How to Choose An Online Broker – Nine Essential Factors To Consider

Frustrated, you closed another page of forex forum. This is the fifth forum and you grow impatient. “All of them are scammers! I’ll never find the RIGHT one!” Yes, for one good review, you’ll find at least one bad review or even more. Well, that’s not how to choose an online broker. You’ll just get frustrated and you’ll never find your “right” one.

Truth to be told, selecting an online broker is really a personal decision. Your friend have been trading with a broker for years and never got any problem. You decide to try the same broker and voila! Problem in withdrawal, countless of re-quotes, ignored stop-loss, the list goes on and on. It’s not necessarily the broker’s fault. You and your friend trade under different circumstances (currency pair, strategy, internet connection, different country, etc) and some brokers just do well in some areas and bad in others.

“So how to choose an online broker that suits me?” First, you must compile a list of what you need from your broker. Put priority in it. Note features that you absolutely must have and features you can live without. Here are some aspects you must include in your list:

1. Regulated broker

Note that being regulated doesn’t mean that they’ll not trick you and some country regulations are less strict than the others. However, it still a good indicator of an honest broker and at the very least you know where to complain if your broker start doing something funny.

2. Accept client from your country

Typically, most brokers accept clients from all “healthy” countries in the world, but some of them also make exception. For example, AvaFX and Exness don’t accept US clients.

3. Where are their offices located?

Some people feel safer if the broker’s office is somewhere within the same country so they can fill complaints in person in case something goes wrong. Personally, I don’t think it’s necessary, but then again, it’s your call.

4. What about their trading platform?

How to choose an online broker that suits you if you won’t try their platform first? You’ll deal with it every day if you end up opening an account there, so might as well get a demo account and get a feel of their trading platform. You might prefer MT4 or just comfortable with their built-in trading platform. You might need MT4 to run your EA. Your activities might not allow you to access your PC and you need mobile trading platform. You might travel a lot and you need web-based platform that can be opened securely in any internet café around the world. In any case, just make sure the broker has what you need.

5. Are your trading strategies allowed?

Some brokers put several restrictions that make particular strategies impossible to apply. The common restrictions are scalping, hedging, using EA, news trading, etc. Make sure you check this out first. If you prefer long-term strategies, be sure to check their swap rates.

6. Minimum deposit

This should be obvious. Some brokers would ask you $10,000 minimum deposit while others are OK with as low as $1.

7. Does they allow swap free Islamic Account?

You might need this info whether for religious reason or to support your hedging/long-term strategies.

8. Fixed spread or variable spread?

Depend on your trading style, you might be better with one of them. Brokers with variable spread usually have low spread during quiet market condition, but it could go up drastically during volatile market. Only several brokers with variable spread could maintain low spread during volatile market; as far as I know, Dukascopy is one of them.

On the other hand, fixed spread will remain the same regardless the market condition. To put it simply, use fixed spread broker if you’re a news trader and use variable spread broker if you prefer to trade during quite market condition. Of course there are other considerations, but if you confused between the two options, use this basic principle to make your decision.

Note: some fixed-spread brokers reserve the right to increase their spread during volatile market/news releases, so if you’re a news trader, make sure to ask this in their live chat before you open an account.

9. Currency Pairs

If you’re planning to trade EUR/USD, GBP/USD, or other major currency pairs, then most brokers are fine, but if you’re going to trade multiple currency pairs and perhaps even gold and oil, you better find out if the broker provides such services.

That’s how to choose an online broker; nothing too complicated. Compile a list and put priorities, then check if the potential brokers can fulfill your requirements. Visit my recommended brokers at top forex brokers for some ideas or just check out a particular broker in the review section at the left sidebar. Note that you might not be able to “get it all”, so it’s recommended that you’re willing to “let go” of some minor requirements if necessary.

A Thought On Forum Reviews

Like I stated before, you’ll only get frustrated if you solely depend on others’ opinions in forums to choose your broker. That’s not really a wise way to choose an online broker. Yet, it’s not wise to completely ignore them either. When you finally have a list of broker candidates that meet your criteria, you might find just too many of them and decide to discard a few of them. This is where you could use those reviews in forums.

Now, before you rushed to count the stars in the forum reviews, it’s advisable to realize that not all reviews are necessarily reflecting “genuine problems” or “genuine benefits” within the broker. Here’s why:

1. Inexperienced traders – This is the most common problems. Some traders are just lack the skills necessary to win and they tend to blame their brokers for that. The most typical case is news trader that trades in volatile market. They expect the spread to stay low and all orders executed immediately, which is probably too much for some brokers out there.

2. Fake positive reviews – Some scam brokerages are just being too naïve by trying to send countless of fake positive reviews from their office’s PC. This can be detected and removed immediately, but others might choose more subtle way and goes undetected. Basically, a large number of 5-star positive reviews isn’t a guarantee of an honest broker.

3. People have problems with the brokerage – Like us clients are prone to being scammed, forex brokers also have similar problem. Some people will try to scam them to get the bonus or commission. They usually get caught and have their account deleted. Others might simply have misunderstanding with the broker. Either way, these people will run to the forums and spread negative reviews.

4. Busy satisfied trader – Being a broker is similar to being a back-office employee. If you do your job well, then it’s normal. It’s how it supposed to be. But if you screwed up, your boss will have your hides and you might receive various forms of punishment.

In forex broker case, most of the satisfied clients think that they receive what they paid for. They’re too busy to linger around in forums and won’t bother to drop good reviews here and there. However, a client that feels he’s being scammed will open 10 forex forums and submit 1-star reviews everywhere. Think of it like a vote where 80% of the members being abstain. It doesn’t actually reflect the real situation.

Then, how to choose an online broker by involving forum reviews? Like I said before, just use them as filter for the final phase if you somehow have too many candidates. They might not reflect the real condition, but they do represent a part of the clients there. In the end, the decision is still in your hands. Choose wisely and don’t lose potential benefits just because you don’t find too many stars on the review.

Visit Top Forex Broker for some ideas on good brokers with excellent services.