For a trader the broker is the key partner in his activity, choosing the right broker can make a huge difference on the trading results.
Here is a check list of the most important points to check:
1. Since how long is he in the business?
It’s good to remind that a forex broker is not a bank, in case of bankruptcy the bank should be recapitalised most of the time by the local government, but not forex brokers.
In 2015 with the swiss franc flash krach several brokers like alpari, excel markets… simply disappeared, in only 1 day! That’s why it’s so important to choose a broker that is in business since a very long time, he already learned how to manage hard times.
2 . Which regulations?
FCA (UK) and CFTC(USA) are the most difficult regulations to obtain, compared to the cysec (Cyprus) for example.
A broker without the FCA is just not safe enough – he didn’t pass the security controls. Without regulation there will be no possibility to complain in case of dispute!
3. Which location?
Better forget the brokers in exotic countries, brokers located in US or UK are the safest ones.
Most of the times if brokers are located in exotic locations like carribean or Cyprus it’s because they want to pay less taxes, but also because there it will be very complicated to complain in case of dispute.
4. Physical presence around the world – staff
It’s logical but not all the traders take the time to make the research, you can choose brokers with offices in 36 countries, or 1 office in 1 country, what looks the safest ?
5. Spreads & comissions
Here is a huge difference! Some brokers having a spread of 0,2 on eur/usd other ones 3 pips !
This difference can be even worst with exotics pairs – From the studies we know that the brokerage cost have big responsability in the ruin of 90% of the traders.
6. Fixed spread or floating
Beginners usually think that fixed spread is a good deal – WRONG –
– on the market the spread depends on the liquidity- it’s the law of the supply and demand -If the spread is high that’s the proof that the liquidity is low > not the good timing to enter into the market – but when the liquidity is good it’s possible to have a 0,00 spread so why do you pay 3 if you can get 0?
7. Comission included or not?
Most of the time the best brokerage firms separate the comission from the spread, for the novice it looks weird but it’s far better, because it allows to see the real cost of the brokerage – the spread is not the cost , it depends from liquidity – the comissions per million of notional value vary from 25$ to 60! Here is again a very important detail to check ..
8. Trading platform – execution
Here again a lot of hidden costs, latency, last look, requotes, orders not filled…
Even if the spread is low, if you are not executed close from the price that you see when you click the button, it’s a cost that can change dramatically the result of your trade.
9. MT4 vs API access
MT4 is probably the most used trading platform in the world, what doesn’t mean it’s the best one. Ergonomy, comissions cost ( MT4 comissions are billed to your broker) Professional algoritmic traders will prefer to have a direct access to the API of the broker instead of losing latency with MT4. Here access conditions to the API are very different depending on the broker, some are charging 600$/month, or request a minimum deposit of 50 000$… Other ones are just free.
10. Minimum deposit
Most of the less serious brokers try to attract clients with very low deposits. 1$ -10$-100$
while the most reputable are placing an entry “fence” at minimum 10 000$ deposit.
That is far more realistic, trading is a business that requires a consequent starting capital.
11. Withdrawal/ deposit fees
Totally Free with some broker, other ones can charge 20 $, 99$ or even 5% of deposit fee!
Conclusion – 3 serious brokers to work with to have clear conscience:
- Interactive Brokers – for stock trading probably the biggest broker in the world. Low fees and #1 in its industry.
- Lmax Exchange – for Forex/crypto trading, transparency, execution, low pricing, Lmax set an new standard in the forex world
- Binance – for Crytpocurrencies investing, is one of the most trusted solution