How to choose a broker guide

Regulation and headquarters of the broker

It is extremely important to choose a broker with a license from a reputable regulator.

A regulator is a government financial entity that issues licenses for local financial service providers, overseeing and regulating the operation of the local financial market as well as setting rules & regulations, issuing fines and closing down financial entities if they act illegally. 

The EU/US legislation for financial services are far more stringent than those of offshore jurisdictions. As a European financial service provider, it is much more difficult to obtain a broker’s license as the regulation is far more stringent and the quality standards of European brokers are higher. It is very important to check if Your broker has a license from a local financial regulator. Many vendors advertise with the term ‘broker’ without being licensed. An absence of license means, amongst many things, that your funds are at HUGE RISK, the trades You execute and the “balance” of Your account are nothing more than just numbers on Your screen and most probably You won’t be able to withdraw any funds from this fake broker. Sometimes they will allow the client to withdraw a small sum of his initial deposit, the client thinks that they are trustworthy, deposits even more money “on his account” not understanding that he/she is even deeper in the trap. 

 

ALWAYS CHECK WHETHER YOUR BROKER IS LICENSED BY A REPUTABLE REGULATOR!!!

In order to check whether or not the broker in question is regulated you need to do the following easy steps:

• 1. Go to the main page of  the broker you want to check
• 2. Scroll down until the bottom of the page
• 3. In the footer you can see: name/address of the company running the broker; information on the regulating body(ies) overseeing the broker’s operations; license number(s)

 

If you have found only the name of the company and address, but no info on regulators – DON’T TRUST THAT BROKER!

If there is a regulator stated alongside company info, next step is to identify whether or not you can trust him.

How can I understand whether or not a regulator can be deemed reputable? – You may ask. 

The rule of thumb is the following: If the broker in question is licensed by a regulator from a country that You can’t point on a map – DO NOT trust that broker!!! As the retail investment market is international, most reputable brokers(and the ones we suggest to you at simplyForex.com) have business representation in several jurisdictions, most are licensed by several different regulators, even further increasing their trustworthiness. Don’t fall in the trap of trading with off-shore brokers with shady or no regulation!

In order to further make sure that the broker is not lying about his license (this does happen, unfortunately), we should:

• 1. Google the name of the regulator to find their official website (it is usually a website in the .gov domain)
• 2. In the search bar on the main page of the regulator, type either the name of the broker or the license number found in the footer to verify that the license is active and not revoked and that there is no warnings issued by the regulator.

 

Note from our editors*
Our team at simplyForex.com has seen a concerning surge in the prevalence of Brand Identity theft, fake or cloned websites of famous and reputable brokers/financial service providers. These scammers cunningly replicate the appearance and branding of legitimate financial platforms, most of the time using strikingly similar names that are difficult to distinguish from the original. One of the many cases that we heard of was fraudsters creating a website called “ www.forexlive.co.in ” to mimic the reputable FX market reporting and analysis portal “www.forexlive.com”. 

These cloned websites can be astonishingly accurate, sometimes featuring an exact replica of the original site, or simply incorporating copied logos and design elements. The ultimate goal of these scams is to deceive unsuspecting investors and obtain their money, credit card information or login credentials. 

Despite the growing issue of fraudulent clone websites, regulators are still grappling with ways to effectively combat this rampant trend. It is crucial for investors to remain vigilant and THOROUGHLY verify the authenticity of any financial platform/service provider they interact with in order to protect themselves from falling victim to these sophisticated scams. 

 

Security of client funds

A very important question when choosing a broker is whether or not Your funds and funds of Your broker are stored on one bank account. This is important in case of insolvency – your money will be part of the bankruptcy assets of the broker and will be used to cover broker’s liabilities if Your funds and Your broker’s funds are mixed and held on one account. This risk is not insignificant. Likewise it is important that your broker cooperates with reputable banks and has an omnibus account where every customer is allocated his/her own private place to store funds where they are stored separately from funds of other clients as well as separately from Your broker’s funds. If this is not the case the funds can be very difficult to separate Your funds from those of Your broker in the event of a Your broker’s insolvency/financial crisis etc.  

Service

Your broker must be accessible during trading hours in your language or at least in English. If you do not have access to the platform for some reason and urgently need to place an order it may lead to significant losses if your broker is not reachable. Phone orders and cancellations should also be offered. You should also pay attention to the quality of customer service so that more complicated issues can be resolved. Many call center agents who work daily for several companies are neither motivated nor properly competent to respond to the situation. Furthermore it is important that your broker provides You with good learning materials as well as interesting seminars/webinars for continuous development of Your trading skillset.  

Platforms

Fees

Low fees are important as the greater Your trading volume will become the greater Your fees will be and finding the best deal for execution of Your trades should complete the list of things You should check/find out in order to find a decent broker. Always remember that different brokers will have different fees for different instruments. Spreads on Forex might tighten/widen depending on market conditions so checking them on demo at one instance might not show the full picture! So have a list of potential brokers, request information from each broker on fees for the particular instruments You would like to trade, if phone orders cost extra money, if there is an inactivity fee or fee for not reaching minimum trading volume and how much are the fees for the account management, if any.  

All of the brokers that we recommend on simplyForex.com are heavily regulated, safe and secure. Therefore, you can select any one of our recommended brokers with peace of mind!