage provides some form of trading education as it can show that they care about their clients being informed traders.
Funding options
Each forex broker can have a variety of different methods to make deposit and withdrawals to and from your trading account. You will usually find that most offer bank transfer along with credit/debit card. Many also support online payment processors including Skrill, Neteller and PayPal. It would be a wise idea to ensure that they have a funding option that is most convenient for you.
Customer support
This is one of the most important things to consider when you choose a forex broker. They can have the best trading conditions in the world, but that wouldn’t really matter if the customer support team was either rude or irresponsive.
Most brokers will offer around the clock support via online chat, telephone and email. Some also provide multilingual support for traders around the globe. You should check that they provide a contact method and operate during hours that are suitable for you. I like to test out the customer service by sending a few questions through to check that they will respond in a prompt, polite and efficient manner.
Choosing a forex broker summary
Hopefully you now have a good idea of what to look for when choosing a forex broker to trade online with. To reiterate the key points, they are regulation, spreads, commissions, platforms, tools, instruments, education, funding and support. I have hundreds of forex broker reviews where you can see a detailed analysis on the above and compare forex brokers.
Self-confessed Forex Geek spending my days researching and testing everything forex related. I have many years of experience in the forex industry having reviewed thousands of forex robots, brokers, strategies, courses and more. I share my knowledge with you for free to help you learn more about the crazy world of forex trading! Read more about me.
