How to Compare Forex Brokers?

compare brokers

Choosing your Forex broker is one of the most important steps towards success in this business. You would be amazed if you knew how big differences there are between these companies. And to make matters a bit more complex there is no such thing as “The Best Forex Broker”, although some of them are saying just that about themselves.

Why is that? Because there are lots of different strategies, personalities, and also several personal preferences of traders, making this choice a unique one for each of them.

But what is best for you? What are the factors to consider before deciding? Let’s see a list of the most crucial things to weigh:

  • Reputation, history of the broker
  • Regulations
  • Offered products
  • Spreads, Commissions, and other fees
  • Margin rates
  • Trading Platform, Demo Account
  • Customer support
  • Conditions of account opening, bonuses
  • Leverage

It is essential to read reviews of brokers as you won’t have to try out all the possible companies. Believe me, with the hundreds of available choices this will you save a lot of time.

What is the most important factor to You?

This can depend on a lot of things. For a novice trader, I would suggest trying a demo account for a bunch of brokers as a start. Feeling comfortable with the trading platform is crucial. You will have to know what you are doing, not just because your comfort, although that is also good to have. A badly executed trade can ruin a lot of hard work. An order placed at the wrong level can cost you hundreds or even thousands of dollars.

What about the other factors?

Reputation, history of the broker

You have to trust your broker, period. Your money will be on their account so you don’t want to engage with a firm that has a bad reputation or had serious issues with withdrawals or trading conditions. How do you know if a broker you have in sight is a reliable one?

You should do some research. We will help you with reviewing some of the best brokers out there which you can certainly trust with your money. But you should also read some forums where actual users talk about the brokers. Some issues might be revealed this way, but don’t worry, if you follow our guidance you won’t run into a shady company!

Regulations

The financial authority that regulates the company will determine a lot of things from the amount of protection you get to available products and the legal obligations of the broker. Some brokers are not allowed to conduct business in some countries (a common problem is US citizenship); you should always check the eligibility of the provider before you engage with it.

Some great companies are regulated under several laws giving you more options to choose from. With reliable companies, it is likely that you will never notice the difference but knowing about your rights will help you in the event of any trouble.

Offered Products

This might be an issue that becomes more important later on as you expand your scope to different products and markets. For a beginner, it is wise to concentrate on one or two assets to get a feeling of trading. Even some top traders only deal with one currency pair; even with one currency pair with only one simple strategy.

It is a common misconception that you need to master a lot of things to become a successful trader. Sometimes keeping it simple is the key. Nevertheless, it is nice to have options; maybe you will find your favorite pair among the lesser traded ones. Maybe you want to trade with CFDs, precious metals, or stocks… If you do, you should check the product range of the company before making a decision!

Another aspect is the availability of mini accounts; having the opportunity to trade small is vital for beginners with limited amount of capital.

Spreads, commissions and other fees

Spreads are important if you trade a lot—for active investors the cost of trading is maybe the number one factor. And it’s not just the average spread that counts, it is also crucial to have stable spreads even in volatile markets. If you also trade other assets (like CFDs) commissions may also be important.

Other fees might include the cost of money transfers, account maintenance, and market data feeds. These will be the majority of your costs if you are a less active investor.

Margin Rates

These rates are basically the cost of holding a forex position for more than one day. If you are a day trader who doesn’t have overnight position you won’t pay a dime of this. But if you have longer time-frame trades, they might eat up a huge portion of your profits by some of the brokerages.

So this should be one of the first things to look for if you plan to do these types of trades!

Trading Platform, Demo Account, Extra functions

These factors are all concerning how comfortable and secure it is to trade by a broker. While that might not sound professional it is a very important condition. Actually using a good platform can be the difference between a successful and a losing trade or even the trader itself. Why?

As I said earlier, having easy ways to enter orders makes you quicker and more effective for example. Analyzing your previous trades is crucial—having good methods to do that can help you speed up your progress. Also, some platforms offer great extra functions like social trading, VPS (Virtual Private Server) for automated trading, copying successful traders, and innovative ways of communication.

And don’t forget demo accounts. They are not only useful in practicing but come in handy when choosing a broker. You can test their trading platform and its fit with your needs without having to put money on the line.

Customer support

For a serious trader sometimes technical support is vital. This factor is often ignored by users as secondary—that is only true until you get into a situation where you would need it. Having technical issues in sensitive situations may cause you losses that would have been avoidable. You don’t want to get into a position like that, believe me.

The only good way to gather information about the CS of a broker is to read reviews and forums about it; I encourage you to do that before you commit to a firm.

Conditions of account opening, payment methods, bonuses

For a novice trader, the minimum amount needed to open an account might be a deal breaker. If you want to start with a smaller amount there are great options for you; as low as $50 or equivalent. Be sure to look for opening bonuses; they can provide hundreds of dollars of extra capital to trade with.

Depending on the country you live in the payment methods available for both depositing and withdrawing money are crucial. Some methods like wire transfers might be close to impossible or very expensive between certain countries. Online wallets and payment services offer great alternatives for some, and you must get informed in this matter before you choose a broker.

Leverage

I left this factor to the end intentionally as in a lot of cases this is the first thing that you will notice about a broker. A lot of brokers advertise themselves with their leverage allowances. (100 times to 1000 times…). The truth is that while it is nice to have high leverage as an option, most of the strategies don’t need high levels.

Even day-traders who use extensive leverage should be well off with 20-40 times of it. The high level of the allowance is more of a marketing term than a really useful function, in fact using up the leverage can be really dangerous for a beginner as it amplifies the risks. I wouldn’t recommend deciding based upon the maximum leverage.

Final words

Even if now it seems a complex issue to choose a good broker following this guide will help you get going quickly. Be sure to check out our comprehensive reviews (links to articles 3,4,5,6,) about some of the best brokers!