There are a lot of things to think about when it comes to forex trading. One of the most important aspects of your trading will be the forex broker that you use. This is why it is so important to know how to choose the right forex broker for you. There are thousands of options out there, each one offering different trading platforms, spreads, commissions and more. So let’s take a look at some of the different features that the forex brokers are offering. So we can help find the best forex broker for you.
You will also find that some of the tips from successful traders are also about having the right broker for the job.
Types of Forex Brokers
There are two main types of forex brokers, those that are classed as market makers and those that are classed as ECN brokers. Market Makers used to be everywhere, they were the first to allow the retail trader to trade the global markets.
These sorts of forex brokers aren’t forex brokers, instead, they are larger financial institutes that allow you to trade, but the catch is that you are trading on their closed market, which only has them and their clients. This means that you are trading against the broker, not something that you want to be doing as it leaves you open to market manipulation, where the broker will add spreads or pips to catch you out.
The other sort of forex broker is an ECN or STP broker. STP means Straight Through Processing. What this means is that you place an order with them, it goes directly to the market to be filled by someone placing a trade in the other direction. This makes it far harder for a broker to manipulate the markets. Of course, it is still possible, but it is far less likely that this will happen during your trading experience.
We would always recommend that you go for an ECN or STP broker as their spreads are often lower and they often seem a safer bet against any sort of manipulation within the markets, they also often have much faster and more reliable trade execution.
There are many different account types available from most brokers. More often than not they are based on the amount that you deposit, the more you deposit the better the features you get, such as lower spreads or more cashback.
Once you have found the forex broker that you want, you will need to work out which account, of course, you can jump between them, starting on a lower account and as you grow, moving up to a new one.
Read carefully before selecting, as a good broker may not have accounts that suit you, we can’t give too much guidance on this, but consider the spreads, commissions, trading platform, and more that is available with each account.
Deposits and Withdrawals
One major thing to think about is how you can get your money into and out of the forex broker. Many like to use card deposits, so it wouldn’t help to join a broker that only accepts bank wire transfers. A new trend coming up is to use cryptocurrencies to deposit with, so if that s your preferred method, then you need to find a broker that offers that method.
Also, consider withdrawal times, many brokers are moving towards the “within 24 hours” timeframe which is fantastic, get your money out quick. We would avoid the ones that take up to 7 days, we don’t like that wait, and don’t feel we should need to either.
The final thing to think about is whether there are any fees for your deposit, avoid those like the plague, why would you be charged for depositing or taking out your own money, it should not happen don’t fall into this money-making trap.
Apart from the actual account, the biggest thing that a forex broker will offer you is a trading platform. There are a lot of them out there, the ones that you most likely would have heard of are MetaTrader 4, MetaTrader 5 and cTrader, those are the big three, if a broker does not offer any of those trading platforms then there is a good reason to avoid that forex broker.
Which of those that you go for will depend entirely on what your preference is. MetaTrader 4 has been around the longest and has a huge following of forex traders and developers creating new tools and supporting them. MetaTrader 5 is newer and many brokers are looking to move over to it, but that won’t fully happen for many many years. cTrader is the lesser used but still popular.
Ultimately you will need to look at each feature to decide which you prefer to use, once you know which trading platform you wish to use, you will need to look for a forex broker that offers that platform. The majority of these platforms also offer a web-based version too which makes them accessible pretty much anywhere you are.
There is another type of trading, something that has become a lot more popular over the past few years. That is of course social trading. Social trading is where you can copy what another trader is doing. This is a completely hands-off style of trading, which can be easy for those who do not want to learn or do not have much time, but it can also offer a higher risk as you have no control over your trades when you are copy trading.
It is important that once you know the sort of platform that you know. That you make sure that you choose a forex broker that offers that platform.
Currencies and Assets
You would probably think that most forex brokers would offer the same assets and instruments to trade. Seeing as they are all offering to trade on the same forex market. While they are all on the same market, different brokers will offer different assets to trade. This is mainly due to a couple of things, the cost of offering the asset to trade and the regulations that may be in place in the country the broker is based.
Different financial markets are available with different brokers. You will find some of the newer brokers are starting to offer crypto assets to trade. These are a big selling point for many as they allow you to trade 24/7 rather than having the usual weekend break in the forex markets.
Take a look at what assets each broker uses. If you are interested in metals, then look at the metals and the spreads offered on them. If you want cryptocurrencies then look for them. Just make sure that the broker you choose offers the assets you wish to trade.
Just keep in mind that different assets offer different trading conditions and amounts of market volatility. If you are new to trading, try and pick the more stable ones like EUR USD. Then try to avoid the rather more explosive exotic pairs.
Customer support is vital. The last thing that you want to happen is to work out that something doesn’t work or that it is wrong and not be able to get through to someone for help. Maybe your trading platform doesn’t function properly or the charts of the forex market aren’t working, or that you aren’t able to deposit. Whatever your issue is, you need to be able to get in contact with someone.
The best thing to do would be to simply jump onto the customer support chat or give them a phone. Do this before signing up or deciding that they are the broker for you. By doing this you can be sure that their customer support is there and functioning. This will help by giving you a little peace of mind.
Demo accounts are vital, make sure that you get yourself a demo account. Any respectable forex broker will offer a demo account for you to use and to test out their market conditions. All of the best forex brokers will offer demo accounts. Make sure you make use of them, there isn’t much more to say than that. A demo account will allow you to try the markets within your chosen trading platform. While they try to follow the market conditions as well as they can. They are never 100%, but will at least give you an idea of what to expect on a real account.
Leverage is all about how much you can borrow from a broker. If you did not have any leverage and wanted to trade with a forex broker. You deposit $1,000 and place a 0.01 lot trade. That is all that you could do. That trade would take up the entire margin that you have available on the trading account.
If you had the leverage of 100:1 then that $1,000 would be worth $100,000, meaning that you could place trades of a much higher value without the account being completely used up. Many brokers are now offering up to 500:1. However many regulations have come into place reducing the maximum available leverage, this will then depend on whether or not the forex broker is regulated or not.
It should be noted that trading with higher leverage will mean that you are also putting more risk on your account. This means that you can lose more as well as gain more.
The main thing that you will be looking at here is what the minimum trade size available is. The vast majority of forex brokers will offer you accounts with a minimum trade size of 0.01 lots which is 1,000 units of the base currency. Other brokers may have a minimum trade size of 0.1 lots (10,000 units) or even 1 lot which is (100,000 units).
We would always recommend going for brokers that offer 0.01 lots. Simply, since if you are at the start of your trading career and still looking for the best forex broker for you, then you most likely don’t have the thousands and thousands required to trade higher lot sizes yet.
Spreads are one of the aspects of a forex broker that will decide how expensive it is to trade with them. If a broker offers high spreads, then it can be quite costly to trade there while if they are low, then it can be a lot cheaper. The majority of brokers offering low spreads will then charge a form of commission.
Spreads will range from pretty much nothing up to 10 pips, which is incredibly high and expensive. You will want to aim for something relatively low, around 1 or 2 pips max for the EURUSD pair. Just be sure to check the commissions along with it to see how expensive the broker is.
Forex trading can be expensive, another aspect that can add to your trading costs are commissions. these are charged by forex brokers that often offer very low spreads. It is simply their way of making some money with each trade that you make. When you place a trade they will add a little commission, the industry average seems to be around $6 per lot traded at the moment, which in the long run is quite good.
If the broker that you are looking at has much higher commissions, such as $20 per lot traded, then they may not be the right one for you as those commissions will begin to add up and switching to a cheaper broker could save you a lot of money in the long run.
Every account has account minimums. This is the minimum amount that you can deposit into your account to start trading. These range from as little as $10 up to $10,000 or more. Choosing a forex broker that requires a large minimum deposit when you only have a small one available is not a good idea as you won’t be able to trade. Instead, look for one that has a minimum deposit requirement that is within your budget. This way you can ensure that you can fully sign up and begin trading with them.
Many forex traders recently have been looking to create small accounts. So the newer forex brokers offering lower deposit amounts are becoming more and more popular.
Several what people consider to be the best forex brokers offer a form of training or education. Granted that more often than not you will notice that the educational programs that are being offered are not the most comprehensive. They will teach you some basic things like what forex trading is, what currency pairs are and things like price action.
Honestly, it is probably not worth selecting your broker based solely on the training that they provide. Instead concentrate on looking at the trading platforms, trading conditions and markets that they are offering.
For many, automated trading is the way that they wish to trade, using expert advisors to place trades for you. If you are one of those people, then be sure that the broker allows you to use expert advisors to trade for you, <any brokers or at least some accounts won’t allow you to use them.
As a side note, make sure you select an account or forex broker that also allows you to hedge. This is when you place trades both as buys and sells on the same currency pair at the same time.
Forex broker regulation is a big talking point at the moment. Regulation means that there is an organisation overlooking the way that the broker is operating. Looking at their deposits and withdrawals, the market conditions, the way that they treat their forex traders and more.
There is a misconception though, that a regulated forex broker is a lot safer than an unregulated one. While this is true in regards to your funds should the broker go bust? It doesn’t necessarily mean that it is safer for everyday trading. Recently, there have been several high profile issues with regulated brokers, and of course a lot from unregulated.
There are a lot more scummy unregulated ones of course, but chose the right one, with a good reputation and that has been around for a while, then regulated brokers can be just as safe and reliable as regulated. If you are however in doubt, then we would suggest going for a regulated one. Even though they will come with a few additional limitations.
Many brokers offer bonuses to new clients or even existing ones. These bonuses can be from deposit bonuses, rebates on your trading or even a brand new iPad. The thing is these forex brokerage services are here for profit, so they won’t simply be giving money away.
If a forex broker is offering you an extra $1,000 on your deposit, be sure to check the small print. You may have to trade a ridiculous amount of trades to withdraw it. Some will even lock in your additional deposit to do it, so try not to be drawn in by the biggest and seemingly best broker on offer.
If you want a bonus, go for a rebate bonus. These simply reward you for trading on the broker’s trading platform. Each trade will get you a little back, this is more often than not catch-free and is simply deposited into your account either at the end of the trading day or at the end of the month.
How To Choose The Right Forex Broker Conclusion
That is a lot to take in, the broker that you go for needs to suit you. Look at the accounts they offer, the trading platforms, the currency pairs and assets available to trade, the deposit and withdrawal methods and speeds, how their dealing desk works, how many active traders there are, and more. There is no one forex broker meant for everyone. Each person will find a different one better suited for them. So it is all about researching and looking about what is out there and what suits your own needs.
Which forex brokers do you consider the best forex brokers and which one did you go for?