· Make sure you are with a regulated broker
· Having good customer service will make everything better
· Different brokers will offer different commissions
· What does the broker offer for leverage.
· ECN brokers and dealing desk brokers
Looking for a broker can be extremely tough at times, especially with brokers popping up allover the place. A broker is an individual or firm that will execute buy/sell orders for their clients. A fee or commission is charged in return. This is the basics of how a broker makes money. Finding the right broker can be huge in your trading business. Many beginners become attracted to flashy deposit bonuses, high leverage, and minimum deposits. An honest and reliable broker will keep your trading business professional and your money in your pocket!
The most important detail to look for in a broker is if they’re regulated, but also making sure the regulation agency is legitimate. A lot of overseas brokers maybe regulated, but that does not necessarily mean the regulation agency is credible. Brokers should have an NFA or reference ID at the bottom of the page you can search the regulation on it.
Below, I will list good regulations to look for by country:
a. The CFTC and NFA are the two associations in charge of the Foreign Exchange Market.
2. Canada-IIROC (Investment Industry Regulatory Organization of Canada)
3. Europe- FCA (Financial Conduct Authority), ESMA (European Securities and Markets Authority)
a. The FCA is a regulation agency in the UK
4. Australia- ASIC (Australian Securities and Investments Commission)
Great customer service will make things a whole lot easier if an issue may arise. Oanda’s live chat option is available 24/6 and you can get in contact with someone quick.They have always been extremely helpful when I have had to reach out. If you are with a legitimate broker, you should not have many issues at all. Make sure before you go with a specific broker, check out their customer service. Another broker with great customer service is Blueberry markets. Its important that you do your own diligence and interact with brokers to see their customer service.
The dreaded trading fees..
Different brokers will have different commissions & fees. It is best to shop around and know the structures of how a broker charges its fees. Just like anything, we want to pay what we think is fair. I have listed a couple examples down below:
- Oanda will use both buy and sell side of the trade to determine commissions. A midpoint is found between the bid and ask prices to determine the spread costs,and then another formula for the commission cost
- TD Ameritrade fees are based on a spread. Non-Commission pairs must traded in increments of 10,000 units
- IC markets offers variable spread to its traders
Some brokers offer different leverage
The big deal breaker among new traders, is if the broker offers higher leverage. I have seen some brokers offer as much as 3000:1 leverage! Absolutely insane! At Top Traders, the highest leverage we would ever recommend is 50:1. That is the max amount of leverage in the U.S. If you are coming into the market with the mindset of using 3000:1, 1000:1, 500:1 in hopes to “flip” your account, you will not last long at all!
ECN & Dealing Desk brokers.
ECN (Electronic communications network) and dealing desk are two common types of Forex brokerages. An ECN broker has access to liquidity providers and will match your order with someone willing to take the opposite side of your order. Liquidity providers could bean financial institution, bank or prime broker. A dealing desk, also known as a market maker, take the opposite side of your position. Now don’t get freaked out and jump to a conclusion about the market makers hunting your stops! There are some brokers, most likely unregulated and overseas brokers, that will manipulate price against their clients. With more reputable dealing desks such as Oanda, they are only there to provide liquidity for clients. FXCM had a scandal a couple years back where they were routing their “no dealing desk”clients directly to a liquidity provider. Here is the twist! The liquidity provider they were routing to was a dealing desk partially owned by FXCM! Check it out here! TD Ameritrade has access to liquidity providers on their TOS platform.
Overall, for the majority of traders.There is no reason you shouldn’t be using a regulated broker with some of the regulation agencies. The only brokers we would recommend to anyone would be Oanda, TD, Blueberry markets (because of the ASIC regulation) or any other broker with the listed regulations. Oanda is available to the majority of traders (except India, and a few other countries), so there is no reason you should have your money with an illegitimate broker. Keep your trading business as professional as possible and find a trustworthy broker. If you have questions about a broker check out our video or shoot us a message on Top Traders FX.