Comparing Forex Brokers

Deciding which forex broker to use can be a tricky task. Although your choice of a regular bank may not be so important (all banks are pretty much the same), forex brokers vary widely in terms of quality and in terms of the services they offer. Here's a quick guide to help you pick the one that's right for you.

Step 1 - Know your needs in relation to your forex trading style

Start by creating your own list of features needed for your forex trading style.
- What instruments are you trading? Currencies, stock indexes, gold/silver, commodities?
- What kind of spreads are used: fixed, variable, how many pips?
- What is your minimum initial investment?
- Do you trade with mini lots of 1000 units or more?
- How much leverage do you need?
- What tools and forex trading indicators do you use for forex trading?
- Do you use trading via telephone and/or trading alerts?
- Do you need a specific trading platform (such as MetaTrader 4 for automated trading)?
- A platform without downloading software to trade in your browser?
- Do you want to use scalping?
- Do you use an easy hedging strategy?
- Do you need a trailing stop?
- Should your broker be an ECN/STP or a dealing desk broker?
- Does the broker have a good reputation on forex-related forums?
- How will you deposit funds (bank transfer, PayPal, credit card, etc.)?
- What are the costs of deposits and withdrawals to fund your account?
- Does customer support speak your language at the broker, is it easily reachable if something goes wrong?

You can of course improve this list with your specific needs.

Step 2 - Make a selection based on your criteria. A comparison of forex brokers and CFD brokers will allow you to make a preliminary selection of several brokers who might meet your expectations.

Step 3 - Visit the broker's website

After selecting a few forex brokers, it is time to do some research by visiting websites to read their respective trading rules and conditions to get an idea of their corporate transparency. An online broker cannot afford to have a website that looks amateur, the site must have a pro design. The presence of information such as address, telephone numbers of customer support, information on accreditation and regulation bodies needs to be present on the broker's site. If a broker has no physical address listed on the website or on the Contact page, do not sign up with them.

Another important factor is to choose a broker and open an account with a broker that is regulated and/or accredited to provide services in your country.

Here is a list of some regulatory bodies:
- USA: NFA, CFTC
- Canada: BCSC, CIPF, OSC
- United Kingdom: UK FSA
- France: MFA
- Germany: BaFin
- Switzerland: SFDF, ARIF, FINMA (As of 2009, all Swiss forex brokers need to have a banking license)
- Sweden: Swedish FSA
- Denmark: Danish FSA
- Spain: CNMV
- Japan: Japan FSA FFAJ
- Hong Kong: SFC
- Australia: ASIC
- Dubai: DMCC, DGCX, DFSA, ESCA This is not a complete list, for other countries, there will be other regulators of financial markets.

Choosing a broker 

Step 4 - Open a demo account

Demo accounts don't always reflect reality in terms of timeliness of slippage and higher spreads during economic news announcements, but they help one to become familiar with the trading platform.

During this trial period, you can also seek advice from customer support to see if it is responsive and responsible. After the initial start with a small amount of starting capital, you can then make additional deposits if trading conditions meet your expectations. Remain cautious with brokers who encourage you to deposit more funds or who offer deposit bonuses.

 Stay cautious, forex trading is a risky activity that requires a significant personal investment. Follow Forex training to learn the basics of trading and, most importantly, do not use leverage to try to recoup your losses, instead, diversify your positions or increase your exposure during winning trades.