Forex Brokers... The Good, the Bad and the Scammers

May 8, 2018

Forex Brokers... An introduction to a common Forex traders headache...

 

Forex trading has it's ups and downs. When you are winning, Forex trading feels euphoric. When you are losing, you are eager for the next winning streak. When your Forex broker stops you out for no apparent reason or has technical issues, trading can become frustrating.

 

To be honest, I have not had Forex broker issues for years. I feel that this is mainly due to the fact that I know what I am looking for when opening an account with a Forex broker - I have had my period of trial and error.

 

 

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Forex Brokers - The Scammers

 

I often receive emails from people who have opened Forex trading accounts with Forex brokers that I have never heard of and that are based somewhere fairly exotic. These emails usually go something like this...

 

'Have you heard of [insert broker name]? I opened an account with them and deposited [insert amount of money] and now I cannot access my account or withdraw my funds. Their customer service team are not responding to my emails... I think I have been scammed'.

 

After I read an email like this, I often feel sorry for the scammed individual. I do often think to myself though 'what were you thinking?!'.

 

You should never give money away so easily. You should do some research before using the services of any company . You should not trade live until you are profitable trading demo - always open a demo trading account first. Once you can make a consistent return trading Forex on a demo account, then go live. 

 

Only trade using a Forex broker that is registered and well-regulated by a recognised financial body/regulator. When I have checked the websites of scammer and fake Forex brokers that are withholding client funds, there is often no detail about regulation. If there are details about regulation, the Forex broker is usually regulated somewhere exotic that is not a recognised financial centre. I suggest that you only trade with Forex brokers that are registered and regulated in the UK, the US, Australia and Cyprus.

 

 Forex Brokers - The Bad

 

Some brokers are well-regulated but still offer a negative trading experience. These Forex brokers are those that are generally market makers. This does not mean that all market maker brokers are bad and not worth using, but from my experience this is generally the case.

 

Why do Forex market maker brokers offer such a bad trading experience? I believe this is usually down to the spreads. Market maker brokers (spread betting brokers and CFD brokers) may boast that they offer commission-free Forex trading but spreads are usually very wide and extremely variable. During news events, I have seen 3-4 pip spreads widen to 30-50 pips, even with the most popular spread betting and CFD Forex brokers. This results in terrible entry prices, orders not triggered and stop-losses unexpectedly triggered.

 

When choosing a Forex broker, some traders take into consideration the platform(s) supported by the broker. With free chart analysis websites like TradingView and so many brokers now offering free unlimited demo accounts, the trading platform(s) offered by a Forex broker should not be a priority when deciding your Forex broker. Nowadays, you can use a Forex broker for execution only and find a third-party website or free trading account elsewhere for chart analysis - having a Forex broker that offers a great platform for analysis is no longer needed.

 

 

Forex Brokers - The Good

 

So, what do I consider a good Forex broker? For me, it is a broker that I can trust with my funds, who will execute my trades as expected and provide tight spreads, even when markets are volatile due to high impact news events. The Forex brokers that meet my personal criteria are often STP and ECN brokers. It is true that these brokers charge a commission per trade but spreads are extremely tight - sometimes 0 pips on major pairs - and overnight/swap fees are minuet (quite often they are  positive - meaning you are paid to hold positions overnight).

 

The 2 brokers I have been personally trading with the last couple of years have been Darwinex and IC Markets. I don't have a complaint about either broker. Below are some details that you may find useful...

 

Darwinex

Open a free demo account - click here

Broker type: STP

Spread at time of writing this post: AUDUSD 0.4 pips, EURUSD 0.2 pips, GBPUSD 0.3 PIPS

Regulator: FCA (UK)

 

IC Markets

Open a free demo account - click here

Broker type: ECN

Spread at time of writing this post: AUDUSD 0.3 pips, EURUSD 0.1 pips, GBPUSD 0.3 pips

Regulator: ASIC (Australia)

 

Thank you for the time you have taken to read this post about Forex brokers. I wish you all the best in your trading.

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