One of the hardest decisions you face when starting out as a forex trader is which forex broker to go with. If you do a search online you will find hundreds of different forex brokers to choose from. The trouble is that some are better than others, and furthermore there are some that you should avoid like the plague.

So let me give you a list of things you should look out for when choosing a forex broker:

1. Regulation

This is arguably the most important factor because whichever broker you decide to go with, you must make sure that they are fully regulated with the relevant authority. So if they are based in the US, for example, then you should ensure that they are regulated by the NFA (National Futures Association) or the CFTC (Commodity Futures Trading Commission). Similarly if they are a UK-based company, then they should be regulated by the FSA (Financial Services Authority).

If you go with an offshore forex broker that is completely unregulated, for example, then you are taking a huge risk because you may never see your money again.

2. Spreads

If you are a relatively long-term trader and mainly use the 4 hour or daily charts, for instance, then the spreads offered by your chosen forex broker is not so much of an issue. However if you intend to trade the shorter time frames then your points gains per trade will obviously be a lot less, and therefore the spreads will start to eat into your profits. So as a general guide you ideally want to choose a broker that offers spreads of around 2 or 3 pips for the EUR/USD and GBP/USD pairs, and certainly no more than 4.

3. Leverage

The amount of leverage offered by different forex brokers varies greatly. Some may only offer 100:1 leverage while some may offer as much as 400:1. My own personal view is that 100:1 is more than enough, but if you are more of a risk taker then you may want to look for brokers that offer higher leverage.

4. Demo Accounts

If you are relatively inexperienced or if you want to test out a broker's trading platform before deciding whether or not you wish to open a live trading account, then you should choose a broker that provides a free demo account. Most reputable brokers offer demo accounts nowadays so I would always recommend you take advantage of this facility.

5. Account Types

Although all forex brokers cater for the well capitalized traders, not all of them cater for those traders who wish to trade smaller positions. Therefore if you yourself fall into this category, then you should look out for brokers that allow you to trade mini-lots (equivalent to around $1 per pip) or micro-lots ($0.1 per pip).

6. Minimum Deposit

If money is tight or you want to start off small (which is always a good idea), then you will want to choose a forex broker that requires a relatively low minimum deposit when opening a live trading account.

7. Charting Software

Nearly all forex brokers provide some kind of charting software free of charge when you open an account with them. It may be the highly popular Metatrader 4 platform or it may simply be a no-frills charting package. So therefore if you do want to use some of the more advanced charts, then I suggest you go with a broker that provides the Metatrader 4 or ProRealTime platform, for instance, otherwise you will have to fork out some money to access some decent charts elsewhere.

8. Additional Services

As well as charting software, you may also want your broker to provide a range of additional services such as daily commentaries, market analysis, educational materials and the option to deal through your mobile phone.

9. Customer Service

If you are just starting out as a forex trader you will probably have several questions and queries when you first open an account with a broker. So therefore you should try and join a broker that offers a high level of customer service. One way of testing this out is to contact the help desk of the brokers you are considering joining, ask them a particular question, and see how long they take to get back to you.

10. Customer Comments And Reviews

Finally your ultimate choice of forex broker will often be swayed by what other traders have to say about them. There are several websites which contain customer reviews of all of the leading brokers and you will find no shortage of opinions on all of the different forex forums.

However one thing I will say is that you will never come across brokers that have nothing but positive reviews, so don't waste too much time looking for the perfect broker because it simply doesn't exist. Just look for brokers that have a high number of positive comments and you should be fine.


* * * * * * *

To help you narrow down your search, here's a list of some of the leading online forex brokers:

Alpari

Location: Russia / UK / US
Online Since: 1998
Account Types: Micro / Classic
Minimum Account Size: $200
Free Demo Account: Yes (unlimited)
Spreads: 1.8+
Charts / Trading Platform: MetaTrader 4

(Note: Alpari has three different websites (UK, US and Russia) so account features may vary).

CMS Forex

Location: US
Online Since: 1999
Account Types: Universal (trade mini and standard lots from same account)
Minimum Account Size: $200
Free Demo Account: Yes
Spreads: 2 pips for EUR/USD and USD/JPY pairs
Charts / Trading Platform: VT Trader 2.0

dbFX

Location: Germany
Online Since: 2006
Account Types: Standard
Minimum Account Size: $5000
Free Demo Account: Yes
Spreads: 2-4 pips for major currency pairs
Charts / Trading Platform: dbFX Trading Platform

Dukascopy

Location: Switzerland
Online Since: 2004
Account Types: Live / Managed
Minimum Account Size: $50,000
Free Demo Account: Yes (14 days)
Spreads: 0-2 pips for major currency pairs
Charts / Trading Platform: Java / JForex / Web

Forex.com (part of GAIN Capital)

Location: US
Online Since: 1998
Account Types: Mini / Standard
Minimum Account Size: $250
Free Demo Account: Yes (30 days)
Spreads: 1.1+ for major currency pairs
Charts / Trading Platform: MetaTrader 4

FXCM

Location: US
Online Since: 1999
Account Types: Mini / Standard
Minimum Account Size: $2000
Free Demo Account: Yes
Spreads: Typical spreads between 2 and 4 pips for major currency pairs
Charts / Trading Platform: MetaTrader 4

(Note: Separate Micro account also available).

FXDD

Location: US
Online Since: 2002
Account Types: Mini / Standard
Minimum Account Size: $250
Free Demo Account: Yes (90 days)
Spreads: 2 pips for EUR/USD pair
Charts / Trading Platform: MetaTrader 4 / MTXtreme / FXDD Trader / FXDD Auto / Power Trader

FXPro

Location: Cyprus
Online Since: 2008
Account Types: Standard / Premium
Minimum Account Size: $500
Free Demo Account: Yes (unlimited)
Spreads: 0.5+ for major currency pairs
Charts / Trading Platform: MetaTrader 4

GFT Forex

Location: US / Worldwide
Online Since: 2001
Account Types: Mini / Standard / Silver / Gold / Platinum
Minimum Account Size: $250
Free Demo Account: Yes
Spreads: 3-4 pips for major currency pairs
Charts / Trading Platform: DealBook 360

Interactive Brokers

Location: US
Online Since: 1998
Account Types: Universal
Minimum Account Size: $3000+ (depending on the type of account)
Free Demo Account: No
Spreads: 1 pip for EUR/USD pair
Charts / Trading Platform: Trader Workstation

Interbank FX

Location: US
Online Since: 2001
Account Types: Mini / Standard
Minimum Account Size: No minimum
Free Demo Account: Yes (30 days)
Spreads: 2 pips for EUR/USD pair
Charts / Trading Platform: MetaTrader 4

MB Trading

Location: US
Online Since: 2002
Account Types: Standard
Minimum Account Size: $400
Free Demo Account: Yes
Spreads: 0.1-1 pip for major currency pairs
Charts / Trading Platform: MetaTrader 4

MIG Investments

Location: Switzerland
Online Since: 2003
Account Types: Standard / Professional / Institutional
Minimum Account Size: $5000
Free Demo Account: Yes (90 days)
Spreads: 2-3 pips for major currency pairs (less with institutional account)
Charts / Trading Platform: MetaTrader 4

Oanda

Location: Canada
Online Since: 2001
Account Types: Standard
Minimum Account Size: No minimum
Free Demo Account: Yes (unlimited)
Spreads: 0.9 for EUR/USD pair
Charts / Trading Platform: FXTrade platform

ODL Securities

Location: UK
Online Since: 2004
Account Types: Standard (can trade from $1 per point upwards)
Minimum Account Size: $2000
Free Demo Account: Yes
Spreads: 2-3 pips for major currency pairs
Charts / Trading Platform: MetaTrader 4 (and other platforms for professional traders)

Saxo Bank

Location: Denmark
Online Since: 1999
Account Types: Saxo MiniTrader / Saxo Trader
Minimum Account Size: $2000
Free Demo Account: Yes (20 days)
Spreads: 2-3 pips for major currency pairs
Charts / Trading Platform: SaxoTrader