With over $6.6 trillion traded every day, the Forex Market is the largest and most liquid financial market in the world. This sheer market scale, together with easy-access, round-the-clock trading, and opportunities to leverage, combine to make forex trading very appealing to retail traders.
If you want to get involved in this fast-paced world and begin forex trading, you’ll first want to make sure you choose one of the very best forex brokers available to you. Here at TradingForexSites.com we are committed to helping you do that by providing accurate, up-to-date and unbiased reviews of all the best forex brokers in 2022. Rest assured we only feature fx brokers that are regulated by a trusted, top-tier authority.
81% of retail investor accounts lose money when trading CFDs with this provider.
77% of retail investor accounts lose money when trading CFDs with this provider.
84% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
76% of retail investor accounts lose money when trading spread bets and CFDs with this provider.
82% of retail investor accounts lose money when trading CFDs with this provider.
To access the FX market, you must operate through a broker. The broker is connected to the major liquidity providers or market makers. The prices the brokers receive are then passed on to their clients with a spread or commission.
Their are several features about choosing a broker that you should consider when identifying the right match for you. We are going to go through the top 7 aspects you need to consider when selecting the broker you want to trade with.
Regulatory oversight is the very first aspect you need to check your broker for. All brokers should be regulated by an authoritative entity in the jurisdiction where the broker operates. Regulatory authorities guarantee that brokers will operate their business according to the most stringent rules.
The rules brokers must abide by protect clients from possible wrongdoings in the various processes where the broker handles client money. Regulation also guarantees that brokers keep client money segregated from their corporate accounts. Segregation will stop the broker from using funds for daily expenses and will protect funds from creditors in the case of bankruptcy.
There are various levels of regulatory bodies, usually separated into 3 tiers. The following are sample lists of top-tier, tier II and tier III authorities:
When you approach your shortlist of brokers you will inevitably have designed a list of account features your future broker should offer. The list of features should include some fundamental elements. Let’s have a look at 3 aspects that should always be considered.
Risk management tools are a vital aspect of trading in forex. You should be able to see, in real-time, all risk ratios concerning your open positions. For example, the broker should calculate and show you the level of leverage you are currently using. Or how much money you are losing or making with your current open trades.
The broker should offer a wide range of order types such as limit order, stop loss, take profit or guaranteed stop loss. Brokers under EU regulation are also required to offer guaranteed account protection for retail accounts. This protection means you will not be able to lose more than the money you initially deposited into your account.
Demo accounts are a useful way to know your broker and the services they offer before depositing any cash. If you are new to trading, you will also have the opportunity to hone your trading skills. Look for brokers that allow you to keep a demo account for extended periods, some only allow demo accounts for a limited time.
Most brokers offer initial deposits to open a trading account in the low hundreds of US dollars, Euros or pounds. Some have even lower limits; you may find as low as $25. We strongly advise against opening forex trading accounts with such small amounts.
Of course, we are all free to dabble with a bit of trading using a negligible amount of cash. But the fact of the matter is you may be simply throwing your money away. The minimum trading size is 1,000 units. For a EUR/USD trade that would be a trade worth 1,000 Euros.
If the EUR/USD rate is 1.25, then you’re trading for $1,250 or 50 times your initial deposit of $25. If the market moves against you by 1%, you will lose 50 X 1%, or 50% of your deposit. And most FX markets experience 1% price moves frequently over the course of a couple of days.
Forex markets compare the value of one currency (base currency) against that of another currency. The base currency is given a value of 1, and the price of the FX pair is quoted in terms of the other currency (quote currency).
In the EUR/USD FX pair, the base currency is the Euro, and the FX pair is quoted in terms of US dollars, for example, 1.2500. This price is the number of US dollars need to buy or sell 1 Euro. Most brokers offer all the major FX pairs plus other pairs known as minors and exotics.
If you are considering other currencies such as Polish zloty, or Mexican peso you will need to check the list of currency pairs that the broker offers. Be aware that for certain currencies such as the Mexican peso or the Brazilian real the broker may only offer these currencies against the US dollar. Similarly, Polish zloty or Hungarian forint may only be offered against the Euro.
Spreads and commissions are how the broker generates revenue as you trade. Clearly, higher commissions will bite into your bottom line detracting from your profits. Spreads are also important as the difference between the bid and offer will determine how much of your profits you get to keep.
The spreads in the major FX pairs are usually very tight, while minor pairs will experience wider spreads. If you are going to trade exotics, spreads are usually exceptionally wide, this is due to the smaller number of participants and banks providing prices.
Most brokers offer the MetaTrader MT4 and MT5 platforms as they have become a retail trading industry standard. Many will offer alongside those platforms proprietary platforms built in-house. They should also offer mobile platforms, standard with the MetaTrader platforms, so you can check your positions and risk on the go.
MetaTrader platforms offer sophisticated technical analysis tools, news, customizable templates and the capability of writing your own scripts for technical analysis and automated trading. If you are just starting, proprietary systems offered by the broker may provide a simple but effective solution.
As you grow into an experienced trader you may want more from your trading platform. So, make sure the brokers' in-house platforms offer everything you might need later. Or that they also offer MetaTrader platforms or other top-tier platforms such as ProRealTime.
Customer service is an important feature of the services offered by an FX broker. You want to be able to access this service promptly and easily. Most brokers offer customer support 24 hours 5 days a week. Some brokers go a bit further and offer the service 7 days a week.
Check they have a variety of channels available for you to contact them. Depending on your location you may want to check they offer support in your language also. The main channels for contacting support should include a telephone number, email and online webchat.
The latter is becoming popular with many traders as it allows you to continue watching the markets while you wait for your response. If the telephone number is in a foreign country, you may also want to make webchat your first choice to avoid extra costs when calling customer support.