Choosing Your Forex Broker in the UK
Choosing the best forex broker can be a challenging endeavour, especially with the myriad of great choices from around the world. An important first step is to do your research thoroughly and carefully. The last thing that you want to happen is to trade with a company that doesn’t understand your needs. At the end of the day, this is your hard-earned money, and you need to be able to choose based on your preferences and personal requirements. Here are some important questions to ask yourself when comparing forex brokers:
Is It Trustworthy?
Trustworthiness and reliability are two important factors that you should look for in a forex provider. Trading currencies with a broker that you trust is crucial for success in the international currency market. Your broker’s goal should be to help you gain profits and not incur losses. Check online reviews on sites like TrustPilot or visit forex forums to see what other trader friends have to say about the broker. If they’re satisfied, then there’s a good chance that you’ll be, too. Even though, the list above contains only trusted and reputable brokers, you should do your own homework.
Is It Regulated by a Competent and Recognised Authority?
It is important for a forex brokerage firm to be licensed, regulated and to follow monetary regulations laid out by prominent financial authorities. This is for your protection, If the company is authorised and regulated, then you are assured that your funds are secure. To find a broker that is licensed, they need to comply with governing bodies. When you compare forex brokers, check if they are regulated by checking their licence number on their website. In this case your forex broker (and eventually, your trading account) should be authorised and regulated by the UK Financial Conduct Authority (FCA).
What Are Their Policies?
The best forex brokers adhere to several strict policies. The stricter the policies, the more secure and pleasant your trading experience will be. Brokers should post their initial deposit requirements, account security measures (your funds will be held in a segregated bank account to protect your deposits), account levels, and ways to deposit and withdraw money. All this information should be clearly laid out. If a prospective client is unsure of a specific policy or has questions, the FX broker should be able to provide a way to contact them and have their queries answered.
What Are the Trading Costs? Spreads? Fees on Deposits?
Forex brokers might charge the following fees (not necessarily all of them): commission, spreads, and interest rate swap. Additional costs include overnight financing charges, account fees, and fees for deposits and withdrawals. Overnight financing charges can either be a refund (net credit) or a loss (net debit). Forex brokerage firms usually have two fee models for traders: the commission model and the spread model. The commission fee is a fixed amount, and it largely depends on the trading volume. In this model, traders don’t need to pay an additional spread other than the commission. The spread is the difference between the buy and sell price of currencies. In the spread model, the broker earns money through an additional spread. Depending on trading supply and demand, the spread can widen or narrow. Depending on how often you plan to trade, those fees and spreads might add up to a considerable sum of money; here, you must apply your trading plan to figure out which forex trading account is best for you.
What fees you should expect from a reputable forex broker:
- Tight spreads, competitive commission
- $0 inactivity or account fees
- $0 deposit and withdrawal fees
- Overnight funding fee of (2.5% +/- LIBOR)
Types of Orders. What Are Its Different Trade Entry Types?
When you examine the trade execution screen of a trading platform (this can be accessed if you open a demo account or have a live account with another provider), you will see different trade entry types and stop orders. These are all safety provisions for the trader, designed to protect and help the trader. The forex broker should have a Limit Order, Market Order, Stop Order, Stop-Limit Order, Guaranteed Stop-Loss Order, and a Close All order.
Forex Trading Platforms
Gone are those times when an FX brokerage was someone that you dealt with over the phone. The advent of the internet has changed all that. Now, traders can use forex trading platforms downloaded on their phones or laptops or directly done on web browsers from their computers. With a number of forex platforms on the markets on top of the proprietary ones, you’re here for a treat. At this point, you should know which trading platform is best for you and you feel comfortable with.
Additional Features and Analyses
As it was mentioned before, forex market is super competitive with hundreds of brokers vying for new business with new marketing tricks and promotions. Since deposit bonuses were banned by the regulators, brokerages had to adapt and come up with new ideas. Depending on your trading style and strategies you should opt for a broker which offers you the necessary tools for free; for example, if you’re not sure how to trade you might want to decide to follow more experienced traders through copy trading or use free forex signals to save time on research. The possibilities are endless now. Comparison table above shows which extra features are offered by each broker.
Choosing the Right Trading Platform in the UK
Wherever you are, there are forex brokers that you can trade with. Brokers have various trading platforms that offer a range of financial offerings, trading education, research, customised features, and technical indicators. The best forex platforms allow investors to have a smooth trading experience. They also offer their clients more trading tools that are specifically designed to understand volatile currencies.
When you find a forex broker, you must make informed decisions about how and to trade and invest using their system. You can use your desktop or laptop, tablet, or even your mobile phone for more accessibility. Here’s what you should look out for:
It Should Have a User-friendly Interface
Forex traders should be able to have a great trading experience. With just one look at the platform, traders should know what to click and where to go. Luckily, nowadays, the software is beginner-friendly, intuitive, and easy-to-use.
It Should Provide Basic Functionalities and Additional Features
Forex traders of varying levels use the platform, so it should be flexible enough to accommodate beginners. It should be simple enough for novice traders to understand, with intuitive functions that understand how traders navigate through a site or a mobile app. However, it should also be customizable and should have options for more sophisticated features that cater to veteran traders.
Adequate Support Should Be Provided
Online forex brokers usually provide a helpline for clients who have queries and who need assistance in various areas. A lot of them provide a live online chat feature with an actual broker to advice clients while they’re trading. Most brokers also provide email support, FAQs, and online community forums so that traders can discuss their trades with others.
It Should Provide Trading Education and Research
Some of the best forex brokers in the world offer educational and training opportunities for traders. These usually come in the form of FAQs, training videos, and extensive informational articles. Forex brokers usually offer novice traders a chance to practice by offering demo accounts. It allows prospective clients to trade forex pairs using play money. This is an invaluable resource that allows the trader to examine the quality of the broker’s bid/ask pricing. Forex brokers should also provide economic analysis and comprehensive market research which helps traders watch out for short-term profit opportunities.
Forex Trading in the UK
To trade in the foreign exchange market, you need a forex broker. A forex broker, by its simplest definition, quotes current forex rates and execute customers’ trades and orders through their trading platform and will charge the spread or commission for the service.
When trading currencies, they come in pairs. The base currency is on top, and the quote currency is at the bottom. For instance, EUR/CAD or USD/GBP are translated as the euro versus the Canadian dollar and the US dollar versus the pound sterling, respectively. There is also a price associated with each pair. For example, if for EUR/CAD the price is 1.5, that means it costs 1.5 Canadian dollars to buy 1 euro. If it changes to 1.6, then the euro has increased in value and the Canadian dollar has decreased.
Traders usually take a position in a specific currency pair, speculating that there will be an upward movement in the currency that they are purchasing and conversely, a weakness in the currency that they are selling. If this happens, then they will make a profit. Although you can trade in many different currency pairs, the four major pairs that are most popular are the U.S. dollar and the Swiss franc, the U.S. Dollar and the Japanese Yen, the euro and the U.S. dollar and the British pound sterling and the U.S. dollar.
Why Forex Trading?
As mentioned earlier, one of the main benefits of forex trading is its global market with around-the-clock trading. Since it happens all over the world, people can trade 24/5, at all hours of the day, five days a week. Currencies are traded worldwide in major financial hubs: New York, Hong Kong, London, Sydney, Tokyo, Singapore, Zurich, etc. There is always a transaction taking place somewhere in the world, and this is a very liquid market. The implication of this is that the trader has a lot of opportunities. Here are other reasons why you should try forex trading:
- You can jump right into forex trading with the help of a forex broker without much capital. Forex trading has a lower trading cost compared to options and stocks.
- The forex market is quite extensive. Some forex brokers allow clients to trade over 100 currency pairs.
- You can choose to automate your trades based on certain buy and sell conditions.
- You can trade on a level playing field because no single company controls the market and forex isn’t really owned by anyone. It is also decentralised so there’s no middleman. The forex broker merely acts as a facilitator of the trade.
The Bottom Line
If you’re looking to trade in foreign currencies, a good forex broker will be able to help you to get accustomed to forex and assist you with their trading platform and trading technicalities. Finding the best forex broker ultimately depends on what you need and your preferred trading style. The bottom line is that forex brokers should have integrity, be regulated and reputable with a good and clean track record. Traders may compare forex brokers all they want, but this is the most important thing to consider, especially with today’s volatile market. Your trades, your money – your perfect broker.
Final Thoughts on Forex Brokers and Trading Platforms
What is the best forex broker in the UK?
It really depends on your trading style and requirements. It all comes down to what you really want from your fx account. The list above represents the most trusted brokers but it’s up to a trader to decide what broker to choose.
Should I trade with a regulated broker?
Absolutely, only trade with regulated brokers to avoid problems later in your trading career. Only trade with good and reputable currency providers to enjoy your forex trading experience. It’s worth checking broker reviews online to see what other traders think about your broker.
What are the features I need to successfully trade forex?
As you can see from the comparison table, forex brokers provide a variety of extra features you can use for free; but it really depends what features you want, for example, if you rely on forex trading signals you should sign up with a broker which provides those signals for free. And you can enjoy a wide range of features: copy trading, advanced charts, signals, economic calendar, and many more.
What are the best 5 forex brokers?
There are many good forex brokers and thus it’s hard to say who are the top 5 providers. We don’t do “best 5 forex brokers” or “top 8 forex brokers” as it’s impossible to put a number on it. The comparison table simply lists reliable and trusted forex brokers in the UK.