If your considering becoming a day a trader in the foreign exchange market, you will find numerous online forex brokers are vying for your business. Visit any financial news website, and you’ll be inundated with many internet adverts from these brokers. The inexperienced should be aware that trading CFDs without instruction or knowledge is a quick way to lose your money (over 70% do), but it can also be very rewarding. Some brokers, such as eToro, allow you to copy the trades of experienced traders. if your a novice this might be a good place to start. This article discusses five key factors to consider when choosing the right broker.

1. Regulatory Compliance

Check the broker’s reputation first. 

There are a number of bodies that any credible forex broker will belong to. In the past many unregulated brokers have gone bankrupt with little to no chance of recovering your funds. Quite often the reason for this would be the broker were busy gambling with their clients money. These days ALL reputable brokers are regulated. However the quality of the oversight provided in Cyprus may not level up to the same governance provided in the US or the UK. There should be a clear policy on the non-use of client funds. 

Don’t be fooled by a flashy website; a genuine broker will readily display its regulatory compliance. We advise only to open accounts with properly regulated brokers to ensure deposit safety and integrity. Also, please note that we provide all brokers referral links to comply with this policy. But it is strongly advised to make your own checks.

2. Account Features

Forex brokers offer varied account features. Compare these four areas: leverage and margin, commissions and spread, initial deposit requirements, and the simplicity of deposits and withdrawals.

Leverage and Margin

Forex participants might access different leverage levels depending on the broker. 

For instance, with 50:1 leverage, a trader with a $1,000 account can control a $50,000 position. Some brokers offer up to 200:1 leverage. While leverage can increase profits, it also amplifies potential losses. Exercise caution with leverage.

Commissions and Spreads

Commission-based brokers might charge a portion of the spread, the difference between a forex pair’s bid and ask price. Non-commission brokers earn through wider spreads. Understand how your broker profits and compare options.

Initial Deposit

Most forex accounts start with a small deposit, sometimes as low as $50. Leverage increases buying power, making forex trading accessible to new traders. Brokers typically offer various accounts with different initial deposit requirements.

Ease of Deposits and Withdrawals

Brokers have specific policies for account funding and withdrawals. Funding methods include credit cards, SEPA payment, PayPal, bank transfers. Withdrawals are usually via bank transfer, potentially incurring fees. You should also note that reputable brokers will generally only credit the account that paid money in. In most cases large withdrawals will have to go through an approval process this can take a few days. You are strongly advised to check each broker payment policy before making any choices. 

3. Currency Pairs Offered

Many currencies are available for trading, but only a few have high liquidity. Besides popular pairs like EUR/USD and GBP/USD, major pairs include USD/JPY and USD/CHF. Choose a broker that offers the currency pairs that interest you.

4. Customer Service

Forex trading happens around the clock, so broker support should be available anytime. Test their customer service’s responsiveness and accessibility. We would especially advise this when making withdrawals, as many brokers have an approval process involving customer service.

5. Trading Platform

The trading platform is your gateway to the markets. Ensure the broker’s platform has the necessary technical and fundamental analysis tools and that trades can be executed smoothly. A well-designed platform will have clear buy and sell buttons and possibly a “panic” button for closing all positions. Interface design can affect order accuracy.

Other factors include customisation, order types, automated trading, strategy builders, backtesting, and trading alerts. Most brokers provide free demo accounts to test their platforms before committing. You should also note that the spreads offered on so called demo accounts will not reflect live prices. 

Do your own research when choosing a forex broker

Confidence in your forex broker lets you focus on analysis and strategy development. Research before choosing a broker can significantly enhance your chances of success in the competitive forex market.

Trade Responsibly. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 

73% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money