There are currently nearly 14 million online Forex traders globally and Forex trading has become one of the most popular online markets. There are thousands of brokers, but we recommend considering these 20 Pro Tips for Choosing the Right Forex Broker.
What is Forex trading?
Forex trading is when currencies are traded in pairs with the intention of making a profit. Before you can exchange currencies, you need to open an account with a Forex broker that facilitates the trading of currency pairs.
Forex trading is not the same as trading cryptocurrencies, and it is also not the same as buying stocks or indices. When you trade currencies, you are only trading national fiat currencies and the trading pair will always consist of the base currency (currency you want to buy) and the quote currency (currency you are trying to sell).
Instead of using a single centralized trading exchange, markets are connected through computer networks from all around the world, which makes it possible for Forex markets to stay open 24 hours a day and this is one of the reasons why Forex trading has become one of the most liquid online markets in the world.
To learn more about Forex market hours and when to trade, read our article on The Basics of Forex Trading Sessions
What is a Forex Broker?
A Forex broker is responsible for buying and selling currency pairs on your behalf. Forex brokers offer account types for trading and brokers are generally chosen based on their trading conditions, the platforms they support and the instruments you can trade with them.
Think of your Forex broker as a type of middle man between you and thousands of online markets and millions of traders. Having a broker significantly simplifies the process of trading any online assets by reducing the admin you would need to do and reducing the costs of trading.
There are many different types of Forex brokers and the broker you choose will depend on your trading style and experience level, your investment portfolio, your trading capital and your trading strategy.
Before you choose your broker, there are some important factors you must consider and we will discuss them in more detail below.
What are some of the things you should consider before choosing a Forex broker?
- Broker Type
- Security of Data and Privacy
- Customer Service
- Customer Reviews and Ratings
- Number of Clients
- Trading Styles
- Account Types
- Product Offering
- Platforms Supported
- Trade Execution
- Payment options and Funding
- Deposits and Withdrawals
- Cost of Trading
- Margin Call and Leverage
- Educational Resources
- Bonuses and Promotions
- Accessibility and Availability
- Website and User-friendliness
It is important to understand how the different types of Forex brokers operate. Some of the most common broker types are as follows:
Straight Through Processing (STP):
- Orders are passed directly to the broker’s liquidity provider and directly to the market
- Multiple liquidity providers are used by the broker
- This broker is a type of Market Maker and is not a Dealing Desk broker
Electric Communication Network (ECN)
- Orderbooks are provided with historical data and prices offered
- These brokers add transparency to the market and maybe a good reference point
- Usually, commissions will be charged on trades
- All transactions are processed in the interbank market
Dealing Desk (DD)
- Also referred to as a Market Maker
- Fixed spreads are usually provided
- Their payment is received through spreads
- Recommended for beginners and experts
- Suitable for traders who do not want to deal directly with liquidity providers
No Dealing Desk (NDD)
- These brokers give traders direct access to markets
- Prices are seldomly requoted
- Spreads are usually low and variable, based on market conditions
- More volatility and more opportunity
- Commissions are sometimes added to trades
By understanding what type of spreads you will be offered and if commission fees will be charged, the type of market volatility you can expect and whether or not you will have direct access to the markets, we hope that you will be one step closer to choosing the broker that is right for you.
Your broker’s regulatory compliance is perhaps the most important factor you should consider. If the broker you use is not regulated, there is a great chance of being scammed!
The Forex market is not centralized, so it is difficult to regulate all online trading activity, but trading with a regulated broker ensures that your assets are protected, that your data is private and secure, and that no fraudulent activity will be tolerated.
Most regulated brokers are also audited on a regular basis, and some of them will publicly share their audit reports.
Many leading Forex brokers are regulated in multiple jurisdictions because different countries have different regulations for online trading, so we recommend trading with a broker that is regulated in at least 3 jurisdictions.
The following agencies regulate online trading in their respective countries:
|ASIC||Australian Securities and Investment Commission||Australia|
|FSCBVI||BVI Financial Services Commission||British Virgin Islands|
|IIROC||Investment Information Regulatory Organization of Canada||Canada|
|CySEC||Cyprus Securities and Exchange Commission||Cyprus|
|DFSA||Dubai Financial Services Authority||Dubai, UAE|
|AMF||Autorité des Marchés Financiers||France|
|BaFIN||Bundesanstalt für Finanzdienstleistungsaufsicht||Germany|
|CMA||Capital Markets Authority||Kenya|
|FSC Mauritius||Financial Services Commission of Mauritius||Mauritius|
|SEC Nigeria||Securities & Exchange Commission Nigeria||Nigeria|
|FSA||Financial Services Authority||Seychelles|
|FSCA||Financial Services Conduct Authority||South Africa|
|SFBC||Swiss Federal Banking Commission||Switzerland|
|FCA||Financial Conduct Authority||United Kingdom|
|PRA||Prudential Regulation Authority||United Kingdom|
|NFA||National Futures Association||United States|
|CFTC||Commodity Futures Trading Commission||United States|
Security of Data and Privacy
We recommend trading with a regulated broker because you often need to submit confidential documentation when verifying a new account with a Forex broker.
In most cases, Forex brokers will require proof of residence and identification, and depending on the payment method you use, you will need to input your credit card details on their system to make deposits or add your banking details to make withdrawals.
Regulated brokers often adhere to Anti Money Laundering policies, which ensures that your documents remain private and secure. Not only should the broker be transparent about how your documentation is used, but they should also have security measures in place for protecting information against unauthorised access.
Perhaps, you are having issues with funding your account or making withdrawals, or you need advice on choosing the right account or platform. Maybe you are not sure how to use certain trading tools, or maybe you simply want to know more about the instruments offered and the spreads and transaction fees.
We recommend using a broker that offers live chat support, as well as being available telephonically and via email. You should always opt to choose a broker that values its customers and keeps the communication channels open.
Many popular brokers also provide Help Centres and FAQ sections with detailed answers to the most common questions asked by their clients.
Customer Reviews and Ratings
The most popular websites for Forex broker reviews are Trustpilot, Hellopeter and Yelp. By reading customer reviews and ratings, you can familiarise yourself with issues that other customers are experiencing and evaluate how those queries are being handled by the broker’s customer support team.
Negative reviews do not mean that Forex brokers are bad, unreliable or untrustworthy, but it does give an indication that you may encounter similar issues along the way.
It really depends on what the query is. Sometimes, customers are misinformed or make unprofitable trades and they blame the broker, in which case, you cannot trust their reviews because they are dishonest (most people won’t admit that their failure is their fault!).
However, if you find a broker with clients who are constantly complaining about issues with withdrawals, being ignored for weeks or months at a time and never getting help, then you should probably find another broker.
Number of Clients
The number of clients a broker has will give you an idea of how well-established a broker is and generally, the more active traders there are in a market, the higher the trading volume and the lower the spreads.
Some brokes have less than 100,000 clients, while others have more than 10 million. Brokers with more clients are also usually accessible by more countries and probably have lower minimum deposit requirements – making it easy for all types of investors and clients to enter the markets.
You should always check what rewards a broker has won. This will give you an indication of their strengths and what the broker excels at. Some brokers are awarded for their platforms, others for customer service and educational material, and so on. Being officially recognised definitely adds some credibility to a broker’s profile!
You can usually find the list of awards on the brokers page, but some brokers don’t have this section on their websites.
There are so manys to trade and a great variety of strategies you can use, but the broker you choose should offers the tools, platforms and features that you need to execute your trading strategies.
We recommend that you develop some type of trading style first by using a demo account and testing some strategies if you are a beginner. This will help you determine whether you are more suited for day trading, scalping, hedging, copy trading, swing trading or whatever style of trading you prefer.
But not all brokers support copy trading, nor does every broker offer tools for EA trading or allow scalping.
Some brokers may charge overnight fees, which is not good for a long-term investment strategy. Other brokers may have high latency and slow execution speeds, which will be detrimental for day traders and other styles of short-term trading.
When evaluating the account types offered by a Forex broker, you should compare the following features of different accounts, as well as different brokers:
- Minimum deposit required
- Spreads offered
- Base currencies supported
- Payment methods
- Instruments offered
- Negative Balance Protection offered
- Rollover fees
- Inactivity fees
- Demo account availability
- Commission fees
- Account management fees
- Deposit and Withdrawal fees
- Platforms supported
- Tools provided
- Hedging allowed?
- Scalping allowed?
- Expert Advisors allowed?
- Availability of Swap-free accounts
- VIP features
- Special features
- Margin call
- Leverage limits
Forex brokers that offer multiple accounts usually accommodate different trading styles, as well as different types of traders (Retail or Corporate). By having multiple options for accounts, you are able to experiment with different platforms, tools and trading strategies, but usually accounts offer different conditions based on your trading volume, the spreads offered and your experience level.
Most brokers are referred to as “Forex Brokers”, but this does not mean that you can ONLY trade Forex with them. In fact, most Forex brokers now offer instruments from upto 6 different asset classes on average and most of them also allow you to trade cryptocurrencies.
Before you choose a broker, you need to understand what type of investment portfolio you want to have and how those instruments behave.
For instance, Forex currencies are generally affected by economic news and may experience sudden spikes in prices over the course of the trading day.
We do not recommend choosing volatile instruments if you are inexperienced, but if you are interested in Forex trading, you should opt to trade major currencies until you are more familiar with the platforms, tools and market conditions.
To keep your options open and your portfolio diverse, it may be a good idea to find a broker that offers a little bit of everything, such as stocks, commodities, indices, crypto, metals, energies and Forex.
Many people are familiar with MetaTrader 4 and 5, and cTrader and prefer to use them because of the tools provided, the user interface and because there are so many tutorials and guides available.
However, there are many perks to using proprietary platforms and you should not be discouraged if a broker is not compatible with mainstream platforms. Many brokers develop platforms that support their account structures and some may even have special tools and features that mainstream platforms do not offer.
But as a beginner, you may want to opt for a platform that is used by many people, with an active community, plenty of resources and customer support to help you along the way. Most brokers are compatible with MetaTrafer 4 and 5.
There are also other platforms like Myfxbook, ZuluTrade and Duplitrade that are great for copy trading and social trading.
Tools and Features
Regardless of the platform you use, you must ensure that you have access to the following tools and features:
- Free, up to date news feed
- A website and platform that is easy to use
- Tools for technical and fundamental analysis
- Advanced charting tools
- Educational resources
- A platform with a customizable interface
- Multi-platform support
- Flexible payment methods
You should opt for a broker that guarantees low server latency because the faster you can open and close traders, the greater your chances of success. A market data system should always have a latency below 1 millisecond for optimal performance.
The fees you pay and currencies you can use to fund your accounts often depend on the type of payment methods you use.
Most brokers will accept the following:
- Credit and debit cards
- Bank wire transfers
- Digital wallet transfers (PayPal, Skrill, UnionPay etc.)
- Cheques (mostly for USA brokers)
Choosing a broker with flexible payment methods will definitely be in your favour in the case where fees might be lower for some payment methods, or perhaps you cancel your credit card and need other options.
Deposits and Base Currencies
To ensure that you are not impacted too heavily by exchange rates, you should try to use a broker that supports your native currency. For instance, if you live in South Africa and make a deposit in USD, you will benefit if you profit but it will also cost more to trade. Where a 50 USD deposit is low for a trader in the USA, it can be much higher for a trader in SA.
There are some brokers that support more than 10 base currencies and offer flexible payment methods, so we would recommend reading some of our other broker reviews to see if you find a broker that supports the currency you use.
Cost of Trading
The cost of trading will vary depending on the type of broker (NDD, DD, STP or ECN) and your trading volume. Some brokers offer lower commission for higher trading volumes, while other brokers do not charge any commission at all.
However, it is not only commission fees you should be concerned about. You also need to consider the costs of holding positions open over night, and whether deposits and withdrawals will cost you anything. Most of the time, deposits are free but withdrawals may incur a small fee (but once again, a 5 USD withdrawals fee is low for a USA citizen, but it will be mostly for someone living in SA).
Some brokers also penalise you if you are inactive and will charge a fee. If you are not trading often, you should definitely find a broker that does not charge inactivity fees!
Margin Call and Leverage
Margin calls are simply alerts that get sent to your phone or email through the platform or app that you are using to notify you that your capital is depleting and your positions might be closed if your account is not funded. Your margin level should always be above 100% if you want to have a good trading profile.
Leverage is not the same as margin call. When you trade with leverage, you are multiplying your initial investment by a certain amount so that you can enter the markets with a bigger amount of capital.
We only recommend leveraged trading for experienced traders because it can be extremely risky!
The leverage offered by brokers will depend on their regulations.
Most brokers have a section for educational resources on their websites. This is probably the second most important factor to consider if you are a beginner because if you do not have access to trading guides, tips, webinars, video tutorials and other content to help you learn trading, you might find it very challenging to trade at all.
The best way to learn is by finding a broker that offers plenty of resources and different demo accounts, but you can also learn through copy trading.
Bonuses and Promotions
You will notice that not many brokers offer welcome bonuses or sign up bonuses, or even have promotional offers or cash rebates, but trading with a broker that offers even just one of latter will greatly improve your motivation and trading experience.
As a high volume trader, you might want to find a broker that offers cash rebates and an active trader program.
If you have a lot of friends or a large following, you could use a broker with a great referral program and you could even consider becoming an affiliate.
Beginners often benefit from welcome and sign-up bonuses because they get some extra capital to start with.
Some brokers also encourage community engagement by hosting trading contests with cash prizes and other awesome rewards (like cars and computers)!
Website and User-friendliness
The broker’s website is often the first impression you get of that broker, and a website that is difficult to use or does not make information easily accessible, is probably off-putting for most people.
For the best trading experience overall, you should choose a broker with a website that makes you feel comfortable and like it’s easy to find everything you are looking for.
It’s frustrating to find a broker you like, but you can’t find any detailed account information on their websites. Some brokers have educational websites but they don’t have a section on the trading website, so you have to keep jumping around.
A high-quality website indicates that a lot of effort is put into making the trader’s experience easy and user-friendly, so we highly recommend sticking with those brokers that have great websites!
There are hundreds, if not thousands of brokers to choose from nowadays and all of them may appear to offer the same things – but they do not!
Most brokers will offer the same trading instruments minimum deposits, but just because a broker’s minimum deposit is low – doesn’t mean it will be cheap to trade with them overall.
You must closely consider all the factors mentioned above before you make your final decision. The best way to chose your broker is by making a list of the pros and cons of your final options and comparing their accounts and trading conditions.
Remember, once you have made a deposit, you havemade a commitment. So make it worth your while and follow these 20 Pro Tips for Choosing the Right Forex Broker!
Remember, 75% of retail investors lose money when trading CFDs and there is a high risk of losing your capital in the forex markets.
The information on this website is in no way intended to be used as financial advice and opening an account with any broker is done at your own discretion and risk.