Finding the Best Forex and CFD Broker

Finding the “best” FX and CFD broker is a highly personal experience, as it often is a matter of individual preferences. Most traders would first look into the instruments offered, the trading conditions, the platform(s), etc. Below, we have provided a more detailed look into a broad range of factors. Some of them might be more relevant to you than to others, but still they are all worth at least your consideration.

Transaction Costs

Everything that affects your result falls into this category. These costs include, but are not necessarily limited to, the following:

  • Spreads – the difference between the buy and the sell price is something that directly reduces your profit (or loss) per trade. The wider the spread, the greater the amount a broker “charges” you to execute your order. Bear in mind that high-frequency trading entails much higher transaction costs. With bigger spreads, the latter can ratchet up quickly and result in an overall loss for your entire strategy.
  • Overnight Swap/Interest – when dealing with leveraged FX and CFD products, your account gets debited or credited with a specified amount every time you decide to keep your position open overnight. For forex pairs this is called swap; when it comes to indices, stocks and commodities, the term is interest.  As part of the trading terms, how much you get charged overnight is something that each company decides for itself. You want to have a really good look at this before you make the final decision to open an account with an online broker.
  • Commissions – trading in some instruments is associated with specific commissions. Most commonly, you get charges of this type when trading stocks. However, since it is an individual decision of the company, you can incur a fee for virtually every instrument you choose to speculate with, including currency pairs.

Other Trading Conditions

There are more aspects of the terms a company offers that will directly or indirectly affect you as a client. The most important ones are:

  • List of Tradable Assets – one of the first things you want to check is whether an online broker could provide you with the instruments that interest you. If you are into trading majors or the most liquid US indices and shares, then most companies would easily meet your demands. If you want to speculate with penny shares, exotic FX pairs and underground cryptocurrencies, then not many brokers will be a good pick for you.
  • Margin Requirements (Leverage) – the leverage a trading company allows for the different asset classes is something that varies greatly in the industry. In a predominant percent of the cases major forex pairs and the most liquid indices of leading countries are traded with comparatively low margin requirements; and vice versa, more illiquid instruments like small-cap stocks, cryptocurrencies and agricultural commodities go with higher margins. This directly affects your free funds available for trading, so you would better check the leverage that your online broker could give you before you decide to become a client.
  • Speed of Execution – the time it takes for your order to be filled is of great importance too. Some brokers resort to a practise known as “slippage”, which in short means delaying the execution of your trade. The latter often results in the order to be filled on a price different from the one requested from you (the one you saw when you clicked on the buy/sell button). Companies with slow execution, no matter the reason, cannot be a good online trading partner for you.
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Trading Platform

There is no universal platform, which can be dubbed number one in the entire forex and CFD industry. The software should rather suit you and your trading style. Whether you prefer a more simplified interface, or a more professional platform with rich functionality, analytical tools and built-in widgets – your choice will be strictly individual.

Desktop platforms usually integrate multiple features and tools, which sometimes makes them a bit clumsy and lacking in flexibility. Their use has been on the fall for quite some time in favor of web and mobile platforms. So, if trading on the move is your thing, make sure that your brand offers a mobile app, compatible with your device’s operation system (iOS, Android or Windows).

No matter what your level of experience is, you have surely heard about the MT4 and MT5, the most well-known retail trading platforms in the industry. Used by millions of traders around the world, the MetaTrader is light and easy to use, yet integrating sophisticated tools for market monitoring and analysis. MetaQuotes, the owners of the software, have developed a desktop, a web and a mobile application, which makes the MT4 and the MT5 a top choice for retail investors and speculators alike.

Regulation

Whether you want to use the services of a regulated broker or not, is a choice that you need to make for yourself. Companies not strictly monitored by a regulator, could potentially give you more flexibility than those that fall under closer scrutiny of a dedicated institution. The latter would usually require from you more paperwork before verifying and opening your account, they would be tighter when it comes to some aspects of the business, like margin requirements, for example. What matters at the end of the day, however, is what business logic a broker is following and what its long-term goals are. You want to find yourself a customer-friendly company, which will be your reliable partner in the world of financial markets trading.

Payment Methods and Security of Your Funds

The more methods you have readily available to deposit and withdraw, the easier it will be for you to send or receive money via the method(s) you prefer in general. The absolute minimum of options a forex company should offer are: credit/debit card and bank wire, both in EUR and USD. Paypal, Skrill, Neteller, and Revolut are payment methods being adopted by a growing number of brokers. Some brands accept deposits in Bitcoin and other cryptocurrencies, which is an intriguing alternative for those of you who are into cryptocurrency trading.

The security of your money should be a top priority for you when choosing a firm to open an account with. For this reason, you should always check whether the entity is following the regulatory demands to segregate company and client funds. Our team’s advice is to stick to companies in the jurisdiction of European regulators. Only in this way you can be sure that your money is safe.

Your questions answered by the Finance Academy team - trading strategies, market analyses, risk and money management. No question is too simple to ask!
April 3, 2020