An individual currency trader needs a broker to trade Forex, stocks or other markets. Every single trader wants to find a trusted/reliable/fair broker. However, few actually find such brokers. Thanks to the experts of , trading veterans and lawyers we have made a list of key factors, which can help you to a reliable broker.
Most losing traders will never learn whether they have been the clients of a fair broker.
For a beginner it is not the broker that is a major concern. Almost all the Forex brokers around the world provide the same quotes. At this point it is all about understanding the market essence and gaining profits. 95% of traders lose (without the interference of their brokers) because they lack trading skills and experience. The money lost by the mentioned 95% goes to those brokers as most of them do not trade in the interbank. Moreover, the losers don’t care whom their money goes to.
The bottom line: Choosing a reliable broker becomes a major concern when a trader can gain a stable profit at least when demo-trading. When you start real-money trading and earn money, with some brokers successful trading can be a nightmare, especially as such brokers refuse to pay the earned profit. For example, until 8 successful students of have already complained about cases of non-payment.
Can a licensed broker be trusted a priori?
Do you think that a bunch of licenses allows you to trust a certain broker/bank/dealing center? Then why do 5-6 banks go bankrupt every month? (Those banks have all the necessary licenses given by the world’s most serious regulators). Remember Lehman Brothers, a bank with 150 years of spotless reputation, or Dunfermline, Scotland ’s biggest bank, or Refco, a major Swiss broker. Broco, a major Russian broker, was deprived of its licenses a year after it refused to pay a student of his profit.
The bottom line: licenses are essential but insufficient to fully trust a certain broker or dealing center. Banks and broking companies are deprived of their licenses when they are already broke.
Client agreement.
The client agreement should be read carefully, especially what is forbidden to do. If everything is ok, you won’t probably remember about those terms and conditions. Otherwise, if your broker refuses to pay, you may be surprised to find out that scalping/ intensive trading (trades that last less than 5-10 min) is forbidden. For more details read the article called “Non-payments of profit: brokers versus clients. Who is right?”
The bottom line: The client agreement should be read carefully before signing it. If you are not competent enough you can always address a legal company.
Don’t trust ads
When a celebrity starts persuading you that a certain broker is the best (It is interesting to know how competent this celebrity is when it comes to trading) just smile and think how much money he or she is paid for advertizing the broker. In order to not fall prey to various advertising campaigns it is necessary to conduct a comprehensive analysis. For example, you can use the 17 independent criteria of ’s rating of Forex brokers.
Deposit insurance
It is necessary to find out whether your deposit is insured. Then ask the name of the insurance company and the sum you will get if there is any force-majeure. For example, each EU country guarantees security of funds for any account under €20K euro opened with any of the licensed brokers.
The bottom line: You should choose a broker that can secure your funds.
Is there any difference between a broker and a dealing center?
A dealing center can call itself a broker only when it has access to the liquidity of at least one market maker and can hedge trades. In this case there is no conflict of interests. When a dealing center becomes a contracting party, there is a conflict of interests: the client’s loss is the DC’s profit.
The bottom line: you should contact the broker’s support to find out whether the broker cooperates with a market maker.
Dirty tricks of a “virtual dealer”
Some brokers play various dirty tricks on their most successful clients, including execution delays, the inability to close the trade, wider spreads etc. How to find out whether your broker uses a “virtual dealer”? No dirty broker will ever reveal this info. However, the broker is most likely uses a “virtual dealer” if:
· Orders are never executed instantly (a delay that lasts 2, 3 seconds or more)
· Orders are executed faster if the price goes against you.
· If during a delay the price changes by +1 point and you get a re-quote while during a -1pt change you get your order executed.
Payment/ withdrawal methods
Serious brokers accept direct bank transfers apart from electronic payment systems like moneybookers, webmoney, yandex-money, qiwi, liberty reserve etc. A lot of dealing centers do accept bank transfers and payments by "Visa" and "Mastercard" credit/debit card. However, when you fill in the form, pay attention whether you are redirected to the website of some offshore bank, which can be dangerous for your money.
The bottom line: When a reliable broker accepts "Visa" and "Mastercard" payments, it is done directly, without any third-party shady banks.
Don’t forget to study the blacklist of dirty/scam brokers
According to ICM Brokers (Top 5 in ’s rating of FX brokers), before signing a client agreement it is necessary to study various blacklists of brokers and to read the feedback left by the clients of the broker you are interested in.
Market Leader and would appreciate it if you could participate in a survey. Please, visit the Academy’s forum for traders and investors and answer the following questions:
To your mind, what traders should pay attention to when choosing a broker?
