Forex, or foreign exchange trading, has been one of the fastest growing financial markets of recent years. In 2025 around $7 billion a day is traded on the markets, according to some estimates. However, it is a complicated system that can take many years to master and there's a lot of risk. So most individuals choose to go through a broker, who can handle varying aspects of the operation for them. But how can you tell a good broker, and what do you need to look out for?
This article will discuss the key points to making such a decision, from safety and regulatory concerns to commissions, fees, clarity and education, to technology and tools. All so you can jump in secure in the knowledge your money will be on an above board and safe platform with the best toolsets available to hopefully execute trades that make you money.
Regulation and Safety Is Important to Know What You're Getting Into
Regulation is the foundation of trust in the financial services business, and forex trading is no different. Some international financial regulators of note include:
- The Financial Conduct Authority (UK)
- The Commodities and Futures Trading Commission (USA)
- Securities and Investments Commission (Australia)
- The Securities and Markets Authority (Europe)
A top forex broker will be licensed by an internationally respected regulator, as well as hosting various options for trading and education on how to use them. A great broker knows that when individual traders succeed they do to, so they'll provide you with all the tools you need to make good trades as well as incentives and customisation options.
One of the main things that regulators ensure is coverage in case of bad trades. Even Forex brokers are not immune from unexpected market moves, and compartmentalised funds ensure that individual investors' monies are not wrapped up in the overall finances of the broker in case of disaster.
Some regulators, such as the UK's FCA offer protection for individual traders of up to $50,000 or more (depending on circumstances) in the event of a crash or liquidity issues at a broker. Make sure to check your chosen broker is licensed with a globally respected regulator before you deposit and start trading, to ensure you're covered.
Know Your Trading Costs, Commissions and Fees - A Quick Guide
Obviously, forex brokers don't offer the service purely out of altruism and charity. They expect to make some kind of profit from traders who sign up to their services. There are several ways they can do this:
- Commission on each trade
- Flat monthly fees
- Withdrawal fees after successful trades
- Spread fees, based on the difference in price between pairs of currency when setting up a trade
Some fees (especially commissions and spread fees) are measured in pips, which can be quite complex to understand if you're not an experienced trader. A pip is the smallest unit of movement possible between a currency pair on a particular trade - usually one ten thousandth of a unit of currency.
Understanding the different types of fees and costs is vital to avoid surprises later on. Margins can be tight on forex trading - even for successful traders - so making sure costs are factored in correctly can make the difference between a profit or a loss.
Withdrawals should also be quick and easy. When you want to take your money out, as long as you've registered with all your correct details, a top broker will have your funds sent over within 24 to 48 hours maximum.
Customer Support, Guidance and Educational Tools are Also Essential
On that note, it is important to look for a broker that has educational materials available to help you understand these things. As mentioned previously, when individual traders succeed so do brokers.
This means it is in the best interest of a broker to educate individual traders on how the market works. If there's no information available, and you don't understand what you're getting into, it's best to stay away until you're more familiar with what you're doing.
Some brokers know this and will offer free training or testing environments, where you can trade with virtual play money before jumping in with the real thing. According to research, these kinds of educational tools at a broker can help 10% to 20% more traders turn a profit when starting out. Considering most new traders do not turn a profit, this kind of advice can be invaluable.
Another point to note here is that most regulators require brokers to publish outcomes of their registered traders. If you see 80% + of traders at a site are losing money, it could be that the broker isn't offering enough support and information to help traders understand what they're doing. Or the fees are too high.
Customer support is also important. When you need clarification on fees, or anything else, having quick response times to chat support requests is a good indicator of a solid broker. Support should also be available in multiple languages - as forex is, by definition, an international business.
At the end of the day though - a broker doesn't make the trades for you. The platform could do everything right to set you up, but if you're not willing to put the work and the study in then you could still lose out. On the other hand, a great broker is an educator, a platform and a tech provider all in one.