How to select a forex broker

How to select a forex broker

Most recently, I wrote about how to avoid getting scammed while buying forex products. Finding a good forex broker is even more important.

I currently have active accounts with several brokers. I won’t name those brokerages in this article. Actually, I won’t mention any other brokerage names in this article. My purpose in writing this article is to help you select the forex broker that is right for YOU, not to tell you which broker you should chose.

If you’ve have already picked a forex broker that you are completely happy with, then you’re done. If you are having trouble deciding which broker to trade forex with, please read on.

From my perspective, choosing a forex broker is a personal decision. First, you need to make a list of what you want from a broker. Some things you will absolutely require, others will be things you want, but can live without.

There are so many factors to consider. There is no way I can list them all, but here are some of the major ones:

What country is the forex broker regulated in? Is the broker regulated at all? Some aren’t. Some will claim to be “self-regulated.” That means they are unregulated, but they aren’t honest enough to admit it. There are a few unregulated brokers that aren’t too badly rated. The problem with this is how do you know they won’t go bad later? Regulation doesn’t guarantee that a broker is a good broker, but at least gives you some recourse if things go terribly wrong. Also, remember that some countries have better regulations than others.

Does the broker allow clients from your country? Not all brokers allow traders from all countries. There was one well-rated brokerage in the UK that I really wanted to open an account with, but they aren’t legally allowed to have accounts from residents of the USA.

What country is the brokerage located in? Many brokerages are multinational. Just because they are regulated in one country doesn’t mean their primary offices are there. Since I live in the USA (most of the time – “Ni hao!” to all my friends in Guangdong Province), I prefer a forex brokerage that is both based in and regulated in the United States. This saves me the effort of getting my passport out of the safe if something strange happens and I feel an overwhelming need to pay them a visit to express my annoyance in person. Don’t trust the brokerage if it claims to be regulated, check them out yourself on the regulator’s website to be sure. There are a lot of “Swiss Brokers” that are about as Swiss as the Swiss cheese that I buy at the grocery store (which is made in Wisconsin).

Can you use a downloaded trading platform, or do you need a web-based trading platform? If you trade from home or have administrator access on your work PC (and your boss doesn’t mind), then you can install a trading platform like MetaTrader. If you can’t install software where you will be trading from, then look for a broker with a web-based forex trading platform. If you plan to trade with automated EAs, you’ll need a broker that has MetaTrader. There are other platforms that allow autotrading, but there aren’t nearly as many products available to work on them.

Does the broker permit your trading style? This is very important if you plan to newstrade or scalp. Some brokers might suspend you. Others will cancel your winning trades (but neveryour losing trades). Certain extremely unethical brokers will decide that your trading style has caused them “damages” and will confiscate as much of your account as they feel like.

How low can you go? Some brokerages allow you to open an account for $1. Some brokerages allow you to trade nanolots (1 cent per pip of xxxUSD pairs) or even lower. On the other end of the cost spectrum, there is one very well-rated brokerage which requires $50,000 to open an account. If you want to live test EAs or other trading systems, nanolots are a good way to do it without risking a lot of money. If you have plenty of money to trade with and are just looking at changing to a better forex broker, this won’t be that big of an issue for you.

Do they offer swap-free (Islamic) accounts? Followers of the Islamic faith are forbidden to charge or pay interest. People who want to hedge a trade with a negative swap pair also would like to avoid paying interest. Whether for religious or hedging reasons, be careful – many “swap free” accounts have a daily fee that can cost significantly more than you would pay for swap interest.

For typical accounts, how are the swap rates? It’s normal to charge a little more on negative swap than what a trader gets paid for positive swap, but some brokers use this as another way to squeeze even more money from hard working traders. Some brokers charge negative swap both ways on some or even all pairs. If you rarely leave trades open for very long and can avoid the time that swap is charged, this won’t affect you. For those who trade specifically to collect interest, this could be one of the most important factors in picking a broker.

How can you move money in and out of your account? Some brokerages only do wire transfers and charge some pretty high fees for the privilege. If you plan to move several thousand dollars every time, this isn’t too bad. If you want to withdraw $50 or $100 at a time, then a $25 or more wire transfer fee really cuts into profits. Look for a brokerage with ways to fund and withdraw that are acceptable to you. Don’t wait until you’ve made some money and then find out that it’s difficult and expensive to get your profits. When you first fund your account, put a little extra in and test the withdrawal process with the extra money just to be sure you can get money back out. Personally, I like a brokerage that has free withdrawals by check. Sure, it takes a few days longer, but I don’t have to pay any fees.

What currency pairs does the broker have available? Some only have a few, other have a huge range of choices. If you only want to trade the major pairs, this shouldn’t be a problem for you. If you like trading anything that moves, look at brokers with broader offerings. Some brokers even offer non-forex products on the same trading platform. Keep in mind that some brokerages have fewer pairs on their demo accounts than on their live accounts. Some also have fewer pairs on mini accounts than on regular accounts. If this information isn’t listed on their website, you’ll need to contact them to ask.

I’m sure there are at least a dozen things I left out. As you can see, some of these features will be very important to you, and others you won’t care about at all. Everyone’s list will be a little different.

Break your list into 2 pieces. First, the list of things you MUST have. Any broker that doesn’t meet these requirements is one you will not consider at all. Take everything on your second list and put it in order of priority for you.

Now comes the hard part. There are broker comparison tables out there, but finding one with all of the features you want listed will be hard, if not impossible. The other way to approach this is to call up FPA’s broker reviews, sorted by rating. Start with brokerages that are 4 or 5 star rated with a reasonable number of reviews. Skim through the reviews and make sure there are no significant problems getting money out of the account. Then check the broker’s website, make sure they can open an account for someone from your country. If so, then see if they meet the absolute requirements of your first list.

Depending on your list, you may find no 4 or 5 star brokers that meet your absolute requirements (when I picked my primary broker, I didn’t). If so, go through the 3 star brokerages. Your goal should be to find several brokerages that meet not only your absolute requirements, but also many or all of the desirable features second half of your list.

This is so important I’m going to repeat myself. Exclude any brokerage with complaints about significant problems getting money out of accounts. Why work hard trading forex to make your fortune if you can never withdraw any profits? By significant problems, I don’t mean that one person whined about a single withdrawal taking a few days longer than expected. I mean people who seriously tried to withdraw money, made many attempts, and it took much longer than it should, or (worse yet) they never got the money. If you have some strange urge to send your money away with absolutely no chance of ever getting any of it back, mail it to me and I promise never send it back to you.

Unless your standards are very low, you probably have a short list of brokerages now. Reread the reviews and examine the websites of each of your candidates to make sure there isn’t anything about any of them that you can’t live with. Then rank them by how well they meet the requirements of your second list.

Now comes the time to open demo accounts for the best 2-4 brokers on your list. Demos don’t perform exactly like live accounts, but will let you get familiar with the trading platform(s) your candidate brokers offer. Unless a brokerage will let you open an account with less than $10, I would personally avoid any brokerage that says to skip demo trading and go straight to live trading. A legitimate forex brokerage should give you a chance to learn how to use their trading platform without risking real money if you accidentally press the wrong button.

Check the website of each of your candidate brokerages to see how informative it is. See how many different ways there are to contact support and try them all. Ask all sorts of questions and see how quick and complete the responses are. Make sure to get all possible information about how to add money to your account and how to withdraw your money. Be aware, some brokers do require more information to process withdrawals than deposits. Have a scanned copy and photocopies of your ID ready to send to the brokerage if these will be needed either to open the live account or to withdraw your money from it.

Now it’s time to open a real account.

Pick the one broker from your candidate list that you are the most comfortable with. Deposit a little more than their absolute minimum to open an account. Place a few trades of the smallest amount they permit over a day or two.

Can you remember what you need to do next? That’s right! Try to withdraw a small amount of money and see if this is easy or not. If they give you significant problems, close the account, withdraw all of you money, and move on to the next broker on your list.

Assuming the brokerage has passed all the tests you have given to them so far, trade small quantities with them at first. Treat the new brokerage the same way you would treat a new trading system and use the most cautious levels of risk management at first. If all goes well, scale up until you are
trading as you normally would. Watch out for large slippage, excessive spreads, frequent requotes, and all the other stupid broker tricks that somehow end up making traders lose a few extra pips here and there. If you encounter too many problems like this and the support staff at the brokerage can’t fix them, then close the account and try the next broker on your list.

Remember, good brokerages can go bad. Well-regulated brokerages can go out of business with little or no warning. Never let your guard down. Double-check all of your account statements. Keep an eye on the reviews for your brokerage. If you see complaints about withdrawal problems, try withdrawing some of your money to see if it’s a real problem or just an impatient person who likes to complain. If your brokerage is regulated, check the regulator’s website at least once a month to see if there are any new issues.

There is no single perfect forex broker for everyone. If everyone followed a broker selection system like this, then the worst brokerages would quickly go out of business, and the rest would soon realize that they need to work very hard to earn and keep the respect and business of forex traders.

I look forward to seeing what features others consider to be important when selecting a forex broker.

Author Profile

Pharaoh

Pharaoh

Pharaoh is one of the FPA's oldest members (he claims to be about 4000 years old, but we think he's exaggerating a little). He says he created the world's first trading pair (Cow/Goat) while ruling ancient Egypt. Although there are no archeological or historical records to support this claim, we can't find anything to disprove it. Although he's not as active at the FPA as he used to be, he still holds the highest post count of all FPA members.

We don't understand how he does it, but Pharaoh has an uncanny ability to spot scams faster than anyone else we've seen. He claims to have known a number of companies were HYIP scams just by their domain names and that each time an examination of the website proved him right. He's also famous inside Forex Peace Army for warning about Ponzi schemes, even ones run by large and well established companies. He's been in a number of threads trying to warn people away from active Ponzi schemes. In spite of the efforts of shills and those gullible enough to believe in free money to discredit his words, he keeps up the warnings. In each case, the company ended up either disappearing with all client money or being shut down by the authorities.

In addition to investigating scams, Pharaoh has written a number of articles on a wide rage of trading topics, including forex broker selection, risk management, and how to select a good account manager. He's also covered other items of interest to traders, such as protecting wealth and purchasing precious metals.

Pharaoh claims to be a business consultant, but says he makes most of his income by running a globe-spanning hamster smuggling operation. If we are to believe him, he's currently working on a network of hamster tunnels under southern Europe.

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Comments

F
FXpublish
11 years ago,
Registered user
A and B book.
What’s the distinction between a True ECN and a market maker ECN really is? Really, traders can’t understand the main difference in business – modules of broker. And they don't get that it influences to broker’s behavior concerning to its customers. Market Makers taking on risk, against their clients by running, what is called a B Book.

Well to keep the explanation simple, brokers that run a B Book are those that wish to profit from their clients trading losses, essentially they selectively categorize their clients in order to capture the losses incurred by those customers who lose money. A Book clients on the other hand are those that make money, so as a way to prevent the FX broker form losing money when the client wins the FX broker will hedge all A Book client trades, also get commission from them for execution, or can hedge with any multiplication, i.e. to win more than his client.

So how does this all connect to ECN FX brokers? Well a few ECN brokers are not really ECN FX brokers but are instead market makers utilizing an ECN FX broker price feed by running a B Book behind the scenes. This has naturally led to allot of controversy and forced traders ask whether or not there actually are any true ECN FX brokers out there.

There are some checks which you can carry out yourself which will help you identify whether your FX broker is actually a real ECN. Here are the checks that you ought to perform.

1. Freeze level (Stop order distance from the current market price) – True ECN FX brokers will NOT freeze a distance stop orders can be located from the present market price. As all trades occur in the True ECN environment the FX provider doesn’t care if you scalp for a few pips here or there. Only fake ECN brokers will set a minimum stop distance for placing limit or stop orders.

2. Trade size limits – A True ECN broker won’t put any limit on your deal sizes as inside a True ECN environment there is always a buyer and a seller. A Fake ECN broker will probably restrict your deal sizes as they’re taking the other side of the trade, if your deal is just too large they may not be able to manage their position exposure to you if you are making money.

3. Slippage – Slippage can occur in a True ECN environment and it can work for FX traders and against them, meaning that FX traders could possibly get better or inferior fills. A Fake ECN broker will only pass on negative slippage NOT positive slippage, they’ll always keep the positive slippage for themselves instead of passing it on to their FX traders.

4. Level II- True ECN broker has to provide opportunity to see traders’ limit orders. It makes transparency broker’s trading service. This allows you to watch the trades being executed right in front of you.

You should always perform these 4 simple keys prior to trading with an ECN FX provider to make sure they are actually a True ECN FX broker not just a market maker in disguise. Please find the most appropriate for yourself.
F
F0r3x123
11 years ago,
Registered user
Thank you for the post above.

I there a way to detect without doubt if your broker is a real or fake ECN broker?
M
manish88
11 years ago,
Registered user
The first and the major point you should consider is the loyalty and truthfulness of the broker, lest there are many agents who are indeed lollipops of the insecure beginners of currency trading. The selfish agents synthetically operate the propagate and press into your earnings though they may not be breaking any guidelines lawfully.
G
geoffrey
11 years ago,
Registered user
Re: How to select broker

This is old but still very useful



How to select a forex broker
by Pharaoh



There is no single perfect forex broker for everyone. If everyone followed a broker selection system like this, then the worst brokerages would quickly g..
D
duderex
11 years ago,
Registered user
My suggestion, if you want to search for broker, please make sure that the broker that you are choose is not offering nonsense bonuses. Type broker name that you want to register with, then add scam or spam beside it's name. Then see how the admin answering those people that suspect the broker that you going to choose is spam or scam?
F
ForexWiseGuy
11 years ago,
Registered user
1. Regulatory infractions
Find out if the broker is registered with a regulatory body and if they have any infractions with this body.

2. Leverage ability
What is the maximum and minimum leverage that is being offered? This is essential for proper money management strategies.
R
Red Herring
11 years ago,
Registered user
Nicely described Pharaoh

I wonder why some regulatory body do not appear to control all the brokarage just like all the banks all over the world are trustable amd controlled by their Central Banks!We could trade safely paying charges no problem! Why all the traders will be at risk all the time! It sould not be so in today's world!
P
Pharaoh
11 years ago,
Registered user
A central authority to regulate all national banks as well as private ones would make it much simpler to regulate many things, including forex. Unfortunately, I don't see it as workable in today's world political climate.

Look at all the chaos in the Eurozone. Even with the ECB, there are still issues between the various national banks.

A more workable step would be for more governments to at least have monitoring and the ability to fine the hell out of companies that commit online financial fraud (throwing the worst ones in jail would also be nice). So many of these brokerages are unregulated or under-regulated and so many traders live in countries that have almost no way for a trader to even request an investigation of fraud that occurs outside their own borders.
M
myBrokerStats.com
11 years ago,
Registered user
> This is old but still very useful

old but gold!

(Pharaoh, is it still allowed to make this golden post public to other peoples? Would love to include it in a blog post. Would also make the link back here as the comments are certainly very helpful too. As pointed out earlier, most people just come aware of FPA once too late or in trouble..)
P
Pharaoh
11 years ago,
Registered user
I'm glad someone likes what I write. :cool:

As long as you include a link back to the original post, I'm fine with you reposting my articles.
M
Marcus5799
10 years ago,
Registered user
thank you Pharoah for all your dedication to this thread. You really go out of your way to hlep protect new traders.
I
itkraze
10 years ago,
Registered user
I must say that I have learned a new thing in this page and that is the freeze level distance. I always wonder that why broker don't allow to place a close SL to current market price and today I got the answer.
G
GlennR
10 years ago,
Registered user
I am new and shopping for a broker. I've read about how to choose them, but I don't know where to find a list of them.

Are there any lists that gives the various broker criteria, so I can narrow them down?

thanks,
P
Pharaoh
10 years ago,
Registered user
I have seen at least one searchable database. The problem with it was that the brokers supplied the info and either through incorrect entries or database errors, many of the searches produced highly inaccurate results.

My suggestion - start off with brokers that have at least 25 (better yet, at least 50) reviews. Sort them by rating. Set out your CRITICAL criteria - #1 is that they accept traders from your country, and you've probably got a few other "must have" items on your list. Then visit each broker's website and quickly eliminate those that obviously don't meet your minimum standards.

At that point, check the 20 most recent reviews for the survivors. If you see more than 2 or 3 serious withdrawal issues, eliminate those.

Now it gets hard. Have your list of "must have" and "nice to have" criteria and go back to the surviving broker on your list. Dig a little more carefully and you should be able to dump quite a few.

Next, for any with unanswered questions, get on live chat and see what answers they have. Don't just settle for something like "yes, we've got good swap rates". If you get an answer like that, ask for a link to their current rates.

The ability of live chat agents to quickly and correctly handle your questions should narrow the field down even further.

Yes, this is going to be a lot of work. Then again, when you buy a new car, do you just stop at the first dealership you see and buy whatever the first salesman shows you, or do you put some time and effort into doing some research first?
W
Whitesnake
10 years ago,
Registered user
The first and foremost thing which i look into any broker before opening the account in them is that they should be regulated by a well recognized government agency. Secondly, their deposit and withdrawal should be hassle free and easy for the clients. Good spreads at a competitive rate from other brokers. Excellent customer support.
W
Whitesnake
10 years ago,
Registered user
Basic filtration lists helps the traders a lot so that they can manage to filter the bucket shop and the market makers kind of brokers who are always against the traders and make money out of the traders losses.
P
Pharaoh
10 years ago,
Registered user
> Basic filtration lists helps the traders a lot so that they can manage to filter the bucket shop and the market makers kind of brokers who are always against the traders and make money out of the trad..

Good luck with that. Brokers declare themselves to be NDD, STP, or ECN. This doesn't mean that many of those brokers aren't really bucketshops.

The best way to avoid at least some of this is to trade with well-regulated brokers. People can debate the overall effectiveness of regulation between countries. I personally suggest selecting a broker with US, UK, Swiss, and Australian regulation if you want to at least pick a country where the regulators have some teeth.

Also, be VERY careful. Some brokers have multiple companies. You may open your account on a page bragging about UK regulation and end up with an account "regulated" by Panama.
S
STOP
10 years ago,
Registered user
As for me I think threre are some main points, that we should notice. For ex regulation of broker and having lisences. Also good broker hasn't annoying ads and another noisy ways to get clients. I think the main is how the ssupport talking with customers and how they solve problems and answer on questions. Something like that I think...
F
FringFX
10 years ago,
Registered user
You always have to check other credible sources and make further comparisons.
D
DokterB
10 years ago,
Registered user
Brokers

Can anyone give me advice on what broker you would suggest to be good and has low commissions?
P
Pharaoh
10 years ago,
Registered user
DokterB, did you really read the first post in this thread?

Based on what little info you give, you should take anyone popping up here recommending the perfect broker for you to be a reason to NOT go with that broker.

Selecting a broker that meets YOUR trading needs is going to require YOU to do a little work. Start by following the advice in the article and come up with lists of must-have and nice-to-have features.
J
jim.max
10 years ago,
Registered user
You have to be very careful in selecting a good forex broker.The tips above will certainly help you out in finding a good broker.For me the good broker is those who provide a good support and always there to help you out.
G
Gennietrader
10 years ago,
Registered user
Hello, I'm a newbie and have no idea which online broker to choose from.
do you have any suggestion on a online broker which most traders use?
P
Pharaoh
10 years ago,
Registered user
There are over a thousand brokers out there. This means there is not a specific broker used by most traders. You need to find a broker that accepts people from your country, allows your style of trading, and meets your very specific trading needs.

If someone tells you "Broker X is the perfect broker for you" without knowing anything at all about you and your trading needs, take that as a very firm recommendation - to NOT open an account with Broker X.

Please re-read the first post in this thread very carefully. It explains a method to find a broker that's suitable.
G
Gennietrader
10 years ago,
Registered user
Thanks Pharoah, there are just too many forex broker out there... I guess I'm still new and need to study more about Forex before finding the best broker for me~
P
Pharaoh
10 years ago,
Registered user
It is a lot of work, but you can narrow that 1000+ down very quickly.

First, you need brokers that accept people from your country. You would think that all brokers can accept people from all countries, but the truth is that different brokers and different countries have different rules.

Second, how regulated do you want your broker to be? If you want the strongest regulations, the main choices are brokers regulated in the USA, UK, Switzerland, or Australia. Make sure they are registered with the financial regulators and don't just have a simple business license.

Regulation isn't always perfect, but in the case of US regulation, if the ripoff is bad enough, at least someone ends up in prison.
F
fxgermany
10 years ago,
Registered user
>
Second, how regulated do you want your broker to be? If you want the strongest regulations, the main choices are brokers regulated in the USA, UK, Switzerland, or Australia. Make sure they are reg..

I'd like to add that people should be careful when brokers advertise with UK regulation. Since April 2013 the FCA (Financial Conduct Authority, formerly FSA) has to acknowledge all brokers that have been registered or are regulated within the European Economic Area. The status of such brokers shown by the FCA will be "EEA Authorised".
P
Pharaoh
10 years ago,
Registered user
Yeah, I'm pretty sure there are some other regulators out there that also acknowledge other regulator registrations - even ones that suck.

So, traders need to find out where the original regulator is. The FCA won't help you if the broker is EAA Authorized because they are really registered with the regulators in Elbonia.

It's too bad. I'd like to see competent regulators acknowledge each other's registrations. For example, if the CFTC and NFA could sign a deal with the FCA (for FCA original registrations only), this would be a very useful thing (especially for US traders).
S
Scottlouie
10 years ago,
Registered user
Be aware that the FSA in the UK is now the FCA.


https://en.wikipedia.org/wiki/Financial_Conduct_Authority
J
Jafoste
10 years ago,
Registered user
Very good article! Agree with everything... somethings i wasn't aware and now ill be keep open eye.
G
groverrrrr
10 years ago,
Registered user
in my opinion and practice, the best way to sellect a forex broker is to look at the regulatory body (deffinitely to have one) then spreads and then execution.
All the rest is just sweet cover on a rotten fruit and should not fall for it! :)
P
Pharaoh
10 years ago,
Registered user
> in my opinion and practice, the best way to sellect a forex broker is to look at the regulatory body (deffinitely to have one) then spreads and then execution.
All the rest is just sweet cover on a r..

That's the quick and dirty version. :)

Make sure to find a regulator that has a history of really regulating. Some don't do anything to force brokers to pay what's owed to clients.
G
groverrrrr
10 years ago,
Registered user
Of course, Pharaoh ! I was definitely not talking about CySEC obviously ;)
btw, in your opinion which regulator is the strongest/ most severe?
P
Pharaoh
10 years ago,
Registered user
Cysec is what I'd call a lower tier regulator. At least they fine companies that violate certain rules. Other regulators only will revoke registrations. Others don't do anything except collect the annual fees the charge.

In terms of toughness, I'd have to point to the US and the Swiss. Switzerland makes getting regulated very hard and has shut down at least one bad broker. In the US, the NFA and CFTC are slow, but do force brokers to return money that's been improperly taken from traders, at least when the company is still in business and has the money.

The drawback to US protection is US nanny state regulations restricting your trading options.

Beyond those, look for regulators that have some sort of method for broker clients to file disputes. Not all of these are effective, but if there isn't a way to file to try to recover funds that should be yours, then the regulator won't do you any good at all.
G
groverrrrr
10 years ago,
Registered user
Thank you for the detailed answers! What about EU regulators?
Aren't they save also? ....or cutting some slack here and there?
P
Pharaoh
10 years ago,
Registered user
Within Europe, other than Switzerland and Cyprus (already discussed), the only one I have any info on is the UK FCA/FOS. This is far superior to Cyprus, but in my opinion, is somewhat less aggressive than the NFA in defending clients.

The advantage of FCA regulation is that it doesn't slap all the anti-hedging, FIFO, and leverage restrictions onto accounts like the NFA does.
D
Drew-nn
10 years ago,
Registered user
No autority will pay back money to any user scammed by its brokers, their role is to punish a broker in case it violate its agreement, they're made to monitor the activities of a broker and to garantee that they won't manage the market as they want by playing with prices......etc.
Actually, now those autorities are like a marketing tool, not more not less.
P
Pharaoh
10 years ago,
Registered user
You need to update your information. The NFA and CFTC don't just fine brokers. They also demand that brokers repay money owed to clients before any other parts of the fine are given the the regulator. Other regulators have methods to repay clients under different circumstances.

Of course, there are plenty of BS regulators out there that do nothing more than accept a fee to allow a broker to claim that it's regulated.
V
vic84
10 years ago,
Registered user
my advise is that you first open a Demo account with a broker, and check how he is dealing with you, if you like it then go ahead with it....
P
Pharaoh
10 years ago,
Registered user
> my advise is that you first open a Demo account with a broker, and check how he is dealing with you, if you like it then go ahead with it....

Opening a demo is one part of checking out a broker. Be aware that demos don't have limits on liquidity. If you have enough money in your demo account and enough leverage, you can open an order for billions of dollars of currency and are unlikely to experience slippage or requotes. The real market doesn't work that way.

Plus, there's always that sneaking suspicion that demo servers may be rigged to give you positive slippage, thus making trading appear even more profitable to encourage you to open a live account.
J
Jussar
9 years ago,
Registered user
It's really important to do your research before going live with a broker, the last thing you want is to do a ton of hard work, research, then risk your money only to have a broker scam you, do your research and go out there only when you're ready.
J
John Sachman
9 years ago,
Registered user
Choosing the right broker is so important. Thanks for this article!
U
undertaker
9 years ago,
Registered user
> my advise is that you first open a Demo account with a broker, and check how he is dealing with you, if you like it then go ahead with it....

Open a demo account is first step but it isn't a main factor to decide you should go with that broker. Be careful!
T
theemilym
9 years ago,
Registered user
I guess the most important thing is research. If you really look into the brokers that you are thinking about going with, then there shouldn't be any nasty surprises down the line It's always better to have too much information that ends up being unnecessary, than not enough, right? :-)
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Pharaoh
9 years ago,
Registered user
There can always be unpleasant surprises, but the chances of this happening are far smaller if you do research.

Doing that research and sticking with well-regulated brokers will also improve your chances of recovery in the event of an unpleasant surprise. Clients of PFG Best should get a large part of their money back, unlike clients of dozens of unregulated or under-regulated brokers that went belly up and ran off with all the money.
K
Ken T
9 years ago,
Registered user
Thank you for the tips regarding the "ups" and "downs" of a demo account... Good to know.
:cool:
H
HotIce
9 years ago,
Registered user
The choice has to be straight forward with the broker. We should just search for it’s been fully licensed (regulated) and then check out review from this awesome site and if all our good then we should be easily working with it but still there are things like minimum deposit, spread and these things that needs to be look at. Mainly I would be happy with a reliable company but it must have low deposit to start with and also spread must be in decent range.
N
NicholasM
9 years ago,
Registered user
> Opening a demo is one part of checking out a broker. Be aware that demos don't have limits on liquidity. If you have enough money in your demo account and enough leverage, you can open an order for ..

I think Demo accounts are nothing more than advertisement. With a Demo account, you never get to test issues such as deposit and WITHDRAWAL processes. All you have a platform to practice your trading tactics and nothing more. And like Pharaoh says, it's a different game once you open a live account. Your tactics may still apply, but you will find that opening and closing of trades may not be as quick.
N
NicholasM
9 years ago,
Registered user
Why is it always easier to deposit money in your trading account than withdraw from it. from my experience when assessing Forex brokers, deposit options are many than withdrawal options. Also when depositing, the money tends to hit your account faster than when withdrawing.. My thoughts are that brokers are more concerned about who they pay rather than who they receive money from. I think it should be equal on both cases.
T
Truth Seeker
9 years ago,
Registered user
Thanks a lot for this awesome advice.. but if you number them, it would made reading them easier..
C
chriswhite010
8 years ago,
Registered user
Hi Pharaoh,
First of all, thanks for sharing this information here. Also you shared the best points on regulatory requirements. Following your posts and looking forward to get more info about it and not to get scammed.
F
fxstrategist
8 years ago,
Registered user
Very helpful advices, thanks.
B
bigdolly
8 years ago,
Registered user
> Be aware that demos don't have limits on liquidity.

Not quite correct. When I opened my first demo with my broker I asked their support a question if demo mirror live trading conditions and they said yes. It means that slippage, price widenings and other trading barriers are there as well.
P
Pharaoh
8 years ago,
Registered user
> Not quite correct. When I opened my first demo with my broker I asked their support a question if demo mirror live trading conditions and they said yes. It means that slippage, price widenings and oth..

I think your broker's statement is a little misleading. A demo may have the same prices and spreads, but a demo has no way to know market depth. Pick something unusual, like CADCHF. Then try to trade it outside of US and UK market times. In a real account, if you tried to trade 1 lot, you may or may not get slippage, but if you tried to trade 100 lots, you would see major slippage (or even partial fills on some brokers). On a demo account, you could trade 10,000 lots and get the same execution as if you had only traded one lot.
M
Michelless
8 years ago,
Registered user
Hi, I am new to Forex, what does the FSA in the UK actually have the power to monitor?
P
Pharaoh
8 years ago,
Registered user
The UK FSA later turned into the FCA. The organization regulates brokers and has the power to levy fines if rules are broken. They also do a good job warning about companies claiming to be in the UK, but which lack registration. In terms of getting money back in the event of a badly behaved FCA regulated broker, you should explain the rules violations to the FCA and also file a complaint with the UK Financial Ombudsman. The Ombudsman is in charge of resolving financial disputes between traders and brokers - i.e. they are the ones who can tell the broker to pay you money you are owed.
D
DOAFLIP
7 years ago,
Registered user
This is AWESOME! Thanks Pharaoh! There were some hurdles to begin with and any time there was an "offer" I stringently read those T's & C's!! Going well now and this is a great resource
C
celeryleaf
7 years ago,
Registered user
Ive just stumbled upon this thread and I just must say thank you. Thats exhaustive.
F
fxWILLIAMfx
7 years ago,
Registered user
> Ive just stumbled upon this thread and I just must say thank you. Thats exhaustive.
exactly, same here :eek::eek::eek:
S
s.erfolg
7 years ago,
Registered user
Gosh so many pages guys :eek: ..need to concentrate and start to read from the start.
Sorry for offtop but I'm newbie here. But can anyone tell me is there any surveys where people can vote for chosen brokers or maybe some statistcs or kind of in this forum? I am not a big reader and prefer graphs and tables and bars ;)
P
Pharaoh
7 years ago,
Registered user
Start off by reading the initial article. It doesn't matter how pretty a broker looks on a chart or graph if you haven't personally checked out their regulation and support. Brokers are also more than willing to try to vote early and often in any surveys.

If you do want to see some hard data on trade execution, I think you'll like this article:


http://www.forexpeacearmy.com/community/threads/what-forex-brokers-never-want-you-to-know.44434/


There's also some new software under development which should allow traders to check broker executions much more carefully.
S
s.erfolg
7 years ago,
Registered user
Pharaoh, thank you for your feedback and useful link - I really appreciate it! I will certainly read all this section just because of less pages ;) oh.. this lack of time.

> Brokers are also more than willing to try to vote early and often in any surveys.

what a shame. yes, you're right I had not thought of this before :rolleyes: well.. everybody got to learn sometimes
C
celeryleaf
7 years ago,
Registered user
> Gosh so many pages guys :eek: ..need to concentrate and start to read from the start.
Sorry for offtop but I'm newbie here. But can anyone tell me is there any surveys where people can vote for chosen..
I also agree that polls and reviews in general are not really truthful. They may show some sort of picture but I wont beleieve them without checking myself. I mean I saw a lot of brokers who had great poll results and reviews and looked fine but when I checked two of them they turned out to be a complete scam. I didnt spend much but its a good lesson anyway.
S
s.erfolg
7 years ago,
Registered user
> I also agree that polls and reviews in general are not really truthful.

Yes in that case I've changed my mind afetr Pharaoh's post above and I wrote it. But I think that there a lot of people in this forum who use different brokers so we could see some general opinion and maybe become to some interesting conclusions. It may seems the best brokers are invisible for masses. For example what companies were your mistakes that made your experience?
C
celeryleaf
7 years ago,
Registered user
> Yes in that case I've changed my mind afetr Pharaoh's post above and I wrote it. But I think that there a lot of people in this forum who use different brokers so we could see some general opinion and..
Well I dont really want to mention their names and to argue with these copanies representatives but they were also not too big (I prefer smaller brokers since they seem to care a bit more about the clients compared to the wealthy monsters). So maybe there are goodies and baddies in both camps.
P
Pharaoh
7 years ago,
Registered user
I recommend avoiding the super-small brokers, just because it's easier for them to run out of cash in a crisis. Super-big brokers sometimes have a different issue. Some decided "we're so big, so we must be doing everything perfectly', which is a recipe for customer service going straight to hell.

So, try to find a broker big enough to not go under if a few customers skip trading for a week. For all remaining candidate brokers, check the tech support and customer service BEFORE opening an account.
J
justfx07
7 years ago,
Registered user
first we see that the broker are regulated.and check review about broker at FPA site.
I
IrwanI
7 years ago,
Registered user
I chose the broker that have office in my country(If anything happen it's easy for my to find them and i bring along my RAMD Batalion to their office with full uniform) and with regulated and good user review in FPA.
F
Ford_A
7 years ago,
Registered user
Thanks, a lot of useful information!)
2
2+2=4
7 years ago,
Registered user
Thanks)
S
somebody with gun
7 years ago,
Registered user
If you were given $0.5 each time you read this article, you would already have a cool car))
P
Pharaoh
7 years ago,
Registered user
Go and and send me 50 cents and encourage all other readers to do the same. :D
S
somebody with gun
7 years ago,
Registered user
> Go and and send me 50 cents and encourage all other readers to do the same. :D
You can give data for payment or the address where you can send a material letter with a card or a beer)
(If this is allowed on this forum)
M
mavhacii
7 years ago,
Registered user
I needed some idea/advice, not sure if this is the right place to ask.. Im trading with a FPA 5 star rated broker, which was good initially. As the days goes by, I noticed that price retracement seems to be taking place on all my manual orders., making it impossible for me to have stop loss. I did request clarification from the broker, but unfortunately the answer over the phone was vague. Even order at 0.01 lot is reacting in the same manner. My leverage is 100. Wondering why is this happening?
P
Pharaoh
7 years ago,
Registered user
> You can give data for payment or the address where you can send a material letter with a card or a beer)
(If this is allowed on this forum)

Send cash, servant girls, gold, silver, platinum, diamonds, etc. to Bill (AsstModerator) at the main FPA address and make sure to label the package as "Tribute to Pharaoh". Hopefully Bill won't skim too much off the top before forwarding the rest to me. :D
P
Pharaoh
7 years ago,
Registered user
> I needed some idea/advice, not sure if this is the right place to ask.. Im trading with a FPA 5 star rated broker, which was good initially. As the days goes by, I noticed that price retracement seems..

How big of a retrace are we talking about? My own "well timed" entries often get a 5-10 pip (50-100 point on 5 digit brokers) retrace. I consider this to just be my bad luck, but I'd be very distressed if this happened 80+% of the time and would be looking for a new broker if it happened to 95% or more of my trades. (The exception being physical gold purchases - my record on price falling significantly within 24-48 hours of purchase is nearly perfect.)

One other thing to consider. If you are placing trades just before big news announcements, spread is likely to widen. This means that orders will nearly always go into drawdown. Assuming you are trading normal market conditions proceed as follows.

Start keeping track of each order, if it hits an immediate retrace, and how deep it is. Take some screenshots. Calling up tech support and saying "I always get deep drawdown just after opening a trade is one thing. Calling them up and saying "18 of my last 20 orders went from 8-25 pips into drawdown within 5 minutes of opening the orders. I've got screenshots of all 20 orders" is quite another thing.

Get a demo account on the same broker and install a second copy of MT4 in another directory or on another computer so you can run live and demo simultaneously. First watch how closely the demo and live feeds match. If the match well, proceed to the next step. If they don't match well (usually within a pip except maybe around big news events), that's a warning sign that something is not right.

If you aren't trading during highly volatile times, the drawdowns are deep, the percent of trades with drawdowns is well above 50%, that's enough to open a thread in the Scam Alerts folder, post the evidence, and send the broker the link and invite them to come and explain publicly.

Some additional things to try:

Try a trade following your usual entry system using only 0.01. Is there a retrace? Is this mirrored on the demo account? If the retrace happens on the live system and not the demo system, get screenshots of everything and get this all posted in Scam Alerts.

Using the same trading system, try a trade on the demo account and see if there's a retrace on the demo and/or live account. If there's no retrace on either, repeat this for the next 10 trades.

Make more trade using your system and try to launch those as close to simultaneously as possible on the demo and live systems and see how price reacts on each.
M
MrGeok
6 years ago,
Registered user
> That's the quick and dirty version. :)

Make sure to find a regulator that has a history of really regulating. Some don't do anything to force brokers to pay what's owed to clients.

Hi Pharao,

First... Thanks a lot for all the messages you post on FPA, im new in the phorum and is great how you help people.

I wonder if you can help me out.

what broker do you use? I want one where i can use metatrader and put automated trades... im sorry english is not my native language.

Im going to start paying for a service of signals... not a cheap one but i want to use it while i learn a little more... so i need a broker that let automated trades to be made.

This signals are ok i believe because some trusted friends are using them and i have seem good profits on there...

Anyway what i didnt like is that they recommend me a broker but i dont think they are trustwhorty.

So could you please recommend me a broker that is fully regulated and secure where i can put automated signals? like a robot
P
Pharaoh
6 years ago,
Registered user
I don't reveal my broker for several reasons. First, a bunch of conspiracy theorists will jump up and down and accuse me of being an IB or employee of that broker, even though I've never recommended a specific broker. Second, even if I trusted my broker, I don't want to be the one who sent people to it the day before they get busted by their regulators for some huge scam I knew nothing about. Third, my needs as a trader are different than yours. That's why I wrote the article on finding a broker which meets YOUR needs at the beginning of this thread.

Your best bet for recommendations is to go to this thread:


https://www.forexpeacearmy.com/community/threads/so-are-there-any-brokers-anyone-likes.11411/
J
Jeff Martinez
6 years ago,
Registered user
For the most part a broker that has a permit to give trading service to its customers is a reliable broker. The permit must be issued by an Country Institution that controls financial matter. Most broker get their permit in their nation of origin and after that enroll with the regulatory bodies in different countries. where they have vast operations. An broker which is enlisted in several country have a bigger customer base and will have the capacity to offer better conditions and lower expenses to its clients.
D
DonCarleone
6 years ago,
Registered user
I also use the criterion of affiliates programs. If a broker is ready to pay generously for each client attracted (something like a multi-level marketing), it's a kind of scam where you'll never be able to win. Affiliate programs are not that directly relevant to trading experience, but it is a fairly good way to understant if a company is trying to lure you into loosing your savings.
R
rasppbear
6 years ago,
Registered user
yeah, affiliates are messy, dirty SCAMS...
V
Vlad_Vahnovanu
6 years ago,
Registered user
What if broker i've chosen not reguated yet? In conflict situations i can forget about my funds?)
P
Pharaoh
6 years ago,
Registered user
> What if broker i've chosen not reguated yet? In conflict situations i can forget about my funds?)

Maybe, maybe not. Unregulated brokers are extremely unsafe. Some do pay withdrawals with no issues for years. The problem is that the "perfect" unregulated broker can vanish in the blink of an eye, taking all of your money with them and leaving you without any regulator to complain to.

My recommendation is to try to get your money out of the unregulated broker. Then find a broker that's well regulated and decently rated to put your money with. If the original broker gets good regulation later, you can always open a new account with them after they are properly regulated.
R
rasppbear
6 years ago,
Registered user
Very good articles, I would say the most useful articles I ever seen
V
Vlad_Vahnovanu
6 years ago,
Registered user
> Maybe, maybe not. Unregulated brokers are extremely unsafe. Some do pay withdrawals with no issues for years. The problem is that the "perfect" unregulated broker can vanish in the blink of an eye,..

Thanks for your advice
R
Rizog
6 years ago,
Registered user
Personally, I would say, go with the broker from the country with best regulations. And, instead of spending frustrating hours and days on finding a perfect broker, may be, start trial with the ones who look reasonable and have minimum entry and exit barriers. You can always jump to another if he fails to satisfy you.
G
GANDUS
6 years ago,
Registered user
Good inputs, still listening
R
Rockjones11
6 years ago,
Registered user
Thanks for the information, still trying to decide on a broker though
A
AbishMathew
6 years ago,
Registered user
> What a great contribution, P.

I have actually spent the last month researching Fx brokerages for my own account and for others' I intend to trade with POA. Even with my roughly 35 separate criteria..



well explained! Legitimacy is of first importance when it comes to chosing a forex broker. Many little uneducated players spoil the market!!!

Good luck everyone and keep in mind you need to keep strict discipline of news sources in today's ocean of disinformation created by the Internet.
B
BogdanProfun
5 years ago,
Registered user
Just follow simple steps, before choosing new broker and everything is gonna be alright.

* Try to find information about broker using famous forex forums and websites.
* Check broker licenses, if he doesn't have them - forget about such broker.
* Try to open demo account
* Read more reviews about broker, try to contact with support if you have some questions
* Make 1st small deposit, and sometime after try to make withdraw.
* Make review of this broker :)
S
sunnyTRIO
5 years ago,
Registered user
Great info.
Thank you.
7
7Bulletin
5 years ago,
Registered user
This is a very crucial thread. To find the right broker, ensure you check whether the broker is regulated, has a valid license, has a reliable customer support system in place, and has convenient transaction costs. That way, you can be sure to get a good broker
D
dextor
4 years ago,
Registered user
Thanks for sharing these really helpful information....

Yes, finding best Forex broker for anyone is bit difficult. But one can select leading broker according to his own requirements. To avoid fraud and reduce risk always register with Regulated Forex Broker for any country. In short words, just checkout these important points including discounted commission, maximum leverage, margin, tools for trading, deposit bonuses and rage of products that offered for trading.
Enjoy happy trading!
N
nsinfodesk
4 years ago,
Registered user
Thanks for all the information but you will be doing a lot more good if you can do another article and mention the names of the brokers you are presently using since you won't be breaking any law by so doing. Lol
I will be waiting for it to choose from the list
Thanks
P
Pharaoh
4 years ago,
Registered user
Nsinfodesk,

The WHOLE point of the article is how to find a broker that meets YOUR trading needs. Maybe my brokers don't take people from your country. Maybe my brokers don't permit your trading style. Maybe you'll hate the platforms offered by my brokers. There is no "one size fits all" broker. If there was, I'd have written a much shorter article and would have included an IB link.
J
Jamil1975
4 years ago,
Registered user
Thank you for you time and information , I appreciate this
D
Damo
3 years ago,
Registered user
Hi Pharoah,the review for Global Prime is amazing ,the problem is they are not regulated in the UK where I am based,
I am researching on FPA but I cannot find a good broker that does not seem to have dozens of beware comments,
its a bit crazy,can you recommend a reliable broker for UK Thanks
P
Pharaoh
3 years ago,
Registered user
Hello Damo,

I specifically mentioned at the very beginning of the article that I wrote it to help each trader find the best broker for his/her trading needs. What might be a good broker for me could be a terrible broker for you.

Follow the advice in the article. For you, it sounds like UK FCA registration is a must have. Good. When you see a broker claiming it, visit the FCA site and make sure it's a REAL registration with the FCA and not a passport from some place with far less effective regulation.

When you've got your list of tempting FCA regulated brokers, check their FPA review pages to avoid the worst rated ones. Then filter what's left by your list of must-have items and then by your list of nice-to-have items.

Then proceed as laid out in the article. Test their support. Test their demo accounts. See which broker(s) seem to suit you best. Then test out one or two with a VERY small live account.
G
GaryJamesDavis
3 years ago,
Registered user
Hi Pharoah, thank you for a great article. I wanted to ask, what does it mean if under the review section of a Broker on FPA it says "prohibited countries". My country (South Africa) is listed as a prohibited country for the Broker I like. The Broker is regulated with two different countries and also accepts clients from South Africa.

So can I or should I use this Broker and what exactly does it mean when your country is listed with the Prohibited countries. Prohibited by what or who and if they are still accepting clients are they engaging in illegal behaviour?
P
Pharaoh
3 years ago,
Registered user
Hi Gary,

That's a good question. I'm pretty sure the FPA review moderators don't have time to contact every country in the world and ask "Do you prohibit people from your country to open accounts with this broker" and do that again every time they add information on a new broker.

I believe the procedure is to check with the broker and asks "Which countries do you NOT accept clients from?" In most cases, that will be a shorter list than a list of accepted countries would be. In many cases, brokers offer that list as part of the footer of their homepage.

Brokers regulated in 2 or more countries can result in confusing answers. In some cases, the broker may have separate review pages. In others, the data shown is a blend of the two.

In theory, if a broker is regulated in 2+ places and those places have separate lists of countries, the list should exclude countries that any branch of the broker accepts. But, there is always the chance of a data entry error, a broker adding a new regulator and not mentioning that this shortens their exclusion list, or of a different country deciding which countres can offer services to their citizens.

So, if the broker looks like a good fit for you and you've got any hint that they may actually accept clients from your country even though the FPA review page says they don't, take that as an opportunity to test the broker's support staff. Email, livechat, or call them and ask. If they do accept people from your country, mention that the data on the FPA either has an error or is out of date. They should be able to set up a representative account and submit updates and corrections.