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If you are researching for the best Forex broker for beginners, you must have a lot of questions on your mind.
First of all, it’s very important to choose the right Forex broker because you don’t want to end up losing all your money by trading with a shady Forex broker.
So, how do you tell if a Forex broker is legit or not?
And what should you look for in a good Forex broker?
Lastly, which Forex broker is the most suitable one for you?
In this detailed Best Forex Broker review, you will find everything you need to help you make an informed decision.
How To Choose The Best Forex Broker
To tell whether a Forex broker is legitimate or not, you have to check the following:
Question #1: Is this broker regulated by a financial regulatory authority?
Whenever you want to open a Forex trading account, you should always go with a broker that is registered and regulated by a financial regulatory authority.
Being regulated by a financial regulatory authority means that it is legally required to follow all the rules (e.g. reporting, capital, risk management, etc) set by the authority and are subject to periodic audits and reviews by the relevant authority.
If they break any rules, their brokerage license could be revoked.
Most Forex brokers have a global presence.
What that means is that they operate in quite a number of different countries.
Each country will have its own financial regulations and rules for them to follow.
Below are the top countries where Forex Brokers operate their business in:
- UK (Financial Conduct Authority of UK)
- Australia (Australian Securities and Investments Commission)
- Singapore (Monetary Authority of Singapore)
So, you must always check if your broker is regulated by the financial regulatory authority of the country.
Question #2: How long has this broker been in business?
Next, you should check how long this broker has been in the brokerage business.
The conventional wisdom is that the longer it has been in business, the better it is.
But this is not to say that new Forex brokers are all not good or legit.
Personally, I still prefer to choose a Forex broker that has been around for years if not decades.
If they can stay in the business for so long, it just goes to show that they are good at what they do.
Question #3: Are all clients’ funds held in segregated client bank accounts for maximum protection in case of broker’s bankruptcy or insolvency?
When you open a Forex trading account, you will need to deposit funds to start trading.
So, how do you make sure your funds are safe and won’t be misused by your broker?
You do this by asking your broker whether or not clients’ funds are held in a segregated client bank account.
As a general rule, you should only choose brokers that put clients’ funds in a segregated client bank account because this is to ensure your money is safe in case of broker’s bankruptcy or insolvency.
Question #4: What are its customer reviews on independent third-party review sites?
Lastly, what did all its customers say about its product and service?
Are the majority of its customer reviews positive?
Be sure to check the most recent reviews in case the quality of the broker’s product and service has gone down over the years.
Some of the most popular third-party review sites are ForexPeacearmy.
Next, how do you tell if a Forex broker is good?
Here are the things to consider when you are trying to determine if a Forex broker is good or not:
- Does the broker offer Forex CFD or Forex Direct Market Access or both? ( Forex CFD means that you are trading against your broker if your broker does not hedge your orders in the physical market. And Forex DMA means that your orders go directly to the market without any middleman.)
- Is the trading platform easy to use and secure?
- Does it offer a wide range of currency pairs for you to choose from?
- Is the bid and ask spread tight?
- Does it provide fast and reliable order execution?
- How easy and fast is it to deposit and withdraw money from the broker? Are there any extra charges for deposit and withdrawal?
- How is its customer service?
Warning: “80.5% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.”
Best Forex Brokers For Beginners
eToro has been around for more than a decade with 314,018,827 trades opened on eToro.
It is the world’s leading social trading platform and allows you to trade not just Forex but also other instruments such as stocks, commodities, ETFs, and cryptocurrencies.
Its trading platform is very intuitive and easy to use.
One of the most distinctive features of its trading platform is called CopyTrader which allows you to view what real successful traders are doing in real time and copy their trading automatically.
If you’re a beginner learning the basics or you simply don’t have time to watch the markets, you can use CopyTrader to leverage other traders’ expertise.
Recently, it launched a brand new long-term thematic investment product called CopyPortfolios, which are ready-made, investment strategies, offering thematic investment, such as medical cannabis, driverless cars, and people-based portfolios.
These are two powerful features that are great for beginner traders who want to copy other successful traders’ trades in real-time.
Its trading platform is available via a mobile app (both IOS & Andriod).
What that means is that you can trade on the go anywhere from your smartphone.
Now, is it free to open an eToro account?
Yes, it’s completely free.
In fact, eToro does not charge any commission.
There are also no management or ticketing fees.
So what fees does it charge?
eToro only charges spread when you trade with them.
But, the spread on eToro is comparatively larger than other Forex Brokers such as IG and CMC Markets.
For example, for one of the most traded currency pairs EUR/USD, you will find that the average spread on IG is about 0.9 pips while the spread on eToro could be as high as 3 pips.
Also, if you are trading Forex CFD, there is also an overnight fee which is essentially an interest payment to cover the cost of the leverage that you use overnight. (note: all CFD brokers charge overnight fees)
What about deposit and withdrawal?
It’s free to deposit funds.
The minimum first-time deposit is $50.
When you withdraw, there is a fixed low fee of $5 which is to cover some of the expenses involved in international money transfers.
Also, if there is no login activity after 12 months, a $10 monthly inactivity fee will be charged on any remaining available balance.
Who is eToro right for?
eToro is suitable for Forex traders who want to copy successful trader’s trades in real time because that’s what is most unique about eToro.
If you just want to trade Forex by yourself, I think there are other Forex brokers with tighter spread and lower fees.
Try out eToro for free
Established in 1974, IG has been in the brokerage business for more than 45 years, serving more than 178,000 clients worldwide.
It is listed on the London Stock Exchange and has offices in 17 countries including the US, Singapore, Australia, and London.
It’s registered and regulated by the financial regulatory authority in every country it operates its business it:
- Commodity Futures Trading Commission (CFTC) in the US
- MAS in Singapore
- Financial Conduct Authority of the UK
- Australian Securities and Investments Commission
When you open your trading account with IG, you can be assured that your money is held in segregated accounts at regulated banks and it’s protected and safe.
Now, what about its trading platform?
IG’s award-winning trading platform and mobile apps allow you to trade seamlessly from wherever you are.
One of the unique features of its trading platform is Guaranteed Stops.
It helps you mitigate risk and manage your positions with a stop loss that is guaranteed to be executed.
This feature will be very useful if the market gets very volatile.
Also, with IG, you have flexible access to more than 17,000 global markets, with reliable and fast execution.
For Forex trading, you have two options to choose from.
The first one is to trade Forex market direct access.
What that means is that you trade on the physical market, without the need for a middleman.
With Forex DMA, you get better pricing, higher liquidity, faster execution, and more control over your own trades.
The other option is to trade Forex CFD.
It stands for contract for difference.
When you trade Forex CFD, you are trading against your brokers.
If your Forex broker does not hedge your order in the physical forex market, then that means your broker will profit from your loss and your profit will your broker’s loss.
In other words, your brokers are betting against you.
Why are so many Forex brokers offer Forex CFD products?
The reason is simple
The majority of traders lose money.
Having said that, that is not to say that you should never trade CFD.
There are obvious advantages of trading CFD such as high leverage, low cost and go long and short.
If you choose to trade Forex CFD, you have to be aware of the risks that are associated with it.
Now, what about its fees and charges?
IG charges zero commission on Forex CFD.
That means you only pay the buy and sell spread.
Is IG’s spread competitive?
Yes, IG offers one of the most competitive Forex spreads.
Below is the spread table for the major currency pairs.
You can see that DMA spread is the smallest while CFD spread is wider.
Although DMA spread is tighter, you will need to pay a commission if you trade Forex Market Direct Access.
Forex Market Direct Access is more suitable for professional Forex traders who trade very large volume every month.
There are also other fees that IG is very transparent about:
- A rolling monthly inactivity fee of $20 if your account is inactive for a period of 24 consecutive months
- Fees for live price data feeds
- A monthly exchange fee if you are trading Forex DMA
Now, what about fund deposit and withdrawal?
IG has no minimum deposit for bank transfers but has a $300 minimum deposit for credit/debit cards and PayPal.
It also has no withdrawal fee.
Lastly, how is IG’s customer service?
IG offers 24/7 live chat support to all its clients.
You can also call its office if you need any urgent client support.
So, who is IG right for?
IG is most suitable for both beginner and advanced Forex traders because of its competitive spread and its wide range of product offering.