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How To Choose A Forex Broker?

How to choose a forex broker

Forex Brokers

Forex trading has increased massively in popularity over the last 10 years and as a result thousands of new forex brokers have come into the market trying to establish their presence. This has had a double effect for traders as if increased competition is generally a good thing, the risk of feeling confused is also there especially as some forex brokers simply cannot be trusted. Here at TopTradingPlatforms.co.uk we have done a huge work to help traders finding the right forex broker for you: by doing that we want to ensure you are going to avoid those potential nightmares that can follow the decision of going for the wrong broker.

As there are so many operators the range is huge: we are going from the highly reputable firms like AVA Trade who are able to handle accounts professionally and honourably to those that are rogue and that have engaged in very questionable pricing and order execution practices which goes into the verge of fraud like for example Refco. That company tried to hide $430 million in bad debts from investors and clients. In that case customer accounts were not even held in segregated bank accounts with traders that lost all their money even before being able to make the first trade. So with so many competitors it is paramount to keep the eyes open and use site likes TopTradingPlatforms.co.uk that do independently carry out reviews and only list reputable and regulated forex brokers.

It is important for a trader to take the time to choose what is the best forex online broker also because with so much offering there isn’t an online forex broker that fits all. Even if a company is fully reputable it doesn’t mean it will fit the style of all traders so there is also a subjective element to consider in the ‘due diligence’ or ‘vetting a vendor’ process. So urgency shouldn’t be there when picking the best forex broker and significant research will pay back overtime. So take your time, visit our forex online best brokers section, try their demos and than eventually make an educated decision when you feel confident in doing so.

The experienced staff at TopTradingPlatforms.co.uk have reviewed lots of top brokers and narrowed down the list to a group of worthy candidates. The process starts with a list of regulated brokers that gets ranked by our experts on several criteria. We than score the forex brokers and present the top list to you. Our suggestion is that you start off slow even when you have picked the final candidate: try their demo than do a small deposit and try them out by doing some small trade to validate your assumptions about that broker. There is no hurry and you shouldn’t be rushed. Trading is a very good things and especially on forex opportunities are always around the corner so don’t burn your chances early on.

How to choose a trusted forex broker?

The first thing to consider when selecting a forex trading broker is to determine if your funds will be secure in their hands. You should look at 4 different things: Domicile, Regulation, Reputation and Funding. Let’s look at those in a bit more details:

Domicile

If the forex broker is based in a big country where the financial regulations are strict and establish than you can be pretty sure as the legal infrastructure should help you recover your funds if there will be issue. It is also important to check that the address looks a reputable one. For example sending money to an online forex broker that is based in less regulated places of the world like for example Bahamas or Panama will surely carry more risks than a forex broker based in Europe or in the UK. So when you are narrowing down your forex broker list it is good idea to avoid those brokers that have a dubious base of operations. If it doesn’t look good, it is likely not good.

Forex Broker

Regulation

The second thing to look at when picking an online forex broker is to check how well it is regulated. If a company has taken the trouble to register with a regulatory agency and go through the process it is a good sign although by himself it doesn’t still give you a complete guarantee that that company is legitimate and that your funds will be in a safe place.

Having said if a regulatory agency is involved than at least you have the opportunity to recover some of your money if the broker will files for bankruptcy or if any other issues will develop that will put your trading funds at risk. It is really important to pick a regulated broker so again take off your list any broker that it is not regulated.

Reputation

The third point to check out is the broker’s reputation. Be sure to check the Internet for either favorable testimonials or continuing complaints about the brokers you have chosen for consideration. Especially look for reviews and comments where traders have had difficulties in withdrawing their funds. If you see evidence of this, don’t waste any more time on this broker.

Funding

As you might well guess your funds will be much more safe if a forex broker has a great financial backing and has been established for a while. So it is important to check that the broker is well funded or that he has a trusted owner or parent company. Finding this should be pretty straightforward as you can check in the ‘About Us’ section or the ‘Press Releases’ section of the broker’s website. Another thing you can do is visiting the website of the regulatory body in the region: those regulators do publish annual statistics on the capital funding for their licensees and once you know those figures you will be able to establish if it is adequate or not. Another key thing to check is if your broker is holding your funds in segregated accounts at Tier-One banks. This will show that they are doing a reputable business and are not messing with traders funds.

What are the broker’s offer and services to check when selecting a forex online broker?

Once you have decided which one is the broker that is worth trusting it is time to move to the next step and look at what are the services and offers you can expert from them. When we scoring an online forex broker we look particularly for 4 things:

  1. Spread Margins
  2. Execution of orders
  3. Trading Platform
  4. Support

1. Spread Margins

Forex brokers normally charge a commission on deals by taking part of the bid offer spread. Generally the tighter the spread is the more advantageous is the deal for the trader. If you have a very active trading strategy than looking at spread margin will be very important as they will eventually impact your bottom line significantly. .

2. Execution of orders

It is really important that you can execute orders with speed. You can try if the broker allows you to do that by using a demo account. Even if demo accounts will give you a good understanding of speed it might not always be a good barometer. You will need to also check reviews online to see if there are ‘slippage’ issues with the broker and if the broker is constantly re-quoting. Speed and effectiveness are very important and if you are not satisfied you should look for another broker!

3. Check out the trading platform

Another critical thing to do when selecting an online broker is to look at the broker’s trading platforms and also at the quality and quantity of online market information offered by the broker to its clients. Do they provide the latest and most efficient trading platforms like Metatrader4? Can the platform being downloaded easily? Can the platform be accessed via web or mobile and how good it is? Is the platform a proprietary design?

Those are just some of the questions that will help you assess how good the trading platforms suite offered by a broker are. Remember the trading platform is very important as it is ultimately where you will action your strategy. Despite there are some objective things to check it is also important that the trading platform will fit your trading style: a trading platform might be good for a trader but bad for another and so on. So it is not always very easy to decide the best forex trading platform as it depends what you want to do with it however there are some general parameters to look in order to narrow down the list.

4. Support

Since the forex market is open 24 hours a day around 6 days a week it is really important to check that you have the right customer support available in case you need to reach them. Considering that the competition is fierce you should aim for a broker that have a 24 hour support. Also it is good to check that their support is professional: they shouldn’t push you to trade more or any other marketing offers but simply support efficiently with your query.

What to watch out for when selecting an online forex broker?

Unusual Trading Rules

Some forex brokers might hide some arcane trading rules like giving you a minimum time to hold a position or denying to ‘pip hunt’.

Outrageous Marketing Claims

Some brokers might try to attract traders interest with marketing claims that are just too good to be true. When you see claims of huge returns, massive tight spreads and professional experts that will make you easily a fortune when trading on forex than something smells. As the competition is very high there are brokers that will simple say anything in order to get your initial deposit. Do not believe in everything you being told by be wary and skeptical as this is the best way to protect you from a potential fraud.

Avoid Brokers That Requote

Requoting is when your trading platform shows a price, the trader goes to deal on it, the platform makes them wait and than show another price which is normally worse. This is not acceptable so avoid those brokers that do that.

Excessive slippage on stops

Slippage can occur when a stop loss is not executed by a forex broker at the rate at which it was placed. The oder is than filled at a rate that it is normally worse than the one intended by the trader. Similar to requoting this is a very bad sign for an online broker.

Front running orders

Front running is happening when a broker is holding an order for an especially large commercial transaction and might trade it ahead of or ‘front run’ so that they make money on the back of client’s expense. It goes without saying it is a completely not acceptable practise.

Other considerations

Doing other checks is also suggested. For example you can go to the broker’s official website and read all the documents about their company so to get a clear understanding on how they operate. It is not a bad idea to give their customer service a call to see how professional they are and how they will be able to help out in case you need. Brokers that do not answer questions straight or that put you on hold for long time should be avoided.

Withdrawals and Deposits

Before you start depositing check that the withdrawal and deposit policies it is acceptable for you. Some brokers do charge huge fees for some transfers and others can let you wait very long time to withdraw your funds. Make sure you are aware of all those terms before give brokers any money.

Make use of bonuses

As the competition is fierce most brokers will offer bonus to new customers when depositing for the first time. Others will reward loyal customers. Make sure you don’t miss out as those are extra opportunities for you to reduce the risk and try out trading strategies.

Conclusion

As mentioned the online forex broker market is huge and there are so many operators out there that you need to spend some time in order to fully understand how trustable those are and what services they can provide. With an adequate due diligence you will be able to get the best deal and ultimately the forex broker that will fit your trading style. This will mean having your funds in a secured partner and also improve your chances of being a successful forex trading in the long term. Here at TopTradingPlatforms.co.uk we offer many different sections where you can see how brokers are scored and make your own mind on the back of our independent experts feedback.

Finding the right broker and trading platform is the most important thing: invest the time that this task requires and you will never regret it.