Well from my experience, I can say it was very time-costly for me to recognize a good forex broker. It took me careful research….long hours of research (most times leading to midnight reading) as I don’t joke with anything that makes good money. Once bitten twice shy. Forex is as real as life and death and there are millions to be made if approached properly and with diligence.
Forex brokers are vital for both retail and institutional Forex traders’ success and it’s also very important to trade using a reliable trading platform. Forex trading is not restricted to professional traders or a few specially chosen people in the market. And top-rated FX brokers are able to cater to a wide variety of needs, beginners and amateurs included. All Forex brokers, both good and bad, are free to be used by any trader, regardless of their experience, budget, or type of investment.
The factors to consider are a trading platform, execution of trades, ECN broker, slippages in trades, Stop loss hunting, deposit/withdrawal processing, an offering of bonuses, regulatory body, customer service, and of course what other clients say about the broker.
Is it free of charge?
Is the software Internet (Java or HTML), Windows, or Mac based?
What types of orders are available?
What charting tools are available?
Is the GUI user-friendly?
Is there access to the historical data and backtesting of strategies?
Does it provide additional features?
A solid trading platform is a must for any broker to be worth your time. If the broker uses unreliable and complex trading software, there’s a good chance it will be ignored by most traders, especially beginners. Of course, the main priority for an experienced and professional trader is to check the reliability of the trading software before actually opening a live trading account. Usually, a broker’s platform would be powered by some of the most innovative and leading software products like MetaTrader, cTrader, TradingStation, JForex, and other leading third-party trading solutions.
2. Execution: It is mandatory that your broker fills you at the best possible price for your orders. Under normal market conditions (e.g. normal liquidity, no important news releases or surprise events), there really is no reason for your broker to not fill you at, or very close to, the market price you see when you click the “buy” or “sell” button.
For example, assuming you have a stable internet connection, if you click “buy” EUR/USD for 1.3000, you should get filled at that price or within micro-pips of it. The speed at which your orders get filled is very important, especially if you’re a scalper. A few pips difference in price can make it that much harder on you to win that trade.
3. ECN broker: we have different types of forex brokers out there….market makers or dealing desk, step (straight-through processing), and then ECN(electronic communications networks. You can google these types of brokers to read more about the differences. But anyone that wants to succeed must stick with a real ECN broker. At the end of this answer, I will give you a few that I have filtered.
4. Slippages in trades: well the bitter truth is that slippages are almost inevitable in forex trading. However, some are positive and most are negative slippages. With a good broker, you should not experience many slippages against your trade. In fx, slippage occurs when an order is executed, often without a limit order, or a stop loss occurs at a less favorable rate than originally set in the order. Slippage is more likely to occur when volatility is high, perhaps due to news events, resulting in an order being impossible to execute at the desired price.
5. Stop Loss Hunting: is a strategy that attempts to force a trade out of his positions by driving the price of an asset to a level where many individuals have chosen to set their stop-loss orders. When this happens, you get stopped out at the price far from your set SL and it really hurts because you probably should profit from that trade. Be careful with brokers that do this often.
6. Deposits/withdrawals: Good FX brokers will allow you to deposit funds and withdraw your earnings hassle-free. Brokers really have no reason to make it hard for you to withdraw your profits because the only reason they hold your funds is to facilitate trading.
Your broker only holds your money to make trading easier so there is no reason for you to have a hard time getting the profits you have earned. Your broker should make sure that the withdrawal process is speedy and smooth.
7. Bonuses: Truth be told, no good broker will offer you bonuses. So be careful if you’re being offered 50% 100% bonuses or any at all. That’s bait at large!
8. Regulation: The first and foremost characteristic that a good broker must have is a high level of security. After all, you’re not going to hand over thousands of dollars to a person who simply claims he’s legit, right?
Fortunately, checking the credibility of a forex broker isn’t very hard. There are regulatory agencies all over the world that separate the trustworthy from the fraudulent.
Below is a list of countries with their corresponding regulatory bodies:
United States: National Futures Association (NFA) and Commodity Futures Trading Commission (CFTC)
United Kingdom: Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA)
Australia: Australian Securities and Investment Commission (ASIC)
Switzerland: Swiss Federal Banking Commission (SFBC)
Germany: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFIN)
France: Autorité des Marchés Financiers (AMF)
Canada: Autorité des Marchés Financiers (AMF)
Before even THINKING of putting your money in a broker, make sure that the broker is a member of the regulatory bodies mentioned above.
9. Last but not least, Customer support: Brokers aren’t perfect, and therefore you must pick a broker that you could easily contact when problems arise. The competence of brokers when dealing with an account or technical support issues is just as important as their performance in executing trades. Brokers may be kind and helpful during the account opening process, but have terrible “after sales” support
All that said, I’m gonna tell you a few reliable brokers (some perhaps don’t accept clients from some countries because of regulation rules) though it depends on your style of trading or strategy. Pls make sure to do due diligence on any broker before using them. Forex Factory and esp Unbiased Forex Broker Reviews are very helpful for this. There you will see what clients are saying about the broker. No broker is perfect so don’t expect to hear only good about any broker, sometimes the trader is the one not getting it right.
List of filtered brokers
For accounts under 25k, I’d say dukascopy, Axitrader or Pepperstone.
for over 25k you can have Vcap and Baxter….. (tire 2 broker) that’s a serious deal.
for 500k and up, I’d go for Hotspot, Marex Spectron, EBS….. or directly with your bank.