CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 84.9% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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How to Choose a Forex Broker

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Forex broker looking at stocks

The forex market’s level of profitability makes it a popular choice for trading—the ideal choice for those with the right expertise, knowledge, and skill. A forex broker plays a crucial role in the forex market, acting as the intermediary between traders and the global market. This allows participants to sell and purchase currency. But what qualities should you look for in a forex broker, and how do you identify one that best fits your situation? Read on to learn more!

How to choose a forex broker 101: What’s a forex broker? 

A forex broker is a financial services company that allows traders access to a trading platform. Transactions carried out in the forex market always consist of a pair of two separate currencies. 

Some forex brokers buy and sell currency pairs for traders, while others allow them to directly trade currencies themselves. Forex brokers also manage fees related to withdrawals, advice or tips, and commissions. 

How to choose a forex broker 101: What should I look for in a forex broker?

Each forex broker has its pros and cons, and forex broker platforms can differ drastically, with various account minimums and transaction fees. Before selecting a forex broker, take an honest look at your short-term and long-term financial goals. 

When deciding how to choose a forex broker, you should consider the following factors: 

  • What’s your current budget? 
  • When it comes to initial deposits, what’s the minimum amount you’re required to invest? 
  • How much are you willing to pay for fees? 
  • Does the forex broker follow regulatory compliance standards? Avoid working with unregulated brokers. In the U.S., the National Futures Association and Commodity Futures Trading Commission regulate forex brokers. France, Germany, Switzerland, Austria, Canada, and the U.K. also regulate forex brokers. 
  • Does the forex broker prioritize security using features such as multifactor authentication? 
  • Does the forex broker offer customer support to traders? 
  • Is there a no-risk way for new traders to gain experience?

A forex broker such as Valutrades offers free demo accounts if you’re new to investing. It’s also regulated and provides 24/7 access to customer support specialists. 

Leverage and Margin 

Leverage is a service offered to investors by many forex brokers that allows them to increase the returns generated on a trade, while margin is a “good faith deposit” required to open a position.

Margin is a portion of a customer’s account balance that is placed aside when carrying out an order trade. It’s usually represented as a percentage amount of the full position: 0.25%, 0.5%, 1%, 2%, and so forth.

Commissions and Spreads

In the forex market, the spread is the difference between the bid and ask price for a given currency—also known as the exchange rate. While we generally think of an exchange as a reciprocal transaction, this definition can be somewhat misleading when it comes to currency. Like any other commodity, currency must be bought and sold at a specific price. The process of exchanging one type of currency for another actually involves two separate transactions: the sale of one currency and the purchase of another.

Commissions may be charged as fixed fees regardless of the volume traded or as a relative fee that increases with a higher trading volume. The spread is charged to the trader each time they place a trade. 

It’s important to understand that not all forex brokers are created equal. Unfortunately, some may “hide” or downplay additional fees by hiding them in fine print at the bottom of a webpage or user agreement. Traders and investors should conduct their research before signing on with a forex broker

How to choose a forex broker 101: What’s an ECN broker?

An ECN broker such as Valutrades uses electronic communications networks to provide access to other currency market participants, effectively offering an increased level of general market access. ECN trading gives market participants access to a marketplace where they can make bids and offers against one another. 

ECN brokers offer many advantages, such as: 

Anonymity and Privacy

Using an ECN broker through a dedicated electronic communications network account enhances privacy and security since the broker is acting as an intermediary in the market rather than a market maker.

Variable Spreads

An ECN broker and a dedicated ECN account give traders unlimited access to market prices. Because prices fluctuate upon supply, demand, volatility, and more, you can trade on tight bid/offer spreads.

The Ability to Carry Out Trades Immediately

Trade execution time matters. ECN brokers ensure effective trade execution since this trading method doesn’t require the client to trade with the broker—it’s simply accessing the network when placing orders

Enhanced Liquidity

ECN brokers operate using a model that allows unlimited trading within a global liquidity pool of competitive and regulated financial institutions. All ECN brokers are given access to the same feed and trade, resulting in transparency of underlying market prices from multiple liquidity providers. 

Trade Continuity

With an ECN broker, a break is not required between trades. ECN brokers allow you to openly trade during events and news, allowing any trader to benefit from forex price volatility.

Take a look at our guide, 9 Effective Trading Strategies, for more insight and advice in your trading journey!



This post was written by Graeme Watkins

CEO Valutrades Limited, Graeme Watkins is an FX and CFD market veteran with more than 10 years experience. Key roles include management, senior systems and controls, sales, project management and operations. Graeme has help significant roles for both brokerages and technology platforms.

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