Regulation
Forex Trading has become more and more popular in the past 10 years and many brokers have been setup to offer trading to retail clients. This includes very good providers but also less reliable ones.
When considering a broker, you want to make sure that your funds are going to be safe and assessing the REGULATION is a good start to check a Forex broker. Indeed, providers who are regulated have to comply with rules and guidelines from their regulatory body who usually aims at protecting the end client (the trader).
Some concrete examples can be: offer best execution, segregate client funds, treat the customers fairly, process withdrawals within 24h. Some regulators also offer a compensation scheme in case of a default of the broker which gives you a real peace of mind when it comes to trading and depositing your funds!
Keep in mind that each regulatory body will have specifics and different kind of protection for the clients dealing in Forex and CFDs that’s why you need to review exactly where your broker is regulated, if they are only registered or fully regulated and the kind of protection offered to you as a client.
Start by looking for the name of the company who owns the website, then go to the according regulator’s website and search for the company in their register (most of them have a directory where you can find all regulated and registered entities)
Always cross check the name of the company that appears on the broker’s website with the name of the company on the regulator’s website : they should match otherwise the company is simply not regulated !
What’s more, regulators often update their blacklisted brokers’ list, make sure the one you consider trading with doesn’t appear in that list.
Range of product
A Forex and CFD trading account can potentially allow you to access a very wide range of financial markets or asset class among stocks, indices, commodities, majors, minors and exotics pairs, bonds, metals, soft commodities and so forth.
However, because we are talking about OTC markets here, the range of products offered differs from one broker to another. In fact there is no “standard offering” and brokers can price the products they want at the conditions they want.
Have a deep look at the full range of products offered by the broker, make sure the markets you want to trade are available with competitive trading conditions (spread / commission / leverage).
Most brokers are displaying their full contract specifications on their website making it easy for you to dig deep and gather the information needed.
Methods of payments
Before you start trading live you will need to make a deposit to fund your account. You have to pay attention to the method you use when making your initial deposit because most regulated brokers will allow you to take your funds back (withdraw) only to the same source and via the same method.
For example if you deposit via bank wire from your bank account A, when you will request a withdrawal the money will be sent to the same bank account A via bank wire.
Essentially you won’t be able to withdraw your capital to a different bank account or through a different method but some brokers allow forex traders to take their profits back to a different source via bank wire.
The common methods of deposit accepted by nearly every company are bank wire and debit / credit card. By using these two methods you will be able to fund your account with pretty much any forex / CFD provider.
In case you are looking to fund using e-wallets such as Skrill, Neteller, or any other online payment method, you will need to double check with the broker if they accept it. You can start looking on their website, if no information is displayed you can ask further details contacting the support through live chat or via email. Even if e-wallets are usually charging fees for payments the majority of brokers will waive these fees. If your broker doesn’t, then you might need to look at another provider who is more competitive.
Execution
Among all criteria, how your trades are executed is probably one of the hardest to check until you place trades on a live account. Behind all the different names such as ECN, DMA, STP, NDD, there are essentially two main model of execution for a broker.
The first one is Market Making : the broker executes your trades giving you liquidity directly and taking the risk for your transactions.
The second one is the Agency model : the broker acts as an « agency » passing the trade on to a third party (liquidity provider or other depending on the technology used) or executing your trade first and hedging it straight away. In this case he doesn’t run any risk for your transactions.
If Market Making usually comes with a bad reputation it’s not necessary justified. Indeed a market maker will usually execute you faster and potentially at a better price (depending on their mark’up on top of the raw spread and the latency of execution), so a broker being an active market maker shouldn’t be a negative point when you consider trading forex and cfd’s.
Usually a good idea to check the execution is to have a look at the reviews from other traders, pay attention to bad reviews related to speed of execution, requotes or slippage.
Make sure you monitor your execution when your account is opened and you place your first live trades. You will have to be really pragmatic : avoid listening at the broker’s marketing. The only thing you need to look at is what price you get on your trades and what is the speed of execution. It needs to be quick, with no re-quotes and very low slippage in normal market conditions.
Execution being a very broad and complicated subject we wrote an article dedicated specifically to this topic
Leverage
Forex and CFD’s being leveraged products they are traded on margin. Leverage will allow you to have a lower margin required to open your trades and give you the possibility to trade bigger size with the potential of raising profits as well as losses, it’s important to keep in mind leverage is a double-edged sword.
The leverage advertised by brokers is always the maximum they can offer on Currency pairs and is usually slightly lower on other asset class such as indices, commodities. To avoid surprises make sure you know what leverage the broker will apply to the markets you want to trade. You can find this information most of the time on the contract specifications on the broker’s website.
High leverage higher risks? Not necessary, when your account is set to a high leverage (let’s say for example 400:1) you have the possibility to open bigger trades with a small portion of capital in the equity of your account. The possibility but not the obligation, in the end it’s up to you to size your trades and make sure you don’t over – leveraged yourself. To sum-up leverage can be a great asset and can help you reduce your cost of trading. Learn how to fully take advantage of it by reading our educational material dedicated to the use of leverage in forex and CFD trading.
Platform
Choosing a platform might sound easy but it’s not. Increasing competition and the rise of technology has pushed forex brokers and platform providers to enhance the trading experience of their clients by offering more and more tools on their platform. You will be able to find amazing platforms out there; the key is to make sure you find the one that fulfills what you need for your trading style specifically.
Do you want to trade automatically with an Expert Advisor (EA) ?
Then Metatrader 4 or Metatrader 5 will be the only platforms that will allow you to run your MQL4 / MQL5 algos.
MT4 and MT5 are platforms developed by Metaquotes. They are available with nearly every broker and used by thousands of retail traders. MT4 specifically is by far the most popular platform worlwide. Even if it has been developed and designed for trading with expert advisors, the developers made the platform in a way that any manual trader can use it. You will find functions such as one click trading, the possibility to trade from the charts, drag and drop functions to place take profit and stop loss among others. It is very easy to use and getting familiar with MT4 should take you no longer than one day on a demo account. For more information, have a look at our dedicated Metatrader 4 guides.
Do you want to trade manually: scalping, intra-day or swing trading ?
Then you have plenty of choice among multi-asset platforms powered by brokers themselves or independent platform designed and created by technology provider who allows you to trade with their broker partner.
When a broker invested resources to create its own platform he will usually want traders to use it which is why there is generally no cost and the platform is totally free.
Instead, independent platforms usually comes with a cost and very few of the good ones are completely free. The cost can be direct : you pay to get the platform on a monthly / yearly basis. Or it can be indirect such as a mark ‘up on the spread when you will place your orders (this Mark’up allowing the provider to remunerate himself) keep in mind this means you will get worst execution than going directly to the broker.
To help you we shortlisted 3 key points to review any trading platform when you trade manually :
-Trading functions :
How easy is it to place / close an order from the charts ?
Is the one-click trading available ?
Can you open an order directly with take profit and Stop-loss ? (the equivalent of the mini terminal on MT4)
How many order types can you use ?
Can you close multiple orders at the same time ? (close all winners, all losers or all open trades)
How can you monitor opened trades and your P&L ?
Does the platform allow you to access the depth of market ?
The platform should be straight forward, easy to use, load and response fast.
-Mobile :
Is there any Android / iPhone app to monitor your trading activity on the go ? (Please note that MT4 comes with a mobile version)
-Charting package :
Can you create custom views with multiple charts on the same screen ? (in order to monitor different markets or different time-frames)
Can you undock the charts from the platform in order to move them to another screen ?
How many time-frames are available ?
Can you create a custom chart with a time-frame not available by default ?
Can you load custom chart types such as renko or heiken-hashi ?
How far can you go back on the historical data ? (ideally you want at least 10 years)
How many indicators are available ?
How easy is it to customize an indicator ? (period, color, size…)
Support
When trading live on the financial markets you want to be in a safe environment to focus exclusively on your trading, to achieve that you will need the best support possible from your broker.
You might be thinking “I trade with a top tier 1 regulated broker where everything works fine so why would I need any support ?”
Well, when it turns to online trading you will rely on many things you actually don’t’ have control on. First one being your internet connection, unfortunately it can go down at anytime and you don’t want to be stuck with no access to your trading platform while an open position needs to be closed or SL and TP need to be modified. That’s the reason why your broker has to give you the possibility to call the trading desk on the phone at any time during the trading week (5 days on 7 24h/24) to close a position, modify orders or open a position.
In addition, you should expect around the clock support on live chat on the broker’s website for matters such as crediting a deposit to your trading account or simply following up a withdrawal enquiry.
In case English isn’t your main language and you can’t speak it on the phone double check if the broker offers support in other languages. Nowadays, it’s very common for most of the FX and CFD providers to have international desks and to support languages such as Spanish, German, French or Mandarin.
To finish, when contacting the broker’s support via e-mail you should be expecting an answer at least within 24 hours, the ideal scenario being to get an answer as soon as possible, what’s more the broker should never leave any of your enquiries either via e-mail, live chat or phone without any answer.
