Choosing a Forex Broker...

September 5, 2017

There is a lot to consider when becoming a Forex trader. At some point, you will need to decide which of the many Forex brokers you will have a trading account with. You may ask yourself questions like; which Forex broker should I choose, what is the difference between Forex brokers, will my money be safe with this broker, is this broker trustworthy, is this Forex broker price competitive... Becoming a profitable Forex trader is hard enough without 'broker worries'. To help you choose a Forex broker a bit more wisely, let me offer some Forex broker advice...

 

 

What I look for when choosing a Forex broker...

 

When I need to open a new Forex trading account, I have criterion that the broker must meet before I decide to open an account with them. I have listed the criterion below in priority order...

 

#1 Regulation

 

If a broker is not well-regulated then I have no interest whatsoever in trading with that broker. Regulation helps to keep your funds safe and your trading experience legit. There is no guarantee with regulation - you can still lose your money if the broker goes bust and you can still have a negative trading experience - but regulation helps to prevent these things from happening.

 

All of my Forex trading accounts are with brokers that are registered and regulated by the FCA (regulatory body for the UK), the NCA (regulatory body for the US) or the ASIC (regulatory body for Australia). However, there are some very reputable brokers that are regulated by CySec (regulatory body for Cyprus). 

 

I have a list of FCA regulated Forex brokers. You can view the list by clicking here.

 

#2 Products

 

By products I just don't mean which currency pairs are offered by the Forex broker or if the broker offers commodity and index CFDs. I am interested to know if the broker offers positive swap rates and how much the negative swap rates are (overnight fees), how tight the spreads are and how much commission is charged by lot/trade. All of these things are important to me - they all have an impact on my trading profitability. I see Forex trading very much like a business - the lower my overheads, the higher my potential profit. 

 

ECN type brokers generally have the tightest spreads and best swap rates but there are some spread betting brokers that offer very competitive spreads. 

 

#3 Trading Experience

 

Execution and how wide spreads widen during news events have a huge impact on my trading experience. I always open a demo account first and get a feel for the Forex broker before committing to a live account. Once a live account is open, I fund the account with just a small amount of capital first and then add gradually.

 

It is very frustrating to have a trade that is stopped-out by over-widening spreads which would have been profitable or a position that is not stopped-out and price continues past the stop-loss order! All Forex brokers can make mistakes and have technical difficulties but these things should rarely happen.

 

#4 Type of Broker

 

I am not interested in trading Forex with a market maker (most retail Forex brokers in the UK are market makers) but that doesn't mean that you shouldn't (I'll explain more about this later). 99% of my trades are with STP or true ECN Forex brokers. 

 

My recommended broker...

 

My main trading accounts are with Darwinex. They tick all the boxes for me and are by far the best retail Forex broker (in my opinion). You can open an unlimited demo account by clicking here.

 

 

What I don't look for when choosing a Forex broker...

 

There are some things about Forex brokers that are just not important to me. These are...

 

Leverage / Margin

 

If your choice between Forex brokers is down to leverage than you either do not understand risk and money management or you don't understand the importance of margin when trading Forex. If a broker offers at least 1:33 leverage (and they all do) then you'll be fine. If does not matter if a broker offers 1:50 or 1:500 leverage, this has no impact on my trading, hence no impact on my broker choice.

 

If you need a Forex broker with a minimum of 1:200 leverage then it sounds like you are underfunded and need to save for a bigger trading account. 

 

The Trading Platform & Charting Package

 

There are so many good Forex charting packages nowadays that there is very little need to use the package offered by the broker. If you hesitate to trade with a certain Forex broker because they only offer MT4 or they own bespoke package, then use the Forex broker for execution only. I use my Forex brokers for opening trades, managing trades and closing trades - anything else is a bonus. TradingView offer a great charting platform. Oanda's fxTrade platform is also very good (just open an unlimited demo account). 

 

New York Close Charts

 

Just as above, if a Forex broker does not offer New York close charts who cares?! Just look at the alternative charting packages. New York close charts should not be a determining factor when choosing a Forex broker.

 

Market Makers

 

I don't mean to contradict what I said earlier regarding only trading with STP or ECN brokers. I do only trade with these type of brokers but if you are new to Forex trading then I think trading with a market maker broker (CFD broker, spread betting provider, etc) is a good choice. This is how I started. Going straight to an ECN type broker could have been too overwhelming for me at first. Market maker type brokers usually offer quick and simple ways to open and manage trades, ECN brokers typically do not - there is a lot more jargon. 

 

Don't hesitate to open an account with market marker. You should be trading on demo at first anyway, if not, you are going to lose your trading capital nonetheless. Once you are consistent with trading profits and understand the Forex markets better, then is the time to make a transition to a STP or ECN broker. 

 

What next?

 

My recommended broker is Darwinex. To open an account with them, please click here.

 

BrokerNotes is a Forex broker comparison site. You may find the website useful. Please click here to visit BrokerNotes.

 

If you would like to learn more about Forex brokers, please read my Guide to Choosing a Forex Broker post

 

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