The forex broker industry is huge, there seems to be new brokers popping up every day, all claiming to offer tighter pricing, faster execution and better client money protection.
But how can you choose a Forex broker when there are so many options?
Instead of telling you what to look for, here is a guide of three things to avoid when looking for a forex broker.
1. Cypriot regulation
Being regulated in Cyprus also means that a broker can show that they are regulated in the UK and show up on the FCA register.
So if you check the FCA website to make sure a broker is legit, they will show up. But, if they are not fully authorised and regulated by the FCA then client funds are not protected under the FSCS.
The FSCS basically protects a certain amount of clients funds should a broker go into administration, see their website for more information here. If your broker is only based offshore you’ll have little hope of getting any money back.
2. MT4 only brokers
We’re not saying that these brokers are bad, it’s just that they are not as good as full service brokers.
There are lots of decent MetaTrader 4 brokers out there, but a broker that just offers MT4 is probably just a brand white labelling some technology from another service provider. Again, there is nothing wrong with this if that brand provides significant added value.
But it’s often more sensible to go with a broker that provides a range of forex trading platforms.
3. Brokers that offer welcome bonuses
Those days are long gone and the FCA has not yet banned, but has basically told brokers that it will ban welcome cash bonuses as an incentive for new clients to open an account.
Mainly it’s because in order to claim a bonus the terms stated that clients must trade a certain amount and the FCA considers this to be unfair and encouraging clients to take unnecessary risk.
So, the decent brokers have stopped straight away, whilst others are still offering bonuses to new account holders.
It’s worth mentioning that there are decent brokers out there that offer all or some of these things to avoid, but we’re just highlighting a few points that should cause you to conduct a little extra due diligence when opening a forex trading account.
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Richard founded the Good Money Guide (previously Good Broker Guide) in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.