A Simple Guide to Choosing a Forex Broker

 

To help clear any confusion about Forex brokers and the types of Forex brokers, we have created this simple guide...

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1. Getting Started

Most Forex brokers will allow you to open a free demo trading account by signing-up with your email address and other contact details. The demo account is usually opened and active immediately. Depending on the trading platform(s) offered by the Forex broker, you may need to download a platform onto your desktop computer or download an app onto your tablet or phone. Login details and the download link are usually emailed to the email address you used to sign-up. 

Demo trading accounts are just like real-life trading accounts (live accounts), except that the money is virtual (not real). 

Most Forex brokers offer the MetaTrader 4 trading platform, you can take our free MetaTrader 4 tutorial by clicking here

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2. Forex Broker Spreads

Spread is the difference between the buy and sell price of a currency pair. Spreads are different between Forex brokers and are one of the ways that some Forex brokers make money. 

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3. Commissions 

Some Forex brokers charge a commission when a trade is opened. Some brokers don't charge a commission at all. Even though it may sound appealing, commission-free trading is not always the best option when choosing a Forex broker. 

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4. Types of Forex Brokers

There are different types of Forex brokers...

Market Makers - market maker brokers are brokers that do not execute your trade on the actual foreign exchange market. They make their own market - hence the name 'market maker' - they match their own buyers and sellers. Forex market makers generally do not charge a commission. To compensate this they have higher spreads and higher overnight fees. All Forex spread betting and CFD brokers are market makers. 

ECN - these type of brokers are the opposite to market makers. ECN Forex brokers offer access to the actual Forex market. They have very low spreads (sometimes no spread at all), very good overnight fees but charge a commission per trade. ECN brokers are the real deal. The only downside to ECN Forex brokers is that they usually require larger account opening sizes and do not accommodate for smaller traders. 

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5. Regulation 

When choosing a Forex broker you need to ensure that the Forex broker is regulated by a well-respected financial regulator. Regulation helps to ensure that your funds held with the broker are kept safe, that the broker is meeting industry standards and that the broker is not doing anything illegal. The most trusted and competent regulators include the FCA (UK), the ASIC (Australia), CySec (Cyprus) and the NFA (US). Choosing a Forex broker that is registered and regulated by at least one of these regulatory bodies is strongly encouraged. All of the brokers suggested above meet this requirement. 

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6. Depositing and Withdrawing Funds

Depositing funds with a Forex broker is usually very straight-forward. Deposit methods vary from broker to broker but generally include debit and credit cards and bank transfers. PayPal and other deposit methods are sometimes also accepted. 

Withdrawing funds is also very straight-forward. Most Forex brokers will only withdraw using the same method to deposit. For example, if you deposited using your debit card, withdrawals will be processed to the same debit card. 

Some Forex brokers charge for withdrawing funds. Please check their websites for details.

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Recommended Forex Brokers

Please see our recommended brokers below. These brokers are personally used by our own Forex traders...

IC Markets forex broker

IC Markets is a ECN Forex broker. They are regulated by the ASIC and are based in Australia. 

IC Markets offer low spreads, low commission and free demo trading accounts. 

Click here to open a free demo account with IC Markets. 

Darwinex forex broker

Darwinex is a market maker Forex broker. They are regulated by the FCA and are based in London, UK. 

Darwinex offer a transparent service with great customer service and some unique social trading features. 

Click here to open a free demo account with Darwinex

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