How to Choose the Best Forex Broker?
Choosing a safe, well-regulated broker that has competitive fees and easy to access to the markets is essential to competing in the world’s foreign exchange market. On top of the factors already discussed in this guide, you should also pay attention to the following points outlined below.
How to find a safe forex broker?
The safety and trustworthiness of a broker should be the most important factors when choosing a forex broker with which to trade. After all, it is the broker who will hold your trading funds and execute your trades.
Choosing a estrela bet:regulated broker is essential to keeping your funds safe and ensuring your broker has no conflicts of interest in executing your trades. A regulated broker must adhere to strict rules, which, if broken,ꦓ will result in fines or the loss of their license to operate.
In our broker rating reviews, we classify regulators under the following tiers:
- Tier-1 financial regulators are those situated in well-known financial centers and include bodies such as the Australian Securities and Investment Commission (ASIC) and the UK Financial Conduct Authority (FCA), among others.
- Tier-2 financial regulators are those situated in established but smaller financial centers and include bodies such as the Financial Markets Authority of New Zealand (FMA), among others.
- Tier-3 financial regulators are typically situated in offshore countries and include the International Financial Services Commission of Belize (IFSC), among others.
- Unregulated. Some brokers will base their company offshore in a jurisdiction where there is no requirement to be regulated or have a license and include brokers situated in St. Vincent and the Grenadines and St. Lucia.
There is a growing list of brokers that will have multiple entities around the world, with each one regulated by a different financial body or not regulated at all. I would advise you to check which entity you are actually opening a trading account with and confirm what protections – if any – are available to you. This can be done by reading the broker’s terms and conditions document and confirming with customer support in writing. To save you time, we also created detailed guides on the estrela bet:best CySEC regulated brokers, estrela bet:best ASIC regulated brokers and estrela bet:best FCA regulated brokers.
Brokers regulated by Tier-1 financial regulators, the UK FCA, CySEC, and ASIC offer the highest level of protection as it is a legal requirement for them to segregate client funds from their own to ensure they are not using your funds to run the business and offer a negative balance protection policy to ensure your account does not go below zero from any adverse movements in the market.
The FCA and CySEC regulators take investor protection one step further and make it a legal requirement for brokers regulated by them to be part of a compensation scheme that protects your capital up to a certain amount in the event of the broker becoming insolvent.
From my own experience, I would recommend avoiding unregulated brokers at all costs. There is no legal recourse should they run away with your funds or handle your capital negligently.
What fees should you be aware of when choosing a forex broker?
There is a range of fees that you should be aware of and check when choosing a forex broker to trade with. The fees can be categorized into trading and non-trading fees.
Trading fees
These are fees charged for opening, closing, and holding a trade and include:
- Spread. This is the difference between the buy price and sell price of a financial instrument, and should be as low as possible. In our broker rating reviews, we conduct a live spread test with each broker. A spread of less than 1.0 pip – with zero commission – on EUR/USD is considered to be the industry average. See our guide for the estrela bet:best forex br🔯okers with lowest spreads.
- Commission. This is the cost of opening and closing a trade and should be as low as possible. In our broker rating reviews, we conduct a live fee test with each broker. A commission of $3.50 per lot, per side on MT4 and MT5 and $3.00 per lot, per side on cTrader is considered to be the industry average.
- Swaps. This is the cost of holding a leveraged or margined, position overnight. The swap fee is based on the two different interest rates of the currency pair you are trading on, plus a broker’s markup. Discover estrela bet:Best low swaps forex brokers.
The best way to test the fees for yourself is to use a demo trading account or open a live account with the minimum deposit first. Alternatively, you can read the review of a broker from the FX Empire website, in which our team of analysts have tested the spreads for you.
Non-trading fees
Non-trading fees can include charges for account maintenance, account inactivity, deposits, and withdrawals. It is wise to review the deposit and withdrawal methods and their respective fees so you are not surprised by any high charges.
Many brokers will advertise fee-free deposits but then may charge for withdrawals. This information is usually found on the broker’s website, but you can also check with customer support.
How to choose a suitable trading account?
Most brokers will offer a variety of trading accounts which can be generally split into a commission-free account or a commission-based account with lower spreads. This is due to the different execution methods that the broker may offer you, which can include:
- Dealing desk: Not as common anymore, but still around. This is where the broker takes the other side of your trade, expecting the majority of their clients to lose.
- STP: Straight Through Processing is now more common among regulated brokers. This is where the broker sends your orders directly to their liquidity providers for at-market execution. Spreads are usually marked up by the broker but usually without any other commission. Check out the list of estrela bet:Best STP forex brokers.
- ECN: Electronic Communications Network. This is where a wide range of different liquidity providers and banks compete for your orders in an anonymous network. As price quotes are sourced directly from the interbank market, these accounts typically have the lowest spread but usually charge a commission per trade. Explore our guide on the estrela bet:Best ECN forex brokers.
In my experience, each account type may come with a different minimum deposit. Generally speaking, the higher the minimum deposit is, the better the trading terms, products, and services will be.
Investigate each account type thoroughly to find the one that aligns with your needs the most. Usually, you can test each account first using a demo trading account before opening a live trading account.
How to choose a leverage level?
One reason foreign exchange trading has grown in popularity over the years is because of CFD trading accounts. A ‘contract for difference’ trading account allows you to trade long and short using leverage.
Leverage allows you to open a larger position using a smaller deposit and helps to amplify winnings but also losses. If a broker offers 1:30 leverage, this means you can open a position 30 times the size of the capital you put up. For example, you would only need $1,000 to open a $30,000 position.
The leverage amount offered by a broker depends on your categorization as a client with them (retail or professional) and which financial regulator the broker falls under.
In 2018, the MiFiD II European Market Act Directive legally required Tier-1 regulators to impose a 1:30 leverage restriction on retail clients trading foreign exchange. This is because, up until this point, many retail traders were wiping out their trading accounts using too much leverage.
Read more about estrela bet:Best MiFID regulated forex brokers.
If you are categorized as a professional trader, then brokers regulated by Tier-1 regulators can offer higher leverage, sometimes up to 1:200 on forex, but you may lose some other protections afforded to retail traders, such as negative balance protection.
Some brokers may advertise 1:1000 leverage or more. These brokers will be based offshore in low-regulated jurisdictions. There is a reason Tier-1 regulators imposed leverage restrictions on retail traders, so beware of brokers advertising very high leverage.
Explore estrela bet:Best forex brokers with high leverage.
Brokers offer a variety of forex trading platforms. Choosing the best one will depend on your individual trading style and level of experience. However, there are some ‘go-to’ forex platforms that are well-known for their reliability and excellent range of features.
Some of the most common trading platforms include:
- MetaTrader 4: This platform is the ‘go-to’ forex trading platform known for its superior charting technical analysis and drawing tools. Discover estrela bet:Best MetaTrader 4 brokers.
- MetaTrader 5: This is an updated version of MT4, which has more features such as extra timeframes and indicators. Discover estrela bet:Best MetaTrader 5 brokers.
- cTrader: This platform is designed for high-frequency day traders and scalpers and comes with advanced algorithmic trading capabilities. Discover estrela bet:Best cTrader brokers
- TradingView: This platform is fast becoming a leader in the industry as it is fully browser-based with advanced research tools and charting tools for all financial instruments. Discover estrela bet:Best TradingView forex brokers.
- In-House Proprietary Software: Some brokers may invest in having their own proprietary trading software.
Check out our list of estrela bet:Best forex trading platforms.
What to avoid when choosing a forex broker?
It is wise to steer clear of brokers that aren’t regulated by a reputable authority, as there is no legal recourse if they take your capital and handle your funds fraudulently. Also, beware of brokers that promise high returns and that trading is easy.
Brokers regulated by well-established financial regulators have the highest level of investor protection and must follow strict rules to protect your capital. The safety of your funds should always be the number one priority.
How to avoid forex trading scams?
Unfortunately, there are many scam brokers out there nowadays. You can protect yourself by adhering to the following:
- Always trade with a regulated broker from a well-established financial jurisdiction.
- Ensure the broker has physical offices in a well-known country and city.
- Speak to customer support to check they are easy to reach.
- Use a demo trading account first.
- Check the legal terms and conditions document carefully and the entity you are trading with.
- When ready for a live account, start with a small amount of capital.
Our Methodology
In identifying the top forex brokers and trading platforms, we relied on the results of our estrela bet:advanced proprietary methodology. All of the brokers listed were among the leaders in our tests. Since pioneering the broker rating review industry, FX Empire’s review process has expanded and diversified over the years. I𒉰t now includes 250 data points covering nine core categories which include:
- Trust
- Fees
- Platforms and tools
- Tradable instruments
- Customer service
- Deposit and withdrawals
- Account types
- Research
- Education
Through opening live trading accounts and testing the broker’s products, services, and customer support, as well as drawing on my own personal trading experience, our team of analysts identified the best forex brokers to trade with this year. We also took the following factors into consideration:
- The overall top score from our comprehensive 250-point data broker evaluation system.
- The trustworthiness of each broker is substantiated by authorization from top-tier regulators.
- Competitive spreads for the available tradable instruments.
- Access to secure, user-friendly, and feature-rich trading platforms.
- The maximum leverage allowed by the broker’s regulatory authority.
- A wide selection of tradable instruments.
- Efficient, reliable, and prompt customer support.
Meet Our Writers
The team of forex and CFD writers and editors at FX Empire is composed of trading industry professionals and seasoned financial journalists. Our writers have been published on leading financial websites such as Investopedia and Forbes. In addition, they all have extensive trading experience.