The major factors which you keep in mind while choosing forex trading broker are Regulations, commissions, platform interface, account minimums and fees. To help you in choosing the best forex broker in 2021, we have prepare a list of key factors which you must consider while choosing a forex broker or CFD Broker.
Forex Market is the world’s largest financial market having a turnover of around $4Trillion a day. Although forex market is a very huge market but still it don’t have a central exchange for forex traders. If you want to do conduct your transactions you must need a forex trader. That’s why a forex broker plays a very important role. There are lots of forex broker available in market but i won’t everyone is good fit for you.
After doing lots of research on forex brokers, we list a 5 Best Forex Brokers which you can trust and start you trading career. So let’s start how to choose a forex broker which best fit for you.
The First and most important thing you should consider while selecting a forex broker is to see whether the forex broker is regulated by a competent regulatory agency. While dealing with regulated broker, you must assure that broker must met operating standards imposed by the regulatory body.
Having adequate capitalization and maintaining segregated accounts in order to protect the clients’ funds are some regulatory requirements.
Countries having financial regulatory agencies with strict regulatory enforcement include:
- Australia (ASIC)
- Eurozone (Mifid and local regulators)
- India (SEBI)
- Japan (FSA and JSDA)
- Switzerland (FINMA)
- UK (FCA)
- USA (CFTC and SEC)
Trading Software And Platform
Since the trading platform is your gateway to the market, you want to be sure that the trading platform you use can be relied on. Most brokers will offer traders a selection of trading platforms to choose from. In most cases, trading platforms are provided by third party trading solution providers such as MetaQuotes Software.
There are also some brokers who have developed their own trading platforms in an effort to differentiate themselves from other brokers in the industry. Often these proprietary platforms are the best trading platforms as they are specifically designed by the broker’s client base.
However, a good broker should be able to provide a good selection of platforms. This is because some traders prefer to trade from their desktop computer and some prefer to trade from their smartphones. It should be noted that the most common trading platform you will find among various brokers in the industry is the MetaTrader 4 platform. It is estimated that at least 85% of brokers in the industry use the MetaTrader 4 platform. one of the platforms you will be using.
Take a look at the features that trading platforms have to offer. They come with:
- Comprehensive charting package
- Wide range of technical indicators
- One-click trading on the trading platform
- Risk management tools such as stop loss and trailing stops.
While these may seem trivial at first, they will later play a critical role in ensuring smooth and productive trading.
But when it comes to choosing a platform, it really is a matter of personal choice. Most of these platforms will have the same basic functionality. The best way to find out which platform is right for you is to try them on a demo account provided by a broker. For those brokers that don’t provide a demo account, they might not be worth considering.
Commissions & Spreads
This market, unlike other traditional financial markets, mainly operates on spreads rather than commissions. This is the reason why most brokers advertise their services as free.
So how do brokers make money?
They just make money by charging a spread from traders. Spread is the difference between the buy and sell prices. For example, if the buy and sell price for the EUR / USD currency pair is 1.0875 / 1.0878, this means that the spread is 3 pips.
As a Forex trader, you will come across 3 types of trading cost structure charged by a broker:
- Fixed spread – When the spread does not change and you know the size of the spread before you start trading.
- Floating Spread – This spread is variable and always changes based on market volatility.
- Commission – Calculated as a percentage of the broker’s spread. You must know the amount to be paid before trading.
Generally, for traders who want to be confident in their trading costs, fixed spreads will be the preferred choice. Traders looking to pay a smaller spread will prefer floating spreads. Ultimately, which is best will depend on your specific trading needs.
The types of spreads you will receive depend to a large extent on the business model the broker is following.
Broker’s Business Model
As you search for a broker, you will come across terms like STP, ECN, NDD, and Market Maker. All of these terms are actually used to describe the business model by which the broker operates. So what do they all mean?
There are two main types of brokers – dealing center and non-dealing desk.
A forex dealer or market maker processes their clients’ trade instructions through their company’s dealing center. The broker of the dealing center takes over the other side of the trade, that is, when you open a position such as EUR / USD, the trade will be executed by the broker and then they will be open for that trade.
Broker Non-Dealing Desk (NDD) transfers the trade directly to a third party. There are two types of NDD brokers (ECN and STP). Essentially, they are both the link between you, the trader, and the market maker or dealer.
With the first type (ECN), when you click “Buy” on your trading platform, your trade orders will be processed in the broker’s computerized trading system automatically and transmitted through the electronic communications network (ECN) without a dealing center (here the term “Non Dealing Desk” ( NDD) comes from).
When using the second type of NDD broker, after receiving your trade orders, they transmit trade orders directly to the other party for execution by the dealing center of the market maker. In this case, the broker is known as a direct processing broker (STP).
Forex ECN and STP brokers are intermediaries for several dealing centers or market makers in the global Forex market. Market makers or dealers will transmit their prices to ECN or a third party liquidity provider along with the volume for which the quote is valid. ECN / STP, in turn, distributes prices to traders / market makers connected to the system. It should be noted that ECN / STP does not execute trades, but rather acts as a channel for transmitting trade orders from the trader to the dealing center, from where the trader took the price.
Why is it important?
The broker’s business model is important as it will affect the type of spreads you receive and whether the spread is fixed or variable.
Forex broker for beginners
For novice traders, look for brokers with the following qualities:
- Comprehensive Trading Learning Resources – Many brokers provide a set of training materials to help traders master their skills. These are usually webinars, videos, courses, guides, and articles.
- Unlimited Demo Account Access for Trading Practice – Most if not all Forex brokers provide demo trading accounts to their clients. This is especially useful if you are new to the world of Forex trading or want to test the broker’s platform before actually trading.
- Convenient Trading Platform – There are many trading platforms in the market, some of which are more complex than others. As a novice trader, you don’t need a complex platform with features such as an advisor and complex trading strategies. This will happen later, but now you should look for a platform that is fast and easy to learn.
Forex broker for professionals
The trading needs of professional traders differ significantly from those of a novice trader. Typically, professional traders prefer brokers who can provide them with:
- Comprehensive Trading Tools – As a professional trader, you now need a variety of tools, including a commission calculator, an economic calendar, and of course, sophisticated real-time charts to implement your trading strategies.
- High leverage – It is not for the faint of heart, professionals will strive to use leverage to multiply their capital. Leverage increases risk and equally increases reward.
- Low Spreads – If you trade a lot, you want to make sure that spreads are not eating away at your capital. It is important to check the spreads to be paid before choosing a broker. Typically, the larger the account type, the lower your spreads.
Forex broker for day trading
Generally, for an intraday trader, most brokers can meet their trading needs. However, given the shorter time frame that day traders trade, it is best that the broker can provide the day trader with a wide range of tools to find trading opportunities. These can include signaling services, tools such as an economic calendar, market news updates, and profit and loss statements. Since you will likely be placing more short-term trades, make sure you are aware of spreads before trading.
Forex scalping broker
Scalpers are traders who hold their market positions for an extremely short period. Although they only hold a market position for a short period of time, the frequency of their trades is higher than that of the average trader. Their goal is only to make a small profit on all the trades they make, on a large number of trades. Please note that not all brokers allow scalping. Thus, if you are going to trade as a scalper, you should always check with the broker you are going to register with whether they allow scalping.
Most forex brokers in the industry offer traders a selection of trading accounts to serve various categories of traders.
- Micro Account – The smallest type of trading account is the Micro Trading Account, where one trading lot is equivalent to 1000 units of the instrument being traded.
- Mini Account – The next type of trading account higher in the hierarchy is the mini account, where one lot represents 10,000 units.
- Standard account – on a standard account, one lot is equivalent to 100,000 units.
Micro and Mini accounts require only a small minimum initial investment to get you started trading. When using a standard account, although the minimum investment can vary from broker to broker, you will usually need a higher trading capital. Given the different minimum investment for each type of trading account, you should choose a trading account that matches your investment capital.
Most novice traders tend to forget to consider customer service when choosing a broker to register. They may not realize the importance of customer service in their overall trading experience. When it comes to customer service, the question is not whether you will ever need their help, but when you will need their help. Because no matter how experienced or knowledgeable a trader may be, there will always be times when help from customer support is needed. When that time comes, you will want to contact support without any problems. Therefore, it is important to check if the broker you intend to register with can provide you with reliable customer support.
Check if there are multiple ways to contact customer service. Most brokers provide their clients with several ways, such as email, live chat and phone, so that their clients can contact support. In short, you don’t want to end up in a position where you have to spend countless nights worrying about what your broker is going to do with your problem.
Value added services
In a competitive industry like the online Forex trading industry, some brokers will try to differentiate themselves from other brokers by offering value-added value-added services such as free market analysis, real-time news feeds, and trading signals. Most of these additional services are free, but there are some brokers that may require you to deposit a minimum amount before you can access these services.
Questions to the broker
If you have any general questions regarding brokers we can usually advise and recommend, however for more specific information you can read our broker reviews for a deeper understanding. Our video reviews cover many aspects of the trading cycle. Please note, if you have any doubts about the broker’s products or services by asking the right questions, you can clear up any ambiguities you may have before they escalate into an issue later after you sign up.
You should ask the following questions:
- How a broker keeps your funds safe
- Broker regulatory status
- A set of instruments available for trading
- Their business model
- Their customer service hours
- The process of depositing and withdrawing funds, and whether any fees are charged.
- Are there any conditions related to the value-added services provided
Questions and answers
How to choose a broker?
We’re here to help! Check out our list above and choose the broker that’s best for you.
Should I Choose a Regulated Broker?
Yes, you should try choosing a regulated broker for the job. This provides an opportunity for recourse in the event of a dispute or if your broker goes bankrupt. Remember that by using a regulated broker, you will also have access to an investor compensation fund that will insure your deposit up to a certain amount.
What else should you pay attention to when choosing a broker?
You should explore the range of platforms on offer and even ideally test the platform you might want to use. Take a look at additional resources offered by this broker, for example. Signal service, training tools, copy trade. Finally, don’t forget to inquire about spreads and account types before placing a deposit.
Is there any course from where i can learn forex trading?
You can search on youtube to learn about forex trading. If you want buy some course we will recommend TradeJuice-Training Program.
As noted above, there are many factors to consider when choosing a broker. However, with the help of this guide that we have provided, you will be able to see which broker is best for your needs. To make your search even easier, we’ve also done in-depth reviews and tested each of the brokers on our recommended list to make sure they are up to the correct standards. Once you find the right broker for the job, you can focus more on your trading activity and trade more confidently, thereby increasing your chances of being successful in the market.