Brokers are an intermediary that offers financial instruments for traders of all levels to trade. 

A brokerage allows market participants to buy or sell securities on their terms by acting as a middle-man. By doing so, the company makes a profit by charging trading costs through spreads or a commission. 

With many updates in the fintech industry during the past 25 years, tons of exchanges have come forward to provide the best services. Our article will discuss how a trader can filter out the top ones to avoid poor trading conditions and extra fees.

Regulations

One of your major concerns while choosing a forex brokerage should be regulation. Note that top-tier regulatory authorities should regulate the broker within your country. This can help you file a claim against the broker if you feel like you’ve been double-crossed. 

The regulators are responsible for keeping a close eye on the activity of the brokerage and will impose heavy fines in case the facilities are not up to the standard. 

For example, in 2020, interactive brokers had to pay $38 million in penalties to US regulators as it had failed to meet the anti-money laundering requirements.

The following list details all the top regulatory authorities that a trader should keep an eye on:

  • 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)
  • Cyprus: Cyprus Securities and Exchange Commission (CySEC),
  • Switzerland: Swiss Federal Banking Commission (SFBC)
  • Germany: Bundesanstalt für Finanzdienstleistungsaufsicht (BaFIN)
  • France: Autorité des Marchés Financiers (AMF)
  • Canada:  Investment Information Regulatory Organization of Canada (IIROC)

Account opening

Some brokers restrict the residents of some countries due to their policies. So be careful as you might open an account, but the deposit can get stuck if the exchange doesn’t accept your country. 

Other than this, it is relatively easy to sign up with a brokerage. 

A trader will have to provide his credentials, verify his emails and id if needed. Verification may take some time, and it varies from one broker to another. 

Check if the account supports hedging or market-making if you use any one of these strategies.

Deposit and withdrawal options

There should be sufficient options to fund and withdraw from your account. The overall process should not take much time. Bank/wire transfer, credit/debit card, cryptocurrency, e-wallets, and local transfer are standard options amongst brokers these days. 

Fees

Three different types of fees incur when you trade through a brokerage:

  • Swaps. These are overnight charges that occur when you hold your position even after the end of a trading day. Islamic accounts do not have rollover fees but are only available to the Muslim community.
  • Trading costs. Your broker has to cover up their own expenses such as data feed, platform costs, etc. To do so, they charge the fees through the spreads. ECN brokerages have a fixed commission on each trade.
  • Deposit and withdrawal. Make sure to check the fees associated with funding and withdrawal. Some exchanges may not charge anything for both.

Trading platform

A brokerage may offer its own or third-party software for trading. MetaTrader being the industry standard in currency trading is generally available with most forex brokers. 

Before selecting any platform, make sure it is user-friendly and has enough features to cater to your trading needs. The amount of latency should be low, and the orders must go through smoothly with minimal or no slippages.

Account types

Trading accounts may differ in terms of trading costs, execution speeds, number of available instruments, swaps, etc. 

Using an automated algorithm that places multiple orders would require a fast connection and an ECN or no dealing desk portfolio. 

Scalpers also prefer low latency and tight spreads, while swing traders like to open accounts with no swaps.
Micro and cent accounts are beneficial for traders who like to keep extra-low risk on their portfolio. 

A trader can test his strategy on a live account with no fear of losing substantial capital. Most brokers also offer demo accounts to test out their service before depositing real money. 

Available markets

Select a broker with a range of markets if your trading strategy involves multiple instruments. This is especially useful for EAs that use market correlation or arbitrage strategy. 

Nowadays, exchanges are not limited to a single financial asset as they offer stocks, forex, cryptos, etc., under one account.

Research and education

Research and education are essential features that can help professionals and beginners. 

Brokers with a separate learning section allow novice traders to learn and develop their trading by a significant margin. 

Pro traders can also create new strategies and do not have to search for information on other financial websites as everything is available at home. 

Top investors constantly share their knowledge and insight of the markets for helping the mass community.

Customer service

Good customer service ensures that all your concerns are addressed with proper care. See if the broker has an online chat available for communication for at least 24 hours, five days a week. 

Support is also at hand via email and telephone, but the prior is much slower, and it would be better if you avoid it. In some cases, social media such as WhatsApp, Telegram, and Facebook are present for contact.

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