How to Find a Reputable Forex Broker

Getting into the forex game can be fun and exciting – but it can also be stressful, especially when you have to choose between the laundry list of forex brokers on the market.

There is also the challenge of finding an ECN forex broker, discount forex broker, or a host of other options out there in the market.

In this article, you’ll learn more about what brokers are out there in the market, including what choices are out there in the market. I’ll also give you a broker list that you can use to begin your search and narrow down potential matches for your forex trading career.

Forex Brokers: An Overview

First, we’ll define what a broker does and what types of brokers are floating around there in the market.

A broker offers traders the chance to buy and sell currency pairs electronically, from virtually any location in the world. A broker acts just like a stock broker in that it routes your orders from its platform to a market that is comprised largely of other computers and other platforms. This is called an electronic communications network (ECN), and in this configuration, the forex ageitself doesn’t have a role in setting or making prices. Those are called market makers, and those offer different trading conditions, pros, and cons.

It’s important to know which one you are using. With ECN brokers, you’ll typically get better bid/ask prices, more volatility (which can be a good thing), a lack of competition from the broker itself, and even the chance to act as your own market maker by offering a price that is between the bid and ask stated by the platform. Disadvantages include commissions per trade and a higher degree of difficulty to use.

Market makers are generally easier to use and typically come with lower volatility, but they can compete with you, offer less-favorable spreads, and can be prone to price manipulation with less-scrupulous brokers.

There is also a type of broker called a discount forex broker. This term refers to the low costs associated with using their platforms. Full-service brokers offer investment advice and a wide range of tools and resources, but they also come with high prices. Discount brokers allow people to trade currency without having to pay high traditional broker fees, but they also typically don’t offer investment advice or guidance or some of the more advanced platforms.

Still, the rise of discount brokers, arguably, fueled the boom in not only forex trading but in online trading of any kind.

Finding the Best Broker: Forex Tips

To find the best broker in forex trading, it is helpful to consider a few variables:

  • Cost: How much does it cost to trade? All things considered equal, going with the cheaper option means your currency pair of choice doesn’t have to do as well.
  • Trading Choices: How many currency pairs are available that you can choose from? Virtually every broker offers the standard pairs (EUR/USD, USD/JPN, USD/GBP, GBP/EUR, etc.), but you’ll have to search for more exotic pairs like NZD/JPY, USD/SGD, or USD/ZAR.
  • User Friendliness: How easy – or hard – is the platform to use? Is there a steep learning curve, or can you pick up pretty easily without investing hours and hours into learning the system?
  • Bonuses: Bonuses are always nice. Some brokers pay bonuses to people when they sign up, and bonuses are usually staggered into tiers. If you open an account with a certain amount of money, you get a higher bonus than if you opened an account with a lower amount. Which leads to…
  • Minimum Requirements: How much money do you have to have in order to open an account? This amount varies by broker, so find one that fits your budget.
  • Education and Support: Do you have access to educational resources? What about metrics, indicators, data feeds, and other means of support?
  • Leverage: How much currency does one dollar in your account control? Some can get as high as 1:400, which is extreme, in my opinion. High leverage can decimate your account with only one trade. American brokers can only offer 1:25, and I wouldn’t go much higher than that if you’re outside of the United States.

Forex Broker List

I won’t endorse one particular broker for you; it’s an individual choice and largely depends on your preferences. But, I will give you a broker list that will help you jumpstart your trading career and choose the right broker you want. Here are some choices based on favorable user reviews, in alphabetical order:

Peruse this list. Sign up for a few free demo accounts to get a feel for the platforms. Open up a practice trading account if you want to get truly acquainted with the system. Above all, identify your goals and what matters the most for you as a trader – and find a broker to match.

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