When it comes to navigating in the Forex World, one of the most crucial decisions traders have to make is choosing the right Forex Broker. There are a lot of available options in the market, so often this trader’s task is not an easy one. However, after considering the key factors that align with your trading style, goals and preferences you would make the best decision for having the best trading experience.
- Regulatory Compliance – The first and most important factor to consider when choosing a Forex Broker is regulation. Protect your assets by trusting only fully licensed and regulated Forex Brokers. This should be your priority – the Safety of your Deposit. Regulation ensures that the broker adheres to strict guidelines and regulations set by specific regulations agencies, thus providing safety and security for their clients.
Please find a list of the most reputable and well-known Forex Regulators in the EU, UK and USA.
MiFID II directive governs Forex regulations in Europe.
- Cyprus Securities and Exchange Commission (CySEC) – Cyprus is one of the most popular jurisdictions for forex brokers to obtain a license in Europe, due to its low taxes, flexible regulations, and access to the EU market.
- Financial Conduct Authority (FCA) – The FCA is the main regulator of financial services in the UK, which remains one of the leading forex hubs in the world.
- Swiss Financial Market Supervisory Authority (FINMA) – FINMA is the independent regulator of financial services in Switzerland, including forex brokers. FINMA sets high standards for forex brokers’ capital adequacy, risk management, anti-money laundering, and investor protection.
- The UK’s Financial Conduct Authority (FCA) has established rules and regulations that must be adhered to by forex brokers operating in the country. The FCA is part of the EEA (European Economic Area) agreement and the MiFID derivative, which allows FCA regulated brokers to operate in any part of the European Union without setting up additional offices in any other European country.
- Commodity Futures Trading Commission (CFTC) – The CFTC’s over-arching mission and objective is to regulate the futures and commodities marketplace. Forex falls under the umbrella of futures and commodities and thus gets wrapped in.
- National Futures Association (NFA) – it is essentially important for the broker to be member of NFA. Before an entity can become a member of the NFA, they have to first go through a screening process and verify that they will comply with NFA rules, regulations and standards. NFA has worked with the FBI to screen potential members using digital fingerprint images.
- Trading platforms and tools – the trading platform that the specific broker offers plays an important role in your trading experience. Look for platforms that are user friendly with advanced charting tools, technical indicators, and the ability to execute trades fast and efficient. Most of the brokers provide demo accounts for their potential clients, so they would be able to try the platforms and tools that the broker offers. It is recommended to try the demo platform, so you can verify that you feel comfortable trading with the platform before you open an account with the specific broker.
- Spreads and Commissions – three forms of commisions are used by the Forex brokers in their commision structure. Some of them offer firm spread, other variable spread and third charge a commission based on the percantage of the spread(the spread is the difference between the price the market maker is prepared to pay you for buying the currency (the bid price), versus the price at which they are prepared to sell you the currency (the ask price) . So which one is the base choice? It seems like the fixed spread should be the right choise, but that is not the case sometimes. That is a difficult question to answer, because different brokers provide different level of service. Your broker’s effectivness will depend on their relationships with the banks. The volume the broker does with the banks, effects the spread. The higher the volume, tighter the spread. If the broker has good relationships with the banks that might bring you more compatative spread. On the other hand, if you choose a broker with fixed spread, you will get the same amount of pips no matter what happens on the market. In case your choose to wotk with broker who charges a small commission, look what else the broker offers you. For instance, the broker might offer you access to sofware platfrom which is superior to the most online brokers platforms. In summary, choose a broker depending on your personal trading preferences.
- Customer support – accessible, knowledgeable, and reliable costumer support is essential when trading Forex. Look for a broker that provides multiple ways to support you – phone, email, live chat. Having someone to help when having some issues and concerns is very important in trading.
- Reputation – reputation is everything in the broker’s professional life. Check if the broker has had a complaint filed against them, gone through disciplinary proceedings or had their license suspended. Read broker’s reviews and testimonial from their clients. This research would give you piece of mind when choosing your broker.
- Education and research materials – consider brokers that provide educational resources for their clients. On one side this would improve your trading skills and knowledge. On the other hand, providing educational resources to their clients proves the broker’s commitment to their clients’ success. These educational resources could be webinars, articles, market analysis and so on.
- Deposit and withdrawal methods – having easy and convenient methods for deposit and withdrawal is essential for the smooth operation of your finances.