September 26, 2021

Top Forex Brokers

Forex brokers are the necessary link to forex market, so once you decide to become a trader, you are doomed to long process of selecting the broker that not only suits you best, but doesn’t scam its’ traders. Almost every day, dozens New Forex Brokers is being born online. With the abundant variety of features and services promised, the trick is to find a broker that you can actually trust.  All of them claim to be the best, and making the right decision is not an easy task. When Choosing Forex Broker, which characteristics an features you should look for and compare? What are ways to build a reliable relationship with a broker? How can you ensure the security much needed in forex trading? 

choosing the right forex broker

Choosing a forex broker requires you first to figure out what type of investor you are and your goals in investing in currencies. 

Each broker that features forex investments has advantages and disadvantages. Some of the most important things to consider are regulation, the level of security provided by these companies and transaction fees. Security features varies from broker to broker. Some brokers have integrated security features like two-step authentication keep accounts safe from hackers. 

Trading Platforms

Brokers also differ in their platforms have different required account minimums and transaction fees. Before hopping on a trading platform, you may want to create a budget for your investment life. Figure out how much you would like to invest, how much you are willing to pay for fees and what your goals are. There are lots of factors to explore while choosing the right platform for you. Make sure to take as much into account as possible before getting involved.

When choosing a Forex broker, make sure you check what features its platform supports. Some of the must-have functionalities you should look out for include charting and technical analysis tools, automated trading, real-time quotes, options for customization, multiple timeframes, trading through charts, different types of order execution, and backtesting. Multi-language support is always a plus.

A good broker should be able to provide a good selection of platforms. This is because some traders prefer to trade from the desktop computer and some traders prefer to trade from their smartphones. It should be noted that the most common trading platform that you will find among the different brokers in the industry is the MetaTrader 4 platform. It is estimated that at least 85% of brokers in the industry uses the MetaTrader 4 platform. So this means there is a very strong possibility that this is one of the platforms that you will be using.

Spreads and Commissions

Each forex broker offers spreads (the so-called difference between the selling and the buying prices of a selected currency pair). The basic rule is – the lower the spread is, the better. However, for forex brokers the situation is reversed; since they get their commissions from spread, a higher spread is definitely better for any broker. 

So, where is the comfort line where broker doesn’t feel underpaid and a trader doesn’t feel cheated? Generally, an excepted spread among traders doesn’t go over 5 pips. Anything that goes beyond that is suspicious and should be avoided.

On top of that, fixed spreads is your best option. The last thing a trader wants to see is a change in pip spread when you least expect it. So, bear in mind that some forex brokers have variable spreads, meaning that during busy market hours the spread goes so wide, that the only time you could actually profit is when the market goes bullish.

What happens otherwise? Here is a perfect scenario – in the middle of your highly-planned and seemingly profitable trade where you have placed stop loss at, let’s say 6 pips from your trading entry, the charts go wild and your loss has been reached within a blink of an eye.  While you are shocked and unrealistically shaken up, the price goes back to the point of origin!

Solution to this disaster is simple – keep switching forex brokers until you find the one where unexpected stop loss hit dissolve. Once you find a decent broker, your chance of successful trade increases dramatically. 

There is a method that might be very efficient in helping you to make the right decision. Consider the issues below before you decide in favor of a forex brokerage. Perhaps forex ratings reviews and comments will be crucial in forming your opinion. So, please revise:

  1. The company type: is it a broker or a dealer? What’s the capitalization of the company?
  2. Trading platform(s) offered: whether they are popular, well- or little known; are they reliable, what are the pitfalls?
  3. Types of trading accounts. Are there accounts for traders with various levels of skill, amount of investment, and trading preferences?
  4. Fee and commission structures: extra costs a trader has to pay.
  5. What kind of bonuses and promotions does the company offer?
  6. Company’s standards regarding leverage and margin calls.
  7. Client support: is it reliable, efficient, and available at any time when you might need assistance?
  8. Regulation: Which license(s) does the company have, at which jurisdictions were they issued?

Each of these points is critically important. To avoid any misunderstanding of these statements, we invite you to get acknowledged with their detalization below.

Dealing Desk Brokers

Using dealing desks, market makers set their own bid/ask spreads and traders aren’t connected with global liquidity providers. Market makers match orders internally and therefore is the trader’s counterparty. New traders may benefit from the fixed spreads market makers offer, as it simplifies trading and commission fee calculations for beginners.

No Dealing Desk (NDD) Brokers

ECN, DMA and STP brokers that offer NDD execution match orders with external liquidity providers, eliminating the need for intermediaries. While ECN and STP brokers both connect traders with major global liquidity providers, STP brokers have control over their liquidity sources while ECN brokers do not. Likewise, customers of DMA brokers gain direct access to markets and can view all available prices offered by different liquidity sources. Sometimes, brokers may offer hybrids of the above execution methods or even different technologies for various trading accounts they offer.

NDD brokers offer the tightest spreads, with the business model suited to day trading, scalping and those using Expert Advisors.

Varied Deposit and Withdrawal Options

It is always nice to have a varied choice where payments are concerned. When choosing a Forex broker, be sure to check what methods it supports for deposits and withdrawals. The most common options you are likely to encounter include standard bank transfers, credit and debit cards, and online banking.

Many brokerages also accept payments via popular e-wallets such as PayPal, Skrill, WebMoney, and Neteller. The best brokers in the industry support country-specific methods to the benefit of customers from different jurisdictions.

 Let’s examine forex broker’s available payment methods and hidden charges for withdrawing your account funds. Not all brokers charge, however some consider their transaction services worth a fee. On top of that, deposits and withdrawals have to be processed in a fast and smooth manner, meaning your forex broker should provide a secure online transaction and accept not only bank transfers, but also Paypal, Moneybookers or similar online payment services.

Speaking of withdrawal, once you which to get your money out of the account, there shouldn’t be any weird activity at all. And by weird, I mean a request for minimum amount of funds in your account at all times, or a lengthy authorization process or even a possibility of getting your account banned. Of course, this is extreme, and most brokers provide reliable services with acceptable terms and conditions. However, while you search for the perfect broker, it is wise to know what kind of beast might be luring on the net!

Margin and Leverage

All Forex traders have access to different leverage caps depending on their jurisdiction and the brokers they trade with. Leverage can vary anywhere from 2:1 to 1000:1, sometimes even more. The caps usually differ based on the volatility of the respective asset class.

Leverage is basically a credit extended to you by your broker. It allows you to trade significant amounts with a relatively small initial investment. Let’s give a brief example with a 50:1 leverage. If you have $1,000 in your account’s balance, you can inflate the size of your trades to $50,000 thanks to the 50:1 leverage.

Leverage can be your best friend until it turns to your worst enemy! Surely to maximize your potential earnings, a broker with 200:1 leverage is the ideal option. How should you feel about higher leverage, such as, for example, 400:1?  It is luring, however keep in mind that with 200:1 leverage a loss is just a slip... with 400:1 leverage the same fall is a suicide.

Full Regulatory Compliance

Regulatory compliance is one of the first and most important things you need to take a look at. For example, a reputable US Forex broker will be a member of the NFA (the National Futures Association) and will also be officially registered with the CFTC (the Commodity Futures Trading Commission) as a merchant and dealer. Under local regulations, CFD trading is prohibited in the US.

Many forex brokers are regulated. Brokers in the U.S. are regulated by the National Futures Association (NFA) and Commodity Futures Trading Commission (CFTC), and France, Germany, Switzerland, Austria, Canada and the United Kingdom also regulate forex brokers. Not all brokers are regulated, however, and traders should be wary of unregulated firms. 

Regulators work in the best interest of traders. They protect them from fraudulent companies and ensure a fair market environment for all participants. The thing about foreign exchange regulations, though, is that they vary wildly between different jurisdictions. Each country has its own financial regulator, tasked with the oversight of the Forex trading sector.

Regulated forex brokers are definitely much more reliable and stable. After all, there is a watchful eye of the regulating authority. Most registered forex brokers mention their regulator on the website. If, however, this information is unavailable for some reason, make sure to contact your broker and find out who is in charge.

Of course, regulation is not everything. Reputation among other traders is a very important fact. To find out what other traders think about a selected forex broker, try searching for forex broker reviews. There are sites that provide detailed broker reviews; you can also search forums and blog posts about the selected broker. Not everything written is reliable; however these forex broker reviews should give you some idea of other traders’ experiences.

Be careful with Bonuses

When you open a live account avoid any and all "bonuses" the forex broker may offer. Here's an example: "Open a $1,000 account and get $100 in bonus cash!" 

Nothing really comes for free. If you accept a bonus it may interfere with withdrawals, because some of the money in your account is now the broker's money. Send an email with your account application that explicitly states you don't want to take part in any bonuses that they have on offer. 

Fast Speed of Order Execution

The speed of order execution is of essential importance, even more for those who engage in day trading and place market orders. It is of utmost importance that your brokerage fills your orders with lightning speed at the best possible prices.

If order execution is slower, the prices might move a few pips until the broker fulfills the order, which reduces your chances of winning this trade. The average order speed at the best Forex brokerages is as fast as 0.001 seconds.

Imagine having all set and you finally see the right moment to trade. The only thing that keeps you from profiting is the forex broker that doesn’t process your order within seconds. If there is noticeable and uncomfortable delay, move on to the next broker until you find the one that is actually worth the commissions you pay!

Additional Features

Look at the features which the trading platforms have to offer. Do they come with:

  • Comprehensive charting package
  • Wide range of technical indicators
  • One click trading on the trading platform
  • Risk management tools such as stop loss order and trailing stops.

While all these may seem trivial initially, they will later play a crucial part in ensuring that you will get to enjoy a seamless and productive trading experience.

Conclusion

Lastly, your forex trading professionalism relies on a combination of three ingredients – you, good forex broker and forex market itself. You cannot control forex market, however to ensure your success, you can control the learning process and the selection of a broker. By eliminating laziness and a bad choice of forex broker, you forex career is destined to be a smooth ride.