How to choose a broker you can trust? This can be difficult because you will find many brokers on the Internet, and each of them will have negative reviews and dissatisfied clients. How to feel safe giving your money to brokers? In today's article I will tell you everything I know about choosing a reliable broker who will not deceive you.
A good broker is an important component of successful trading. You give the broker your money, you rely on him to execute your trades, you need his help when things go wrong.
You may need a broker with zero spread, a VPS service, a huge deposit bonus, special accounts or other special features. Let's look at what you should consider when choosing the best broker.
Don't trust reviews
You cannot trust reviews about brokers that you can find on the Internet.
Most brokers know that you look for reviews of them before you open a trading account. Therefore, they deliberately create fake reviews and post them all over the Internet. They leave bad reviews for their competitors and good reviews for themselves. Therefore, it will be difficult for you to understand whether the review is genuine and written by a real trader or whether it is fake.
More often than not, your attention will be drawn to the negative reviews you find. If, during the release of important news and high volatility, your broker widens the spread and your stop loss is hit, most likely you will leave a negative review of this broker. However, if your broker provides you with good service and you are satisfied with everything, you are unlikely to write about it. Therefore, this is another reason to think about the positive reviews that you find on the Internet and who is leaving them.
Often many brokers have different offices and representative offices in different countries and regions. Moreover, the same broker may have good service in one representative office and poor service in another. If you are unlucky with the service of one representative office, you are leaving a bad review of the brokerage company as a whole. Therefore, the number of negative reviews may be significant, but this will not be an indicator of the broker’s performance.
The most important points when choosing a broker
Most traders look for the broker with the lowest spread. However, there are much more important things to pay attention to. And the spread, as a rule, will be quite low for all brokers, because the Forex market is quite competitive and spreads are now approximately the same for all brokers.
Always invest a small amount of money in a new broker first. And only then, if everything goes well, gradually contribute more funds.
Your broker must be reliably regulated
A regulated broker has external controls that limit its fraudulent activities.
However, not all regulators are created equal. Good regulators ensure strict compliance with the rules (for example, checking that there is sufficient capital, conducting regular audits). Bad regulators do nothing at all, but only sell their seal for a small fee.
The best regulators will be in Singapore, UK or Australia. The bad ones are in offshore zones, the Cayman Islands, St. Vincent and the Grenadines, or countries you've never heard of.
Good service and support
A good broker should provide 24/5 support and be ready to politely and professionally answer all your questions and help you sort out your problems. If a broker does not provide such a service, then there is no excuse for it and it would be better not to deal with it.
Choose a broker with reliable and fast customer support. Check out how you can contact them. Test them. You can even talk to the broker's support before you sign up to see how they respond.
Deposit currency
Many brokers only offer accounts in the major currencies of USD and EUR, however, some brokers allow you to have ruble accounts.
How does this affect you? Having an account in a currency other than your bank account or e-wallet account may result in increased fees during deposits and withdrawals. I don't think this is a big deal, but you may prefer to have an account in a specific currency.
Supported deposit and withdrawal methods
Methods for replenishing deposits and withdrawals are very important, but these days most brokers support all popular payment systems. You can use bank transfer, plastic cards, electronic wallets WebMoney, Yandex.Money, QIWI, Skrill and Neteller.
Check the available deposit and withdrawal methods before signing up with a broker.
Minimum deposit
All major brokers have a minimum deposit from $10 to $500. This is something to consider if you have limited capital to invest or if you just want to try real money trading.
Bonuses
Bonuses can be very attractive, and some brokers have much better bonuses than others. Some brokers do not offer bonuses, while others offer bonuses on every deposit. Check out the available bonuses before registering with a broker if you want to get additional free funds.
Available trading tools for trading
I mean currencies, indices, stocks, commodities, cryptocurrencies, etc.
Some brokers have a limited list of instruments that you can trade. Other brokers offer a wide range of instruments. The list of trading instruments may also change for the same broker with different account types.
Most brokers provide the opportunity to trade major and cross currency pairs. But not all of them offer exotic pairs such as USDRUB, USDINR, USDMXN.
Spreads
Since the spread is the price you pay to trade the market, it would be preferable to find a broker with low spreads.
Nowadays, many brokers have spreads that are about the same, so just make sure that the broker you want to trade with has spreads close to the market average.
Some brokers offer accounts with zero spread and varying commission percentages.
You should be able to quickly withdraw your money
Nowadays, money moves quickly from one place to another. With the help of the Internet, we have the opportunity to withdraw our money and spend it almost instantly.
A good broker should withdraw your funds within a maximum of 5 business days.
If you hear excuses like:
- “Our bank is closed, so we cannot transfer money to you in the near future.”
- “You must keep your funds with us so that your returns do not fall.”
- “Better top up your funds to receive bonuses from us.”
This means your broker is most likely a scammer.
Additional features
Nowadays, all brokers offer almost the same trading options, the same spreads, the same deposit and withdrawal methods, however, some brokers offer more than others.
It can be:
- Educational materials: courses, videos, trainings, webinars.
- Free trading advisors and services for traders.
- Social trading opportunities.
- Loyalty programs.
- Referral programs.
These are just some of the additional features that your broker may offer, but there may be others.
Does the broker provide the trading platform you need?
Many of you are trading on the Meta Trader 4 platform, which is provided by most forex brokers. However, some brokers only offer you other platforms. Therefore, think first before giving away your funds. Convenience of trading is very important.
Does the broker provide a VSP server?
If you use trading advisors, I highly recommend that you use a broker that offers a virtual private server (VPS).
The advantage of having a broker with a VPS service is that the VPS is usually located close to the broker's servers, and it will also be easier for the broker to provide you with technical support. If you trade enough funds, VPS may be free for you.
ECN, STP or dealing desk?
You have probably heard about the different types of brokers such as ECN, STP and dealing desk. Let's look at each of them in detail.
ECN broker
An ECN broker does not take the opposite side of a trade with a client.
It acts as a bridge that connects retail traders with liquidity providers (such as banks or hedge funds) and charges a commission on each trade. Each transaction you make will incur a commission. You will also be able to see the flow of buy and sell orders. Typically, there are minimum account size requirements for ECN trading.
STP broker
Like an ECN, an STP broker acts as a “bridge” and connects you with other liquidity providers. However, you will not be able to see the order flow. Instead, your broker acts on your behalf and submits your order to the liquidity provider. Every trade you make will be charged a spread. Requotes are also possible.
Dealing center
The dealing desk takes the opposite side of clients' trades, charging an additional spread on each trade.
If you are a profitable trader, they will match your orders with those of other profitable clients and put them on the interbank market. If you are a losing trader, they will take the opposite side of your trades, taking your losses directly. You will not see the order flow. You will have the opportunity to trade in minimum lots. The initial deposit may be minimal. The spread can be fixed in each trade.
If you are a beginner trader, you can trade in a dealing center because they require a minimum deposit to start and you can trade in minimum lots.
If you are a profitable short-term trader, consider switching to an ECN broker as you will be able to save more on transaction costs.
However, if you are a swing trader or a position trader, the spread will have little effect on your trading results.
How to protect yourself from illegal actions on the part of a broker?
Document everything. For example, if there was a sharp spike in price on your broker’s chart that other brokers didn’t see, take screenshots and save your correspondence with the broker in the chat.
Demand an explanation from the broker. If the problem was caused by the broker, you should get your money back. If this has not been done, then it would be better to look for another broker.
Share controversial situations on social networks and on trading forums. No broker wants to have their reputation damaged, so they will try to resolve your situation as quickly as possible and in your favor.
If all else fails, you can complain directly to the regulators. If the regulator is reliable, it can impose a significant fine on the broker or even deprive him of his license.
Trader and broker – friends or enemies?
We often hear that Forex is a scam, is that true? No! In Forex there are only bad experiences that you gain over the years. Perhaps you will be lucky and you will stumble upon a broker who will only be happy with your profits. You can simply register with a trusted broker, whom many traders have trusted.
How many deposits will a cheating broker cost?
The answer is simple: you will lose all your deposits. There are many ways to destroy any trader's account. For example, an unreasonable increase in the spread, which was 2 points, became 12. How then can someone trade with a profit level of 20 points and a loss limitation level of 15 points?
It turns out that the trader risks 27 points to gain 8 points. Money management rules will not approve of this and most likely your deposit will dissolve like sugar in water.
Therefore, before choosing a broker, read reviews about him. Reviews like: Forex is a scam; forex – casino; forex – drains traders, reviews are not considered.
Pay attention to the conditions that the broker offers you, and in the reviews look for whether the broker complies with the specified conditions. If yes, then there are no complaints about it, you can register, top up your deposit and start trading.
Any broker learns in “battle”
What is this for anyway? When trading on a demo account, you will not experience the real trading conditions; most likely, they will be ideal, so I advise you to open a cent account, which you only need to top up with 5 dollars. Yes, you didn’t think so, only $5.
This way you can understand from your own experience whether the broker you have chosen complies with all the conditions or whether everything that was written on the main page is a sweet bait for inexperienced traders. If you like the conditions, then you can safely replenish your deposit and start trading, knowing that you will be provided with a strong rear.
