What to be guided by when choosing a Forex broker

Choosing a broker for a trader is one of the most important tasks. A trader is risking his capital in an already complex market, such as Forex or CFD markets, and does not need additional worries such as conflicts between broker and client. Unfortunately, many novice traders make decisions about choosing a broker mainly based on the model that the brokerage house follows.

The most popular types of brokers include Market Maker (MM), Market Maker No Dealing Desk (MMNDD), Straight Through Processing (STP), and Electronic Communication Network (ECN). It is not enough to choose a broker just by its type.

In business, one of the most important things is trust, which builds over the years. When opening an account with a broker for the first time, a trader can never be sure of successful cooperation.

The rating of Forex and CFD brokers on the website https://forex-brokers-top.com/ is a personal rating created over the years of cooperation with various brokerage houses, which somehow made a positive impression.

Broker type

There is no perfect brokerage model that fits 100% of the requirements of every trader. There is no such broker. Thus, a trader, choosing between the types of brokers mentioned in the review, will choose between margin requirements, minimum allowed trade sizes, fees and commissions, order execution speed, price slippage, re-quotes, and capital protection.

We will not dwell on how different types of brokers differ. It is important that the choice of a broker matches our trading style and portfolio, which will provide psychological comfort. If someone has a small amount and low-risk resistance, they may feel better with an MM or MMNDD broker.

Guaranteed order fulfillment to protect your capital, fixed spreads, low commissions, and admission to trading micro lots give beginners the opportunity to learn and make mistakes.

A more experienced trader with a richer portfolio and tolerance to losses will look for a broker in NDD, STP, and possibly even ECN models. The trader loses the guarantee of his stop-loss execution, but gains access to instant order execution at a good price, without slippage. Of course, he will pay higher commissions for this.

Regulated broker

For the sake of the safety of your funds, it is important to cooperate only with brokers whose activities are regulated by the administrative bodies that control financial markets.

There are also foreign regulators such as the UK FCA (Financial Conduct Authority), the Cyprus CySEC (Cyprus Securities and Exchange Commission), the European ESMA (European Securities and Markets Authority), or the US SEC (Securities and Exchange Commission).

The trader has a guarantee that the broker is not a fraud, and in case of deviation from the law, he can count on the intervention of the regulator.

Fees and commissions

After choosing the broker of your dreams, you need to study the “Fees and Commissions” table on every page of the brokerage house, at least it should be so. It is worth studying such a table so as not to accuse the broker of the disappearance of money from the account.

The table may indicate the number of transaction fees for specific instruments. Someone may face fees charged for withdrawing an amount below the agreed amount from a trading account, for inactivity on the account, or for reissuing paper documents.

Offer, tool specification

The specification of all available instruments should be available on the brokerage house’s website. Some use the Metatrader 4 trading platform, you can find it right in the Market menu.

From the specification, we learn interesting things about trading hours, minimum and maximum position sizes, tick steps, spreads, and much more. A trader needs to understand what he is trading, so it is recommended that you familiarize yourself with the specifications of financial instruments.

Reading the framework agreement

Before accepting the terms or signing the contract, you must read it completely and carefully. If you have doubts or something is not clear, explain it to the broker.

Only a complete understanding of the accepted documentation allows you to avoid any ambiguities, the disappointment of the trader, and the issuance of strange opinions that have no foundation.

Stationary and mobile versions

Do you comfortable with the trading platforms offered by the broker? It is worth taking the time to familiarize yourself with the trading platform and its most important trading options.

We may come across a platform that is only available at a particular brokerage house, but at the time of this writing, the most popular platform was Meta Trader 4. The MT4 platform is available in both fixed and mobile versions.

Support, customer service

The ability to help through channels such as phone, email, chat. Does the brokerage house provide customer service in the languages you use?

While trading, you will have various stressful situations, and it would be good if you had the opportunity, for example, to effectively close all open positions by phone, when, for example, your laptop is not working and the market movement is above average.

The task of the support is to help in any situation. Help is about being professional, efficient, and trustworthy. In the end, we risk our capital and pay it for it.

Instructions for payment/withdrawal of funds. Trading account currency

Please note if it is possible to open a trading account in the selected currency with this broker. The ease of depositing and withdrawing funds from a trading account is important. It is usually very easy to make a deposit, but a withdrawal can be an unpleasant surprise.

After all, it’s about protecting our funds from theft. There are traders who have come across a policy whereby a broker requires the submission of documents already in his possession in order to withdraw funds from an account.

Despite the provision of data when entering the system, you have to provide one more scan of the identity document (two pages). A new confirmation of any payment made from a bank account, for example, for utilities, was required.

Protection of the deposit from negative balance

When you start your acquaintance with the Forex market, with its high volatility and unpredictable situations, you could lose more than your funds deposited into your trading account. Otherwise, by depositing, for example, $ 10,000 and leaving a profitable position over the weekend, you might see your account balance at $ 12,000 on Sunday night when all positions are closed.

On Monday morning, we receive information from the broker with a request to pay off the debt on the account. In such situations, our defense orders were bypassed. Many such controversial circumstances ended in the courts. Today, ESMA rules are in force, which requires the protection of deposits of individuals from negative balances.

In theory, this works in such a way that the client cannot lose more than he deposited, and any losses below the deposit must be settled by the broker itself. In practice, we have different regulators.

One of the brokers protects the client’s deposit from negative balance in any market situation and up to any amount. The second broker will only protect the deposit up to £ 50,000 unless we have above-average volatility or price gaps.

One of the brokers automatically covers all losses in case of a negative balance. Another brokerage house demanded that within a few days after receiving the negative balance, an application be made with a request to zero the loss.

Such a statement has yet to be considered and does not guarantee debt cancellation. Negative balance protection is a good regulation that can really protect a trader, but we need to know under what conditions we can use it in a particular brokerage office.

Scalping and trading permission

Scalping is a trading method that involves the quick opening and quick closing of a large number of orders. The resulting trades are often closed after a few seconds, and the capital is built up in small steps.

Trading robots running on the trading platform can make many transactions in a short period of time without our presence. Not all brokers accept these trading methods. We’re talking about extreme situations where robots could launch and close multiple orders within a second.

Server time zone

For people trading on timeframes M1, M5, M30, H1, this moment does not matter. For traders looking for higher time frames, especially H4, D1, the hours on the platform are of the utmost importance. We trade in one time zone, the clock can work in another, and candles are drawn under this clock.

Depending on the settings of the clock, we may have the so-called “Sunday Candle Effect”. In short, in our time zone, the Forex market opens on Sunday at 23:00, as do the antipode markets, and from that moment on, the D1 candlestick is drawn.

This candle closes at 24:00 when our day ends. Analyzing the historical market on D1 shows us not 5 candles, but 6 candles in the trading week, the first of which is not associated with the D1 and H1 intervals!

Broker reviews

If there are only good opinions about the broker, it immediately raises the suspicion that something is wrong. There is no perfect broker and this business is not perfect. There can always be incomprehensible situations that need to be clarified without unnecessary emotions.

If someone leaves a spicy negative comment written under the influence of emotion, they are most likely broadcasting their approach to the market, and this may be their problem. It is worth reading the positive and negative reviews about how a particular brokerage house protects against customer dissatisfaction.

This is where the broker’s approach to the recipient comes in. If, for example, we had a lot of negatives, and each of them would touch the same topic, for example, that the broker constantly ignores the protective orders of the clients or makes adjustments to profitable transactions and always at a loss for the trader, then better stay away from such a unit.

Some of the negative comments are related to misunderstanding the market and not reading the framework agreement and documents. Read all the reviews and decide whether to start cooperation with a brokerage house.