When you first start trading Forex, it can be overwhelming - there is so much to learn and there is lot's of different opinions! We have tried to make things as simple as possible by creating our Forex 101 trading courses. At some point you are going to be faced with which Forex broker should you trade with/have a trading account with? To make things easier, we have created this blog post that may help shed some light...
Choosing a Forex broker - what you should know
Regulation
Choosing a Forex broker that is highly regulated is a key to choosing the right broker. There are brokers based across the globe; the US, the UK, Cyprus, Japan, Australia, New Zealand, Singapore, and Malaysia are a good portion of the main countries that house Forex brokers. Generally, brokers that have offices in countries and capital cities have to be registered and regulated by that countries financial regulator. The most regarded financial regulators include the FCA (UK regulator), the CFTC (US regulator) and the ASIC (Australian regulator). Choosing a Forex broker that is regulated by one of these is strongly suggested. A broker usually details it's registered and regulated bodies at the bottom of their website in the footer section and/or on their 'about' page.
Trading Platforms
Forex brokers usually offer their own bespoke trading platforms and/or MetaTrader 4. MetaTrader is a widely used trading platform amongst retail Forex traders. The platform is free and easy to download. We also offer a free training course on MetaTrader 4.
If you find that you don't like the MetaTrader 4, it is best to open demo trading accounts with a number of different Forex brokers until you find a platform that you like.
ECN, STP and Derivatives
There are a few ways to trade Forex - brokers can have a different "system" or module for it's clients. These are ECN, STP and Forex derivatives. To keep things as simple as possible, we have made a few notes...
ECN - This is direct access to the Forex market. These type of brokers focus on commission rather than spreads. As you will be trading on the actual market, trading accounts often require a 50,000 USD minimum deposit.
STP - This is in-between a ECN broker and a derivative broker. We highly recommend trading with a STP broker if you plan on trading Forex. Spreads are very low and these brokers are usually very transparent.
Derivatives - Spread betting brokers and CFD brokers fall into this category. They usually charge no commission but have much higher spreads. Trades are not executed on actual markets but are generally hedged by the broker. These brokers can often be called market makers.
Products
Forex brokers can offer different financial products. For example, one broker may offer only 15 currency pairs, whilst another may offer 35. Some brokers offer commodity and index CFDs whilst others don't. Having a broker with a wide-range of financial products is suggested.
Spreads and Commissions
As mentioned previously, brokers can charge different commission and spread amounts. The higher the spread and commission, the more expensive it can be for you to trade. Brokers can offer fixed spreads (they do not change) or variable spreads.
Summary
It is best to trade with a Forex broker that is strongly regulated, that offers the financial assets you wish to trade and that offers a good balance between their trading platform. commission/spreads and service. To give you a helping hand, we have listed our most recommended brokers below.
Our Recommended Forex Brokers
#1 - Darwinex
Type: STP Forex broker
Regulation: FCA (UK)
Trading Platform(s): MetaTrader 4
Notes: Darwinex offer a great STP service. They are based in the UK and offer some of the tightest STP spreads in the industry. Darwinex also offer some very unique social trading services that allow you to trade with additional (investor) capital.
Open an account: Click here
#2 - Core Spreads
Type: Derivative Forex broker (spread betting)
Regulation: FCA (UK)
Trading Platform(s): Bespoke and MetaTrader 4
Notes: Core Spreads and based and regulated in the UK. They offer some of the tightest fixed spreads in the spread betting industry.
Open an account: Click here
#3 - IC Markets
Type: ECN Forex broker
Regulation: ASIC (Australia)
Trading Platform(s): MetaTrader 4, cTrader and ZuluTrade
Notes: IC Markets is a ECN Forex broker based in Australia. They offer a wide-range of financial products, Forex trading platforms and an ECN service.
Open an account: Click here