Finding the right forex broker can be a challenge if you don’t know where to look. There are so many brokers available, all with their own offers trying to lure you in.
Note: I’ve been using FxPro for a while now, and I’m extremely happy with them. Since I’ve been with them, I have been pleasantly surprised with the quality of their support, their spreads are decent, their execution is flawless and they offer both MT4 and cTrader. If you’re looking for a good and reliable forex broker, I’d recommend checking them out:
When choosing a broker, it’s therefore useful to look at the following criteria:
The spread of a currency pair is the difference between the buying price and the selling price of that currency pair. Most forex brokers don’t work on a commission basis, and the spread is how the brokers actually earn money when traders make orders. Different brokers will offer different spreads, and it’s worth looking into which brokers offer the lowest spreads on the currency pairs you’re planning to trade with the most often. A useful website to check a lot of broker spreads for the most common currency pairs can be found here.
Available lot size
Lot size essentially refers to the size of your order. Unless you start off trading forex with a lot of capital (which I wouldn’t recommend!), you probably won’t be trading standard lots at first. Luckily, most forex brokers offer accounts that allow smaller lots, which are called mini lots (1/10th of a standard lot) or micro lots (1/100th of a standard lot). Even though most forex brokers offer these micro lots these days, it’s worth double checking that this is the case.
Initial account deposit
All forex brokers require you to start with a minimum account balance. I’ve seen brokers that allow you to start with £10 / $10, but some require a bigger amount to get started. By the way: I don’t recommend starting with $10, since you will likely be taking too much risk relative to your account size when placing orders. On the other hand, if your broker requires you to deposit a big amount just to get started, it might be useful to look at other brokers with lower entry requirements.
When you’re starting off with forex trading, you will deposit an amount on the broker’s account. It is therefore critical to know that your money is safe and the broker is regulated and backed by lending institutions. Your broker should be registered as a Futures Commission Merchant (FCM) and with the Commodity Futures Trading Commission (CFTC).
Not all forex brokers allow you to run expert advisors or automated trading software. If that is something you’re interested in, you should check that this is actually allowed by your forex broker.
Not all forex brokers allow scalping. If you have a forex trading strategy that includes scalping, check first if your broker allows it.
Check which support levels your forex broker offers. Are they only reachable during office hours or do they have 24/7 (or 24/5) support? Do you need to pay for support calls? If you have open order and something goes wrong, you want to know that there are people who can help you get things sorted.
Available software / APIs
Most retail forex brokers offer trading software called MetaTrader. Other brokers offer their own custom software, which could be an issue if you are looking for software plugins or indicators for this software package. MetaTrader has a vibrant community and lots of community-provided indicators and expert advisors, so it might be worth starting with a broker that at least also offers MetaTrader.
Similarly, if you plan on developing software based on your broker’s data, check if they offer an API. MetaTrader has their built-in way of running automated trading software (expert advisors) but if you want to run your own software, you will need a way to interface with your broker.
What do you look for when choosing a forex broker? Leave your tips in the comments!