Whether you’re new to forex trading and are looking for the right broker, or have been trading for years but are unhappy with your current broker and want to switch to a new one, the process of finding a reliable, good broker can be daunting and, of course, very time-consuming.
There are many useful articles you can read which point out everything you need to look for when choosing a broker (see our own article on choosing the right broker). There are also many articles that explain how to avoid a scam or fraudulent forex broker (read our own article on how to stay away from FX frauds). And, of course, there is an infinite number of broker reviews online which can be of tremendous help, albeit sometimes a bit biased.
To make things easier for you, we’ve compiled a checklist that we encourage you to look at before opening a real trading account with a broker, to make sure that you won’t end up losing your money before you even get a chance to trade. If your broker of choice ticks all the right boxes, your deposit and profits will in all likelihood be in safe hands.
1. The broker I am thinking of trading with is regulated by a recognised regulatory body
A broker needs to be regulated in order to pursue operations legally. Some of the most widely-recognised regulators are FCA (Financial Conduct Authority – United Kingdom), CySEC (Cyprus Securities and Exchange Commission – Cyprus), MiFID Directive (Markets in Financial Instruments Directive – European Union), AMF (Autorité des Marchés Financiers – France), BaFIN (Federal Financial Supervisory Authority – Germany), FINMA (Swiss Financial Market Supervisory Authority – Switzerland), ASIC (Australian Securities and Investment Commission – Australia), U.S. SEC (Security and Exchange Commission – United States), NFA (National Futures Association – United States), CFTC (Commodity Futures Trading Commission – United States).
2. I have asked people I know who trade with this broker to tell me their experiences
Remember: Reputation is key. If you have friends or acquaintances who trade with the broker you are thinking of opening an account with, it is imperative that you ask them to share their experiences.
3. I have visited online forums and read reviews of the broker that were posted by other traders
There are many good forums and review sites where traders post their experiences and satisfaction/disappointment with particular brokers. Although some reviews and comments may be biased, spending some time on such sites will give you a good overall impression of the broker you are thinking of trading with.
4. I have checked the trading platforms available and found that they are stable and user-friendly
If your broker of choice offers demo-trading, make sure you take advantage of it despite the fact that you may already be an experienced trader. Although demo accounts may differ slightly from real accounts in terms of quoted prices, trading briefly with one will help you understand if it is stable, reliable and user-friendly.
5. I have checked if the broker offers Negative Balance Protection
The Negative Balance Protection (NBP) policy ensures that you never lose more than your deposited funds. Since having a NBP policy in place is not a legal requirement, many brokers do not offer it. However, it is better to double-check in order to adapt your trading style accordingly and avoid finding yourself owing more than you can afford to lose.
6. I have visited the broker’s website and found it legitimate.
That’s right, there are many so-called broker websites out there that are pure scams. Before you open a trading account with a broker, make sure you have visited their website and found it legitimate, with useful information and clearly-stated details such as physical addresses and regulators. Do take that extra step and check, also, whether the broker you are looking into has presence on social media.
7. The broker I am looking into has at least one physical address.
To make sure they’re not a scam – read again the description under the previous point.
8. The broker I am considering trading with has won awards for its services
It is true that winning an award does not guarantee good and reliable trading conditions. However, while one award by a random institution may mean nothing, a long list of prestigious awards by highly-acclaimed institutions may actually suggest that the broker you are considering is, at least, legitimate.
9. I am aware of the deposit and withdrawal methods
When trading, you need to be able to deposit AND withdraw funds as easily and quickly as possible. It’s vital, then, that you familiarise yourself with the deposit and withdrawal methods offered by your broker of choice before you open an account with them.
10. I know everything there is to know about transaction costs
Since brokers have to make money for themselves, they will either charge a commission every time you enter and exit a trade, or charge you for the spread. It’s important that you check the actual costs of trading before you actually start trading with a particular broker, keeping in mind that cheap rates do not guarantee a reliable broker.
11. I have read the terms and conditions of the bonus scheme that the broker offers
Not all brokers offer bonus schemes, and bonus schemes do not guarantee a reliable broker any more than cheap transaction costs do. The brokers that do offer bonuses, however, do so only and if you meet the terms and conditions they have set. A bonus should therefore never be the reason for which you choose one broker over another, while in the case you do decide to accept a bonus, make sure you read the terms and conditions associated with it.
12. The broker I am interested in offers customer support.
By customer support we mean actual, prompt and helpful customer support at any time of the day via e-mail, telephone or live chat.
13. I have read and understood the terms and conditions of opening a trading account
If you want to know what to expect from your broker, you simply just have to go through the terms and conditions of opening a real trading account point by point, ensuring that you understand and agree with them.