How to Compare Forex Brokers?

You already know what Forex is all about and how to trade with financial markets. Now is the time to step in the real market. But wait! Have you appointed a broker yet? Well this is the last lesson to learn before making your entry in the big arena. Just like every other industry, the Forex trading market in bursting with brokers and intermediaries. Selecting one from the huge crowd of brokers is not an easy task. But don’t worry, we have simplified this last step of research for you.

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Factors for Comparison

Start by making a list of all the brokers in the Forex market and shortlist a few brokers from it. Here are the four main features that you should consider while trimming down your list of brokers.

Web Based Platform

Gone are the days of physical trade agreements or advanced trading software. Make sure the brokers that you are short listing provide 100% web based trading platform that is accessible everywhere. Well, this won’t help much as majority of the Forex brokers these days are already providing web based trading facilities. However very few of them are flexible with different operating systems and electronic gadgets. Look for the ones that operate on both Mac and windows. Moreover, trading mobile apps and accessibility of trading accounts on Smartphones, tablets, notebooks and PCs are things that are offered by a select few in the industry. This feature is useful especially for those people who are not full time traders and invest in Forex for additional income. They need a trading system that can be accessed on their office computer or cell phone.

Return on Capital

Return on investment or payout range can be found on the homepage of every Forex trader’s website. We would recommend you to look for ones that assure a minimum of 70% return on your principle amount. Here you need to be careful about one thing. Mostly websites post highly attractive minimum payoffs on the main page with a hidden stipulation of it being associated with binary options. Watch out for such marketing tricks. Make sure the stated percentage is on the basis of conventional and simple trading, as hedging tools lead to high returns when incorporated in the payoff formula.

Return on Loss

Now this would certainly cut off a large number of names from your list of Forex brokers. Look for the brokers that offer payback on ‘Out of Money’ trades. This statistic mostly lies in between 5-15%. This number represents the percentage of loss that you will be able to recover in case of loss caused by wrong predictions or unexpected market events. Higher the payoff on ‘Out of Money’ trades, lesser the risk and more you will be able to recoup your capital amount.

Exposure in Forex Markets

Look for brokers that offer trade in maximum number of currencies. This will give you exposure to worldwide Forex markets. Moreover, investing in inversely correlation currency pairs will minimize the risk of loss as the profit caused by one will offset the loss by the other. But then how will you earn profit if all the currency pairs will offset one another. This depends upon your judgment and calculation of correlation coefficient. Let’s not get into such technical details as this would further confuse you. For now, just look for brokers that have a diverse Forex trading portfolio. Your appointed broker or analyst will help you in making the right trading combinations.

Keep crossing names on the basis of the abovementioned characteristics till you are left with 5 Forex brokers on the list. Now you are done with the lengthy and complicated part, the rest is easy. Here is a sample template for you to further evaluate the shortlisted brokers and narrow down the remaining list to the best broker.

About the Company

  • Year of Establishment
  • Number of clients
  • Presence in Countries
  • Exposure in Financial Markets
  • Forex Trade Volume

Trading Basics

  • Payoff
  • Trade Leverage
  • Welcome Bonus
  • Minimum Deposit
  • Maximum Investment
  • Commission/Spread
  • Spread charged on bank transfer
  • Deposit options
  • Withdrawal options

Customer Support

  • Modes of Communication
  • Languages
  • Demo Account
  • Live news feed
  • Online Trainings
  • Customer service hours

Fill in the cells with Yes/No or the appropriate statistic. By the time you fill in the entire table, you will have the best Forex broker as per your risk and return preferences. Just remember, the success of your trade largely depends on your selection of broker. So be very thorough and careful while making that decision.

Other great resources on how to compare Forex brokers: Investopedia and MyFXBook.