Is the broker regulated?
When choosing a forex broker to trade with, it is of paramount importance that you make sure it is a broker where you know that your money will be safe. The easiest way to do this is to choose a broker that is reputable and regulated by top regulatory bodies. However obvious this may be, it is easier said than done as there a hundreds, possibly thousands of brokers out there, many of which will be legitimate but as a trader you have to know which ones to avoid. Forex trading has no centralised market place and so there is no single governing body, meaning that some brokers will be unregulated. So, firstly, check that the broker is regulated and search forex forums to find out if there have been any scam reports. Note that not every scam reported will actually be a scam – some may be reported as scams by traders who have lost money legitimately but then looked to blame the broker. You would need to look further into these cases and weigh up the number of those reporting the broker as a scam against the number of traders who are happy with the service provided by the broker. Remember that traders who have won money are less likely to post reviews than traders who have lost money and so, initially, your search results may seem negatively skewed. We only include a handful of forex brokers in our comparison table as we feel that these are among the best regulated forex brokers in the industry.
What services does the broker provide?
Once you are happy that you have narrowed down your search to brokers with which your money will be secure, you should now look to compare what features the brokers offer. Obviously the features that are of most importance will differ from trader to trader and what he is looking to get out of his broker, but we feel that our comparison table covers all the main services that you should look to consider when making your decision.
Depending on what you are looking to trade, you should consider the range of minor, major and exotic pairs each broker has to offer. Within this you should look to the spread sizes quoted for the various types of currency pair in addition to the leverage offered and the minimum trade size. This denotes what level of exposure you gain for the amount you are willing to invest and the size of the trade you are required to open. The level of importance placed on this will be dependent on what level of trader you are and the size of capital you are looking to invest. Depending on your preferred method of trading you should also consider whether the broker has fixed or variable spreads, as this can make a large difference to your long term profits.
All traders will be aware of the importance of risk management when entering into trades and, as such, should be aware of the various risk management tools made available by the forex broker. Pretty much all will offer stop and limit orders, but those offering trailing stops, guaranteed stops and OCO orders will vary so be sure to check this out prior to opening an account. Many of today’s traders are not confined to the office and are constantly on the move, if you fit into this bracket then you need to explore the mobile trading available with the brokers you are considering. Even if you intend to do the vast majority of your trading from home, there will be times where trades will need to be opened, closed or amended while you are away from your computer and in these instances the mobile trading platform becomes a necessity.
Depending on your experience levels you may also want to consider the type of education and training provided by the broker. Should you already be experienced and well versed in forex trading this may not factor into your decision, but should you be less experienced or a complete beginner then learning the ropes is imperative if you plan to make a success of your forex trading efforts. Even within the selected brokers that we have reviewed in our comparison table the amount of training and education available is varied. Some simply supply a basic glossary and a couple of pages on the basics of forex trading, while others provide live webinars, archived video tutorials and help with technical analysis in addition to the basics of forex trading. There are numerous sites offering forex trading educational materials but those offered on-site by a broker are tailor-made to their platforms and so on completion of your training it makes for a smoother transition to trading on that platform with a live account.
Trading Platform?
On the subject of platform, the vast majority of brokers will offer a demo account enabling traders to practice trading forex on their platform so that they are more prepared and familiar with the platform for when they decide to open a live account. The demo accounts on offer at brokers will vary in terms of currency pairs available for practice trading, the virtual balance you begin with and the length of time the demo account is operational for. So if you feel you would need more than a couple of weeks to familiarise yourself with the system before you go with a live account then make sure the broker you are looking to open an account with offers a demo account for an extended period of time. The last thing you want to do is be forced into opening a live account when you’re not quite ready, it will not be a pleasant entry into the world of forex trading!
You should also take a look at our page that covers the various types of broker.