How to choose the best forex and CFD broker
Are you wondering which broker is the best at the moment? In this article, we will go through the different elements to pay attention to in order to choose the right online broker.
First, what is a broker?
Forex and CFD broker – Definition
A forex broker is a financial intermediary who transmits orders from his clients on the foreign exchange market. A forex broker is a regulated company (because to carry out this activity an agreement or a license needs to be held) which provide traders the access to a trading platform in order to buy or sell currency pairs and other financial instruments. Traders place orders through brokers to access the foreign exchange market 24/5.
Online forex brokers are only responsible for a tiny share of the total exchanged volume. They mainly get their income from the spread, which is the difference between the bid and the ask price of a financial instrument.
The majority of online forex brokers offer demonstration accounts in order to test their services and the quality of their platform.
How to choose a forex broker
We will now look at how to choose a forex broker. You should take into account the following criteria:
- The forex broker's regulation – It is always better to open a trading account with a regulated broker
- The trading platform – It is recommended to choose a broker that provides the trading platform you are most comfortable with, and that suits your needs. Do not hesitate to visit our MetaTrader 4, Webtrader MT4 and MetaTrader 5 pages
- Spreads – Finding the broker with the lowest spreads is good, but beware of the different marketing techniques. A low spread announced on a broker's website does not necessarily mean that you will have this spread all the time. Moreover, some ECN (Electronic Communication Network) and STP (Straight Through Processing) accounts require you to pay a commission to the broker. The best broker must gather low spreads, good and fast order executions, low commissions (with particular accounts) and low swaps. That's why looking at a forex spread comparative between brokers is not necessarily the best idea
- The order execution quality and the slippage – Having low spreads is good, but having orders executed at the required price is more desirable
- The types of trading strategies – If you are looking for the best forex broker in Australia, be aware that a good broker does not limit the trading styles of his or her clients. Indeed, a forex broker allowing scalping (short term trading) does not have to impose a minimum distance between the execution price of an order and its stop loss or take profit
- he differences between no dealing desk and dealing desk forex brokers – Depending on your strategy, choosing a dealing desk or a no dealing desk broker can be more interesting. Make sure that your broker can provide you with the execution model that suits you the best
- Funds security – You should choose a forex broker that maintains segregated bank accounts in Australia
- The different types of trading accounts – A good broker can offer you several types of trading accounts such as ECN (Electronic Communication Network), STP (Straight Through Processing) or accounts with reduced spreads for larger deposits. Visit our Account types, and Forex offers page
- The ability to choose the leverage – Forex is a market that is often traded using leverage. To manage your positions properly, being able to choose the leverage yourself is very important
- The available markets – It is always interesting to be able to invest in different markets at the same time. To do so, a good solution is to trade with a forex broker that also offers access to other markets such as indexes, commodities, equities, crypto currencies, bonds or ETFs
- The customer service – Having a broker with English customer service is much more convenient and reassuring
- .Forex training – A forex broker is not allowed to give investment advice but can provide training for the forex market. For forex beginners, it is imperative to understand the particular vocabulary of trading. Therefore, a broker with the right training tools is better. Admiral Markets offers several training courses as well as a whole library of articles about forex and trading in general
Regulated brokers – How to find an ASIC or FCA regulated broker?
It is always better to open a trading account with a regulated broker. Nowadays on the internet, we can find many CFD brokers which are poorly regulated or even not regulated at all. This is how scams happen, which is why it is always better to spend a bit of time doing some researches to choose a reliable online broker.
The first thing you can check is the ASIC online broker register. This register allows you to see if an online broker is regulated in Australia. You just need to type the company's name in the search engine in order to check if its regulated or not. The ASIC (Australian Securities and Investments Commission) is the Australian financial market regulator. For example, the online forex broker Admiral Markets is regulated by the ASIC in Australia.
You can use the same procedure to check if a broker is regulated by another regulator such as the AMF (Autorité des Marchés Financiers in France) or the FCA (Financial Conduct Authority in England). Keep in mind that the best forex brokers can also be victims of non-regulated companies which steal their names. Be careful not to open an account with a broker that only appears to be reliable.
With the European passport, any financial company registered in one of the countries of the European Union has the right to offer its brokerage services in other countries without the need for additional approvals.
Many scam brokers claim to be based in Cyprus, which is a poorly reputed country in terms of CFD and forex trading. The easiest thing for a forex beginner is to choose a broker regulated in Australia.
When looking for an online forex broker, remember that a website which appears professional does not guarantee that the broker is reliable. Australia and England based brokers are serious if there is indeed a proper regulation behind them.
The security of your funds is also important. You should choose a forex broker with segregated bank accounts in Australia or Europe.
The advantage of an English broker is the FSCS (Financial Services Compensation Scheme), a system that guarantees the broker's clients' funds up to 50 000 GBP if the broker goes bankrupt. This is why English brokers are a good choice for placing orders in the stock market, just as ASIC regulated brokers are. Admiral Markets Pty Ltd is a company authorized and regulated by the Australian Securities and Investments Commission (ASIC), and Admiral Markets UK Ltd is a company authorized and regulated by the FCA (Financial Conduct Authority).
The spreads of your forex broker
Which broker has the best spreads? Many traders who want to invest online ask themselves this question. Finding the online broker with the lowest spreads is good, but beware of the different marketing techniques.
Most forex brokers make a profit from executing orders. They keep the spread or the fee when you enter and exit the market. On standard accounts, the broker takes the spread, which corresponds to the difference between the bid and the ask price (supply and demand).
Spreads and fees may vary a lot from an online forex broker to another. Brokers can provide fixed, variable, or no spread at all but they all make money out of an order.
A low spread announced on a broker's website does not necessarily mean that you will have this spread all the time, on all your orders. Moreover, some ECN (Electronic Communication Network) and STP (Straight Through Processing) accounts require you to pay a commission to the broker. The best broker must gather low spreads, low commissions (with particular accounts) and low swaps. Again, that's why looking at a forex spread comparative between brokers is not necessarily the best idea.
Another important factor in choosing a reliable broker is the quality of the order execution and the slippage. Indeed, having low spreads is good, but having orders executed at the required price is more desirable.
All our spreads are available on the Contract Specifications page of our website.
Here is an overview of the typical spreads that the regulated broker Admiral Markets offers:
Spread during typical trading hours
CFD DAX 30
CFD CAC 40
CDF DJIA 30
Source: Admiral Markets' Contract Specifications page
As you can see above, with the online forex broker Admiral Markets there is a 0.8 point spread on the DAX 30 and the CAC 40 indexes. The more a financial instrument is exchanged, the smaller its spread will be.
We can find many spread comparators on the internet. However, they are usually not updated, so the best remains to open a demo trading account with the broker you are interested in.
The different types of trading accounts
Each broker's trading account is different, from the financial instruments available to be traded to the leverage and trading margins required. This is why you need to select your trading account depending on the financial instruments you want to trade, and the platforms you want to use.
A good broker can offer you several types of trading accounts such as STP (Straight Through Processing), ECN (Electronic Communication Network) or accounts with reduced spreads for larger deposits. Don't hesitate to visit our Account types and Forex offers page
Most forex brokers provide leverages, like 50:1 or 200:1. Leverage is a loan from the broker to the client. To make it simple, if a trader wants to take a $ 1000 position when he only has $ 100, the leverage used will be 10:1. Leverage allows traders to increase their position size, as well as their risk.
Choosing the leverage yourself is very important if you are looking for the best broker to manage your positions properly.
The best online forex brokers usually offer a large choice of financial instruments for you to trade (this list is not exhaustive):
- -Forex CFDs
- -Index CFDs
- -Share CFDs
- -Crypto CFDs
- -Bond CFDs
It is always interesting to be able to invest in different markets at the same time. However, the most important for a trader is to find the financial instruments he wants to trade, in the best possible conditions.
The trading platform
Many people are looking for the best online forex trading platform or the best MetaTrader broker.
A reliable broker uses good, well known and safe trading platforms. These platforms have to be reliable, provide a fast order execution and not be subject to random gaps.
Many online brokers offer the MetaTrader 4 and MetaTrader 5 trading platforms as these are among the most widely used for forex & CFD trading. Many brokers also offer their own trading software, which also have their advantages and disadvantages. Feel free to test these platforms with a demo account to decide which one you are the most comfortable with and suits your needs.
Usually, traders who are wondering which forex broker to choose to trade online also wonder if the broker has a mobile platform available for iPhone or Android smartphones. Therefore, it is important to select a broker with whom you can trade from a mobile application, no matter where you are.
How to find the best forex and CFD broker – Trading strategies
If you are looking for the best forex broker in Australia, be aware that a good broker does not limit the trading styles of his or her clients.
Indeed, a forex broker allowing scalping (short term trading) does not have to impose a minimum distance between the execution price of an order and its stop loss or take profit as this parameter is very important for short term traders.
For day traders, brokerage fees are essential. For swing traders (long term traders), the choice of their forex broker is also made in relation to the swap fee. For share investors, the choice of their online broker will be made in relation to the custody fees and commissions paid, as well as the shares available.
Depending on your strategy, choosing a dealing desk or a no dealing desk broker can be more interesting. Make sure that your broker can provide you with the execution model that suits you the best.
Some traders have an arbitrage trading strategy; find out if your broker allows this type of trading, as not all online brokers do.
The service provided by a reliable online broker
A reliable forex broker should provide customer service in your language. Customer advisors are professional and do not give investment advice as it is not their role. You must be able to easily reach the forex broker by telephone or email to make an appointment if need be.
Good customer service is essential. It is important to know if your broker's customer service is available 24/7 or only during office hours. Usually, the customer service of the best brokers is available at all times in case you encounter any issues. Finally, it is important that phone calls to the customer service team are free for callers.
Free demonstration accounts
A free demo trading account is one of the most essential requirements that need to be provided by an online forex broker. Moreover, the best brokers always offer this kind of account. Demo accounts are funded with virtual money in order to allow novice traders to experiment trading in real market conditions. Trading with a demo account is the first step before investing real money through a live account.
Even though the online forex broker's demo account is funded with virtual money, it shows the novice trader the impact of his decisions on his trading capital. Market movements are the same as on live accounts, so it is an excellent way to practice before facing real trading situations.
Most online brokers also tend to provide video tutorials and guides in order for traders to familiarize with forex strategies and platforms.
Online trading training
A forex broker is not allowed to give investment advice but can provide training with a general character on the forex market.
For forex beginners, it is very important to understand the trader's specific vocabulary. This is why a broker with the right training tools is always better.
The best 2019 forex and CFD broker
If you are looking for the best forex broker in 2019, you will find multiple opinions on this subject on the internet.
If you're looking for a comparative of the best forex brokers, it is good to keep in mind that forums and other websites often get a financial counterpart for the review they provide. Therefore, if you want to trade the forex market through CDFs, the best way to compare brokers is to do it in person or to look on the ASIC website for regulated brokers.
When in doubt, the best is to contact the ASIC instead of relying on online comparators. Many of these websites are IB for not reliable brokers.
The different types of forex brokers
Several types of forex brokers can be distinguished according to different criteria. If you are wondering which broker is the best or which broker to choose, you must know the differences between brokers. There are two types of online forex brokers: dealing desk brokers (DD), also known as "market makers" and no dealing desk brokers (NDD).
- "Dealing Desk" online forex brokers
"Dealing desk" forex brokers offer artificial quotes; they make their own market. They are also called "market makers" because these brokers usually take the opposite side of traders' trades when they don't find a matching long or short order from another client. This means that they don't hedge your positions on the forex market; they just fill both buy and sell orders as a counterparty.
- "No Dealing Desk" online forex brokers
No dealing desk brokers act as a bridge between clients and liquidity providers. They route clients orders directly to liquidity providers and to the inter-bank market without any market re-quote. "No dealing desk" forex brokers only get paid through the spread. This is the most transparent solution for a trader who's looking to trade on the foreign exchange market.
Depending on their clients, forex brokers can be for:
- Professionals clients
- Non-professionals clients
Depending on the trading platforms provided, we can have:
- MT4 forex brokers
- Brokers with a proprietary platform
- Broker with other platforms
Choosing the best online forex broker – Conclusion
As you may know, the daily exchanged volume on the foreign exchange market is huge, making it one of the world biggest financial markets. In order to invest your capital in this market, you must pass through an online broker.
Which broker is the best to invest in the markets? There are lots of growing trading scams on the internet, and that is why it is important to choose well your broker and trading platform. It is not an easy thing.
If you are looking for an online Australian forex broker, the best is to find one that is under the regulation of the ASIC. For your information, Admiral Markets is a reliable and ASIC regulated broker. Get to know more.
The growing number of online forex broker allows anyone who has a computer and an internet connection to start trading the forex market. The platform's choice will also impact your trading success.
As we have seen in this article, many criteria need to be reviewed in order to find the best online forex broker to suit you. Transaction safety, trading fees, and customer services are part of the criteria to analyze before making a choice.
About Admiral Markets
As a regulated broker, we provide access to some of the most widely used trading platforms in the world. With us, you can trade CFDs, shares, and ETFs.