Forex Brokers
One of the hardest decisions you face when starting out as a forex trader is which forex broker to go with. If you do a search online you will find hundreds of different forex brokers to choose from. The trouble is that some are better than others, and furthermore there are some that you should avoid like the plague.
So let me give you a list of things you should look out for when choosing a forex broker:
1. Regulation
This is arguably the most important factor because whichever broker you decide to go with, you must make sure that they are fully regulated with the relevant authority. So if they are based in the US, for example, then you should ensure that they are regulated by the NFA (National Futures Association) or the CFTC (Commodity Futures Trading Commission). Similarly if they are a UK-based company, then they should be regulated by the FSA (Financial Services Authority).
If you go with an offshore forex broker that is completely unregulated, for example, then you are taking a huge risk because you may never see your money again.
2. Spreads
If you are a relatively long-term trader and mainly use the 4 hour or daily charts, for instance, then the spreads offered by your chosen forex broker is not so much of an issue. However if you intend to trade the shorter time frames then your points gains per trade will obviously be a lot less, and therefore the spreads will start to eat into your profits. So as a general guide you ideally want to choose a broker that offers spreads of around 2 or 3 pips for the EUR/USD and GBP/USD pairs, and certainly no more than 4.
3. Leverage
The amount of leverage offered by different forex brokers varies greatly. Some may only offer 100:1 leverage while some may offer as much as 400:1. My own personal view is that 100:1 is more than enough, but if you are more of a risk taker then you may want to look for brokers that offer higher leverage.
4. Demo Accounts
If you are relatively inexperienced or if you want to test out a broker's trading platform before deciding whether or not you wish to open a live trading account, then you should choose a broker that provides a free demo account. Most reputable brokers offer demo accounts nowadays so I would always recommend you take advantage of this facility.
5. Account Types
Although all forex brokers cater for the well capitalized traders, not all of them cater for those traders who wish to trade smaller positions. Therefore if you yourself fall into this category, then you should look out for brokers that allow you to trade mini-lots (equivalent to around $1 per pip) or micro-lots ($0.1 per pip).
6. Minimum Deposit
If money is tight or you want to start off small (which is always a good idea), then you will want to choose a forex broker that requires a relatively low minimum deposit when opening a live trading account.
7. Charting Software
Nearly all forex brokers provide some kind of charting software free of charge when you open an account with them. It may be the highly popular Metatrader 4 platform or it may simply be a no-frills charting package. So therefore if you do want to use some of the more advanced charts, then I suggest you go with a broker that provides the Metatrader 4 or ProRealTime platform, for instance, otherwise you will have to fork out some money to access some decent charts elsewhere.
8. Additional Services
As well as charting software, you may also want your broker to provide a range of additional services such as daily commentaries, market analysis, educational materials and the option to deal through your mobile phone.
9. Customer Service
If you are just starting out as a forex trader you will probably have several questions and queries when you first open an account with a broker. So therefore you should try and join a broker that offers a high level of customer service. One way of testing this out is to contact the help desk of the brokers you are considering joining, ask them a particular question, and see how long they take to get back to you.
10. Customer Comments And Reviews
Finally your ultimate choice of forex broker will often be swayed by what other traders have to say about them. There are several websites which contain customer reviews of all of the leading brokers and you will find no shortage of opinions on all of the different forex forums.
However one thing I will say is that you will never come across brokers that have nothing but positive reviews, so don't waste too much time looking for the perfect broker because it simply doesn't exist. Just look for brokers that have a high number of positive comments and you should be fine.
* * * * * * *
To help you narrow down your search, here's a list of some of the leading online forex brokers:
Location: Russia / UK / US
Online Since: 1998
Account Types: Micro / Classic
Minimum Account Size: $200
Free Demo Account: Yes (unlimited)
Spreads: 1.8+
Charts / Trading Platform: MetaTrader 4
(Note: Alpari has three different websites (UK, US and Russia) so account features may vary).
Location: US
Online Since: 1999
Account Types: Universal (trade mini and standard lots from same account)
Minimum Account Size: $200
Free Demo Account: Yes
Spreads: 2 pips for EUR/USD and USD/JPY pairs
Charts / Trading Platform: VT Trader 2.0
Location: Germany
Online Since: 2006
Account Types: Standard
Minimum Account Size: $5000
Free Demo Account: Yes
Spreads: 2-4 pips for major currency pairs
Charts / Trading Platform: dbFX Trading Platform
Location: Switzerland
Online Since: 2004
Account Types: Live / Managed
Minimum Account Size: $50,000
Free Demo Account: Yes (14 days)
Spreads: 0-2 pips for major currency pairs
Charts / Trading Platform: Java / JForex / Web
Forex.com (part of GAIN Capital)
Location: US
Online Since: 1998
Account Types: Mini / Standard
Minimum Account Size: $250
Free Demo Account: Yes (30 days)
Spreads: 1.1+ for major currency pairs
Charts / Trading Platform: MetaTrader 4
Location: US
Online Since: 1999
Account Types: Mini / Standard
Minimum Account Size: $2000
Free Demo Account: Yes
Spreads: Typical spreads between 2 and 4 pips for major currency pairs
Charts / Trading Platform: MetaTrader 4
(Note: Separate Micro account also available).
Location: US
Online Since: 2002
Account Types: Mini / Standard
Minimum Account Size: $250
Free Demo Account: Yes (90 days)
Spreads: 2 pips for EUR/USD pair
Charts / Trading Platform: MetaTrader 4 / MTXtreme / FXDD Trader / FXDD Auto / Power Trader
Location: Cyprus
Online Since: 2008
Account Types: Standard / Premium
Minimum Account Size: $500
Free Demo Account: Yes (unlimited)
Spreads: 0.5+ for major currency pairs
Charts / Trading Platform: MetaTrader 4
Location: US / Worldwide
Online Since: 2001
Account Types: Mini / Standard / Silver / Gold / Platinum
Minimum Account Size: $250
Free Demo Account: Yes
Spreads: 3-4 pips for major currency pairs
Charts / Trading Platform: DealBook 360
Location: US
Online Since: 1998
Account Types: Universal
Minimum Account Size: $3000+ (depending on the type of account)
Free Demo Account: No
Spreads: 1 pip for EUR/USD pair
Charts / Trading Platform: Trader Workstation
Location: US
Online Since: 2001
Account Types: Mini / Standard
Minimum Account Size: No minimum
Free Demo Account: Yes (30 days)
Spreads: 2 pips for EUR/USD pair
Charts / Trading Platform: MetaTrader 4
Location: US
Online Since: 2002
Account Types: Standard
Minimum Account Size: $400
Free Demo Account: Yes
Spreads: 0.1-1 pip for major currency pairs
Charts / Trading Platform: MetaTrader 4
Location: Switzerland
Online Since: 2003
Account Types: Standard / Professional / Institutional
Minimum Account Size: $5000
Free Demo Account: Yes (90 days)
Spreads: 2-3 pips for major currency pairs (less with institutional account)
Charts / Trading Platform: MetaTrader 4
Location: Canada
Online Since: 2001
Account Types: Standard
Minimum Account Size: No minimum
Free Demo Account: Yes (unlimited)
Spreads: 0.9 for EUR/USD pair
Charts / Trading Platform: FXTrade platform
Location: UK
Online Since: 2004
Account Types: Standard (can trade from $1 per point upwards)
Minimum Account Size: $2000
Free Demo Account: Yes
Spreads: 2-3 pips for major currency pairs
Charts / Trading Platform: MetaTrader 4 (and other platforms for professional traders)
Location: Denmark
Online Since: 1999
Account Types: Saxo MiniTrader / Saxo Trader
Minimum Account Size: $2000
Free Demo Account: Yes (20 days)
Spreads: 2-3 pips for major currency pairs
Charts / Trading Platform: SaxoTrader
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9 Comments on Forex Brokers »
July 21, 2009
Abigail @ 9:02 pm:
When choosing a broker, keep this in mind: there will be No MT4 changes on Interbank FX. Get the FIFO facts:
Interbank FX has good news for customers! They've announced compliance with the new NFA FIFO rule, retaining all MT4 platform order functionality including expert advisors, allowing flexibility with your trading. Todd Crosland, Chairman and President of Interbank FX states, “Certain US competitors have decided that their solution to the new FIFO rules are to move their customers overseas, rather than being compliant.” They've created a seamless solution, see the full story here: http://snurl.com/nnf7x
August 2, 2009
Mark Heron @ 9:34 pm:
I am trying to verify the status of stp at the above website.
They are based in North Carolina.
They host the metatrader4 platform and would hold your account.
They are not on your list of fully regulated fx brokers. Are you able to verify that they are legitimate.
Best regards
Mark Heron
August 3, 2009
James Woolley @ 8:18 am:
Hi Mark,
There are lots of brokers who are fully regulated that are not included on this list.
However I have to admit I've never heard of the company you mention and can't find any mention of who their regulatory body is on their website, so this is not a good sign.
August 21, 2009
Lalsangliana Chhakchhuak @ 6:32 am:
I have been using Interbank Fx since Nov. 2008 and I have found it to be one of the most reliable brokers in the field of forex trading. I do not find problems till time.. Whenever I came across the situation where i was unclear about any subjects as regards to trading has been clarified in the live chat promptly and satisfactorily.
Daniel Shilina @ 1:47 pm:
I have been trading with IBFX that you have in the list of brokers. I have never had any problems with them at all. There spreads are great and customer service is polite and fast.
August 31, 2009
currency brokers @ 1:40 am:
This post is really informative!
This is really applicable to anyone who is involve into this kind of trading and to those who plans to join in this kind of business.It is really important to know about forex in order to get successful in this kind of trading business.
Thanks for this post!
September 16, 2009
twomanager @ 9:33 am:
this has really helped me a lot and thanks for this post
January 11, 2010
topforex @ 4:22 pm:
Your article is very useful for me. Choosing the right broker and profitable in forex trading is not easy. It's need more references to select one broker. Your article contains a review of some brokers are very good. Thank for your article.
January 21, 2010
forexforall @ 4:24 am:
Thanks for putting out this information. I have been searching for a broker for a while. I have tested few demo platforms so far. They are essentially the same with some differences. I am leaning towards interbank so far although I am not the one to judge one or the other. I also tried to find brokers that offer focused training along with simulation accounts like they have with futures brokers. Training, both online and in person, in forex is offered by third parties, not by brokers as I can find out so far. I will probably learn to trade by myself with more research and practice. Seeing the big picture in terms of all the elements like platforms and third party tools (like charting and analysis software provided by third parties) used widely, broker practices, forex trading principles in general etc. is critical I think. I also suggest to watch the NFA video for beginners in forex trading available online. I also found dedicated channels on youtube for trading in forex and they help me understand the forex and trading online in general. Thanks again all for sharing your thoughts/input here.