How to Choose a Forex Broker

Together with the relatively recent development of cryptocurrencies, one of the most popular modern trading avenues – for both professional and part-time traders alike – is that of Forex. A topic never far away from the finance news headlines, trading in foreign currencies is a subject which sparks endless debate and analysis all around the world. For those with a sound trading strategy, Forex trading also provides the very real prospect of making consistent and healthy profits.

A sound and well-thought-out strategy is undoubtedly one key tool in the quest for profit, but just as important is choosing the right Forex Broker. Few decisions will have such an impact on a trader’s long-term bottom line – making that initial decision crucial.

In an increasingly competitive market, the choice for the prospective Forex trader has never been so great, with brokers ranging from the excellent – as detailed in this CMC Markets Review – to the not-so-good. But how to distinguish between the good and the bad? Here we outline what we consider to be the key factors when selecting a Forex Broker.

Low Spreads and Commission

Forex brokers provide an essential service in enabling customers to trade on what is a decentralised market. Like most businesses in the service industry, they make their money by charging customers to use the service.

These charges typically take two forms: the spread and commission. Taking an example of a EUR/USD trade, with a spread of 1.1589/90. What this effectively means is that traders can buy the currency pair at 1.1590 and sell at 1.1589. This one pip difference between the buy and sell price is where the vast majority of a broker’s income comes from.

In addition to the spread, some brokers may also charge a commission on trades. It is essential to way up the total costs – factoring in both the spread and commission – when selecting between brokers. Low spread and zero commission is of course the ultimate goal, but by comparing the various cost structures between brokers – relative to the types of trades you anticipate making – you should be able to zero in on the broker which is right for you.

Variety of Markets

When registering with a new broker, it may be that Forex trading is your main aim. However, it is sound advice to always favour a broker with more than JUST Forex trading available. It would after all be pretty frustrating should an alternative avenue for profit present itself, only to then find that your broker does not facilitate trades in this area. In addition to Forex, look for brokers who provide access to:

• Cryptocurrency CFDs
• Share CFDs
• Commodities
• Stock Indicies

Educational Resources and Tools

Whilst Forex Brokers tend to make money whichever way the market shifts, it is in their interest that their clients return a profit through the use of their service. Profitable customers are after all more likely to continue to use the platform.

With that in mind, many brokers go out of their way to give their clients the very best chance of making money, via extensive educational sections detailing all of the different types of trade and exactly how they work.

Also look out for sites which provide useful trading tools in the areas of market analysis, technical analysis and copy trading – a particularly useful feature which enables clients to quickly replicate the trades of other traders proven to be profitable. MetaTrader 4, Autochartist and PsyQuation are three of the market-leading tools to look out for.

Respected and Properly Regulated

Last but by no means least, always ensure that your Forex Broker of choice is fully regulated and licenced to operate in your country of residence. UK customers should check that the broker has Financial Conduct Authority (FCA) accreditation. This information should be available on the website of any reputable broker and provides clients with the assurance that all trades are conducted in a safe, secure and legal manner.