The broker plays a vital role in the Forex market and represents an intermediary between the Forex traders and the foreign exchange market. The broker allows the trader to buy and sell currency pairs at the best terms and price. Trying to find the perfect Forex broker is like putting the puzzle together. Before choosing the best forex brokers, you must know how to rate a forex broker according to some established criteria.
Importance of a forex broker reviews
Your choice as a new trader will depend on others’ trading experience. Forex brokers reviews are the main resource to check the ratings of Forex websites and platforms.
There are different types of reviews with different goals: to sell the services of specific brokers or to demarket them. Some of them are even paid. So, be careful when making conclusions based on them since the accuracy is not always guaranteed.
The reviews you can rely on should be written by someone who has traded on a platform with the live account. From this kind of review, you get the opinion from an objective perspective. But what review sources to look for. You can try Youtube channels or professional Forex traders, independent forums and websites that specifically provide forex reviews.
There are rating systems with star ratings and those with percentage scores. But how to use these ratings to choose the best Forex brokers for your trading. The stars are not randomly assigned. Specific criteria are used to know how to rate a forex broker.
There are a number of factors that you should look for when choosing a forex broker. Below we highlight what makes a good forex broker.
How to rate a forex broker – main criteria
The main criteria to determine the best forex brokers:
- Types of accounts offered
- Trading tools
- Security and reputation
- Trading requirements
- Offering of investments
- Customer service quality
- Training and demo accounts
- Companies size
- Regulations
1. A variety of trading accounts
The best Forex brokers should be able to present you with a good variety of trading accounts.
These are, for example, STP, ECN accounts, or even accounts that can reduce spreads when you make large deposits.
To prevent you from taking certain positions or limit you in your risky actions, the broker should offer protection, presenting you with different options.
Limited risk accounts cannot have a negative balance. So in the case of strong shifts of rates on one or more leverage positions that would lead to a negative balance, the broker must compensate for the loss and cannot lose more than your account balance.
Guaranteed stop loss
A guaranteed stop loss is a stop order with a guaranteed execution price. Protecting you from unintended and, above all, uncontrolled losses.
2. Trading tools to look for
A good broker must dispose of specific features and cutting-edge tools.
Some of the criteria for rating the broker tools:
- availability of the tool for as many operating systems as possible: Windows, macOS, Linux, Android, IoS;
- the features for your operating system: some platforms are easier to use than others. More complex platforms generally offer more advanced functionalities such as the development of automatic trading strategies, the backtesting, the creation of custom indicators, etc.
- speed of execution of a buy or sell order – in times of high volatility, can impact the success of your trade. Nothing is more annoying than finding yourself unable to place an order to take advantage of a market movement or even worse to exit a position that has gone wrong or move a stop.
- Availability of research tools such as Dupli trade, social-copy platform, trading signals, and market analysis charts
The ease of access via mobile is game-changing for currency trading. The trade execution is better, so many brokers strive to overcome the gap between high tech features and customers’ access.
3. Security and reputation of Forex broker
The trader must trust the broker. Since the broker is responsible for managing your capital and carrying out your buy and sell transactions, he must present you with a secure platform.
These platforms can be hacked, so you risk losing all your money. Your broker must, therefore, have all the necessary tools for his security.
Some brokers make access to your account more secure than others by offering the activation of features such as two-factor authentication or access restriction by IP address.
Two-factor authentication involves requiring the user to have two physically separate codes to access their account. Thus, two-factor authentication could, for example, consist of the connection password and a one-time code (or OTP for One Time Password) received by SMS.
4. Trading requirements – costs and fees
A comparison of cost and fees contributes to having a better picture of the quality of the broker’s services. Depending on your trading style and budget, you will know if costs, fees, and spreads are realistic and fit your needs. Here are some points to consider:
Rollover rates
Forex broker rollover rate is paid or earned for keeping a position overnight. Each currency has an interbank rate, and since forex trade is based on pairs, it also involves two different interest rates.
Spreads
You need to be sure that the broker you choose provides you with good spreads. The best spreads are the lowest. However, just because a broker offers you the lowest spreads doesn’t mean that you should definitely sign up on their platform.
Minimum margin requirement
Margin is the money deposit you have to put on your account to start trading on Forex. It’s equal to the percentage of the total value of your opening position. Some Forex brokers will offer you a starter account with an upfront deposit, and some will secure themself demand as much as $10000 as a deposit.
Maximum Leverage
Maximum leverage depends on the type of asset and the regulations and location of your Forex broker. The maximum leverage can be very high. It can be tempting to use higher levers and be aware of the asymmetry between losses and gains. To erase a loss of 50% of your capital, you need a gain of 100%; a 1% drop in 100 leverage ruins you.
Transaction costs
Transaction costs can only be made up of spreads (fixed or variable) or commissions, or a mix of both. Therefore, you should compare the transaction costs of the brokers that have caught your attention by calculating the fees that will apply to the types of transactions you wish to carry out.
On positions with a high leverage effect, carrying the position over several days (for example, over the weekend) can generate relatively high costs and vary widely depending on the broker. It is fundamental to compare these costs before choosing a broker.
Inactivity fees
If your account is not active for 24 consecutive months, there can be charges which vary from broker to broker. The broker should notify the client before incurring any charges. By logging on to your account, you should see any inactivity fees.
Besides above mentioned, check if the payment methods of the specific broker suit you and the withdrawal fees. Some brokers allow one fee-free withdrawal per month. A few will charge you for every withdrawal.
5. Offering of investments
Today, no broker is exclusively dedicated to Forex. The bigger choice, the better for traders, especially for long position trading style.
Most brokers offer access to a wide choice of investment vehicles such as:
- CFDs on shares: CFDs on shares allow you to take a downward or upward position on a stock with a leverage effect that can vary ;
- CFDs on indexes;
- cryptocurrencies;
- ETFs: Exchange Trading Funds are funds indexed to a benchmark index which makes it very easy to take a position on an index with minimum fees;
- commodities
- corporate and government bonds.
While most brokers provide access to the full set of tools above, the choice or variety of underlying assets can differ from broker to broker. It is advisable to select a broker offering access to the maximum amount of underlying assets according to your preferred investment vehicles. For example, if you plan to operate mainly on currencies, it will be necessary to verify that the chosen broker offers the greatest variety of currency pairs possible. If you prefer to use ETFs, it will be essential to see how many ETFs are provided by each broker and which benchmarks they allow you to trade on.
6. Customer service
Customer service or help desk plays a huge role in the quality of Forex trading platforms. In the event of a problem with the use of the tools provided, with the impossibility of access or of assistance in using it, access to a 24/7 support service is essential, within a reasonable time frame, with a competent contact person and, if possible, in your native language! The live chats are proven as very efficient and become more popular as the communication channel for customer support.
7. Demo account and education
After narrowing down your best Forex brokers list, it’s advisable to open a demo account to see if the interface suits you and the features offered.
The best forex brokers must be able to offer you training. Since the broker is experienced, he could train you so that you reconsider different trading approaches.
If you are a rookie, you should ensure that your broker offers you a demo account. The demo account enables you to practice to gain more experience. Otherwise, it would be very unfavorable and risky to start trading directly and without any experience, which is a critical point if you are a beginner.
8. The importance of company size
The reliability of a particular broker can be directly related to its size. The larger Forex brokers tend to have direct affiliations with some of the biggest banks in the world. This relationship tells you a lot about the reliability of the broker. On the other hand, smaller brokers might not have a close relationship with banks. Instead, they will focus on developing their relationships with their Forex traders, which could be to your advantage.
9. Regulations
An important step to take before investing your money is to make sure that a Forex broker is legal.
Before starting on the foreign currency market, you need to be sure that the broker is part of the FCM (Futures Commission Merchant) and is registered with the United States Commission of Commodity Future Trading. (CFTC) or with the appropriate regulatory body in the country where it is based. Ensuring your Forex broker is regulated correctly is essential to trade in the Forex market, knowing that your funds are protected.
Regulation varies between states and jurisdictions. As a beginner, you should spend time searching for a regulated broker checked by a top financial authority.
Also, look up for blacklists of unauthorized companies and sites, including the sites of Forex brokers or crypto-asset derivatives. We recommend that you review these lists before choosing your broker.
Why should you compare Forex brokers?
There are many Forex brokers, and they all want to attract as many traders as possible. Which means there is fierce competition. FX brokers all try to be the best in a specific niche, and therefore you can choose the best provider by comparing Forex brokers. There is no limit to one or two brokers; you can trade currencies where you want when you want. But each Forex has its pros and cons. Your goal should be to find the best Forex brokers on your own.
Final Thoughts
An enormous choice is good and bad for the new traders. It’s good because, with so many opportunities, it’s more likely you will find the broker that meets your trading style and budget situation. On the other hand, so many choices at your fingertips can lead to confusion. The important thing is to take it seriously, not to rush and to take enough time to select precisely the broker according to your preferences.
We have tried to include in our assessment as many of the criteria as possible of those we think are most important. To accurately rate and finally choose an online trading platform, it is important to understand that you need to conduct extensive research. At any time, if you are not completely happy with your broker, you should consult reliable reviews and find a new broker.
Frequently Asked Questions
Are there any honest forex brokers out there?
Yes, there are. Just make sure to do your homework on brokers thoroughly. One way of doing this is through Broker Reviews.
Should I compare brokers before I trade in forex?
If you are still in the process of choosing a forex broker that is suitable for you, it is best to compare different brokers by multiple criteria.
How do I rate a forex broker?
Read our main criteria on how to rate a forex broker.
Do forex brokers steal their client’s money?
There are those brokers for whom ‘regulation’ is only a tool to attract more traders. Some brokers trade against customers’ order and then charge them outrageous commissions and spreads. You also get those forex brokers who make it nearly impossible to withdraw your money.
Can I trade forex without a broker?
Yes, it is possible, but will require of you to do your own analysis and that may not be accurate without the proper tools.
Top 4 Brokers
