How Should You Choose a Forex Broker?

How to Review Forex Brokers

There are so many Forex brokers out there, so how do you separate the good from the bad? Well for one, you can read the many reviews online, but the majority of Forex broker reviews are basically glorified sales pieces designed to earn their writers a commission. If you’re a serious Forex trader, you would save yourself a lot of trouble and frustration just by doing your own reviews.

As an avid Forex trader and active participant in the Forex community myself, I do plenty of broker reviews and you’ll find many of them on this site. In this article, I’ll share my process for seeking out the best brokers to so that you won’t get scammed and you know you’re getting the best possible deal.

How To Avoid Being Scammed

Just because a Forex broker has a professional looking website, it doesn’t mean that they provide a good service. It just means that they have a good web designer! The most important thing to look for in a Forex broker first and foremost is a proven track record of providing reliable service to their clients. Many people don’t even bother to check that their potential broker is legitimate, and end up losing thousands of dollars. Before making your first deposit, you must be 100% sure that your broker is not just going to run off with it and leave you high and dry.

The best way to ensure that your broker is legitimate is to check on Forex Peace Army and other popular Forex forums to check for any serious complaints. I personally like to see at least a year’s track record of good service before I would even consider making a deposit, because it typically takes about this length of time before the serious complaints arise and scams are discovered. They must also provide client segregated accounts, and be fully compliant with the financial regulations of the country they are based in.

Basic Considerations Before Engaging A Broker

Once you’ve established a shortlist of brokers that are legitimate, then it’s time to seek out the best possible deal. I have 3 basic requirements for a Forex broker, and you should make sure that you’ve thoroughly researched each of these aspects before you make a final decision.

Firstly, you should check that your broker has Direct Market Access (DMA) and Straight Through Processing (STP). Basically, this means that they are processing your orders directly into the market the moment you place them, instead of making a market and taking the other side of your trades. Just imagine if your broker is holding the opposite side of your trades… do you think you’ll be getting a fair deal there? Of course not, because they’ll have a strong incentive to see you lose money. DMA & STP are also extremely important to avoid costly requotes or flat out rejections of your trades. When in doubt, be sure to contact your broker and ask for written proof that they do indeed provide these facilities.

Secondly, as a general rule, the less spread you’re paying for the pairs that you trade, the better. Whether you’re trading an extremely liquid pair like EUR/USD or an exotic cross no one has ever heard of, the tighter the spread, the less money it’s costing you to make your trades. Remember, every pip you save in spread is another $10 per round turn lot you trade, and it adds up very quickly.

Finally, and most importantly, make sure that your broker does not have any restrictions on your trading strategy. Many brokers flat out don’t allow trading practices like scalping or hedging, and if you use these strategies you will forfeit your right to any trading profits you may accumulate using them. There are also certain brokers that prohibit the use of automated systems like EAs, and they will void your profits if you use them as well.

To avoid a messy situation, ensure that you do your homework and properly review each and every Forex broker under consideration before you make a final decision. Alternatively, you can simply check out the Forex broker reviews that I’ve done and save yourself some time and effort that way!