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Contents

Broker Comparison

Make a quick comparison between two brokers you are deciding between.

Over on the right of the screen, you will see two drop-down fields. Select the brokers you want to compare.

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Pepperstone

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75% 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.

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Zulu Trade

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Plus500

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IG.com

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Ayondo

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City Index

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Fidelity

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A comprehensive guide to foreign exchange trading strategies

Foreign exchange trading refers to the practice of trading one currency against the other, based on the rise and fall of the value. For those who have never traded this type of asset before, it may seem startling to learn that this is an industry with a market cap of at least $5 billion US dollars. Every day people are making a significant profit off the back of moves triggered by everything from central bank interest rate changes to the announcement of general elections.

But how do successful forex traders do it? What tips and tricks lie in a traders’ toolbox, and what do they do with the free forex charts and forex trends information that they pore over before placing trades? Ask any two different foreign exchange traders for a detailed answer, and they won’t give the same one. That’s because there are so many forex trading strategy options out there. Depending on the circumstances and priorities of the trader, this can easily change.

For a newbie, the hard part is choosing a strategy, then having the tenacity to try it out properly, as well as identifying when it’s failed and moving on. If a trader chooses a top-rated broker, they might be able to get access to exclusive educational resources which allow them to get pinpointed and accurate advice. But, unless a trader can choose a broker on this basis, it’s more likely that they will need to experiment on a trial and error basis – and that’s where this article can help.

It will explore a series of the most forex common trading strategies, and it will explain each one in turn – and look at the advantages and disadvantages of each, too. And it will take a look at what the future of the dynamic and interesting foreign exchange industry might hold thanks to technology, especially in light of artificial intelligence and social trading. Ultimately, the decision on which strategy – or strategies – to try will come down to the individual forex trader. But this guide will act as a starting point for further research into what each one can offer.

Breakout trading

The first forex trading strategy that this article will explore is “breakout trading”. In layman’s terms, this strategy could perhaps best be described as “getting in there early”: it focuses on opening a position (or stating what the trader think will happen, i.e. a price rise or a price fall) quite early in the process of a trend. (A trend is the indicator which appears on a price chart graph, and which can suggest what might be about to happen next.)

Foreign exchange prices often remain within the bounds of what are described as support or resistance levels, which lie on either side of a fairly stable price point. If a price “breaks out” of this range, it means that it’s moving into new territory and heralding the arrival of a new trend. The consequences of this are usually quite predictable: traders across the markets begin to worry about what this means for their own position, and hence either close existing positions or buy up new ones – leading to a period of volatility.

For an investor thinking about adopting a breakout strategy, then, it’s necessary first to assess whether or not they have the skills and time to manage this risk. Volatility is not necessarily a bad thing: it can be managed in a number of ways, which will be explained below. However, the first thing to do is to learn how to differentiate between a breakout and a so-called “fakeout”. A genuine breakout will have some degree of time and sustainability on its side: it might persist until beyond the end of the current trading session, for example, while a fakeout would end up back where it began – and prove itself to have been a simple misreading of the trend.

Managing the risk involved with this kind of volatility is also important. Usually, the platform of any top rated broker will offer a trader tools like stop losses (which let the trader specify at what potential loss point the trader’s losses should be cut, and the position be automatically closed). Specifically to this strategy, though, is the phenomenon of price targeting. This concept lets the trader work out where the best point to quit – or “exit”, as it is known – the trade might be. Using historic price chart data is wise here. If the chosen currency has shown a change of, say, three cents over the last few days, exiting when the price reaches a three-cent divergence from where it was when it broke out of its support and resistance range is a wise idea.

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Currency carry trade

This trading strategy, which is one of the most common ones out there, relies on the fundamental basis of foreign exchange trading: namely that forex trades are always carried out in pairs. This stands in stark contrast to most forms of asset trading, which speculate on the outcome of either just one asset or a group of single assets. Forex trades, however, pit one currency against another: a trader might speculate that the British pound will rise against the US dollar at a given time, for example, or that the Japanese yen might fall against the New Zealand dollar.

The key to the currency carry trade strategy is to pair these strategically in order to profit of the difference in a certain type of value associated with each currency. This strategy focuses on yield: a currency which has a high yield is placed alongside one with a low yield, with the higher one paying for the trade to be placed. The first step is to work out which interest rate “spreads” work best: the spread between two currencies, in this instance, is often the interest rate in the home country of the relevant currency.

For that reason, traders will often borrow the currency which has a low-interest rate, as that’s cost-effective and use it to buy the currency of the country which has a high-interest rate. Provided that there are no dramatic moves in the exchange rates, a profit can – hopefully – be realised.

However, recent moves in the sphere of central bank interest rate setting has led this strategy to perhaps begin to be a little outdated – or, at least, now hold the potential to become outdated in the future. The strategy only works when some central banks have high rates, and others have low. Given that the moves of many central banks push their interest rates lower and lower in order to stimulate economies and get people and companies borrowing money, it could soon become the case that the currency carry trade strategy is not quite as “simple” as it might seem.

Contracts for difference (CFDs)

In the not so distant past, the only way in which it was possible to purchase a large amount of foreign currency was to buy it. If a trader wants to trade dollars, for example, they or their broker would need to the requisite amount of that currency. But now, the rise of derivatives has changed that.

One of the most popular varieties of derivative is the “contract for difference”, or a CFD. A contract for difference is not actually a currency asset: it’s a product which derives its value entirely from the underlying asset, and whose market appears to mimic that of the legitimate asset exactly. One of the many differences between a contract for difference and the asset from which it is derived is that it can be much more easily bought and sold, at least when compared to the purchasing and selling of large amounts of actual foreign currency.

To some extent, foreign exchange contracts for difference work in a similar way to the real asset. They allow for speculation on whether or not a given currency will rise or fall in proportion to another specified currency, for example, and the process of closing a trade is the same. Selling up (although of course, in this case, it is the contract for difference that is being sold rather than actual currency). The “difference” element comes from the way that the profit (or loss) is calculated in a contract for difference situation. It is calculated based on the price difference between the amount in which the contract for difference was bought and that for which it was sold. In other words – the “spread”. When the position is closed, the payout is in cash.

However, perhaps the most important aspect of contracts for difference trading to bear in mind is how it relies on leverage. CFDs are traded on what are usually described as the “margins”, which means that it is very easy to amplify the size of a trade – and, consequently, the size of a potential profit or loss. This is achieved by funding part of the contract for difference through borrowing. The size of the margin can be relatively astronomical, with leverage amounts as high as 20% sometimes observed. For this reason, it’s often recommended that only traders who are at an advanced stage in their trading career attempt to trade an asset like this: otherwise, it could backfire and leave the trader with a very big loss to nurse.

Day trading

So far, this guide has looked at specific forex trading strategies which can be used by most traders, within reason. Day trading is a strategy – but it’s also a lifestyle, a career and a choice which could have significant effects on how a trader’s life as a forex trader might play out. It refers to the practice of placing trades which open and close on the same day, with the idea being that short-term price fluctuations could lead to profit.

Fundamentally, day trading relies on the assumption that markets don’t always work quite as efficiently as they should. The foreign exchange market, in particular, is often described by day traders as a good example of such a market – although the jury is out on whether that is true, and indeed whether or not day trading as a strategy is effective.

While day trading is a strategy in its own right given that it makes a certain set of assumptions about the value of time periods, it can also be seen as an umbrella term covering many other strategies. Scalping, which will be covered in more detail below, refers to the practice of buying and selling many different forex securities over the course of each day with gaps of few moments in between each action, and trying to profit from the tiny price changes involved each time. News-based trading, which relies heavily on fundamental analysis of the wider world and the economies within it, seeks to profit from announcements of interest rate changes, data releases and many more.

Perhaps the major disadvantage of a day trading strategy is that it’s not particularly suitable for beginners who are just starting out in their forex careers. It requires a significant degree of knowledge: it often only works when the foreign exchange is particularly liquid and high volumes of currency are being bought and sold, for example. Identifying the triggers of this kind of movement (such as particular economic data releases) takes time and skill.

But it also requires a distinctive sort of emotional and psychological outlook, too. Those who find themselves making instant, non-strategic and knee-jerk reactions to price movements (especially those who move against their own favour, or which perhaps offer the illusion of a chance to make some quick cash) are unlikely to find day trading a successful strategy.

Finally, it’s also worth noting that a trader should always choose a top rated broker before deciding to press ahead with a day trading strategy. The reason for this is that fraud related to day trading is highly common. Scam adverts which claim that it is possible to accrue a significant return in a very short space of time through day trading pervade many parts of the Internet. Using broker reviews to choose a broker is essential here, as it means the risk of falling victim to one of these scams can be significantly reduced.

Reversal trading

In some ways, reversal trading is perhaps the simplest of the foreign exchange trading strategies to understand – at least on a superficial level. It refers to a sustained change in the way a currency’s value goes. If a currency was previously rising in value, then a reversal would mean it was losing value. If it was previously losing value, then a reversal would cause it to gain value. In technical terms, these are often referred to uptrends or downtrends, with the reversal itself being described as “to the downside” or “to the upside” – although it is always worth checking the figures and working this out for sure rather than just relying on third parties’ description of price movements.

But not just any move in the opposite direction constitutes a price reversal. The reversal has to be sustained for a while before it can be properly labelled as such: prices in the often-volatile currency markets can be seen to be all over the place, and a trend needs to emerge before a reversal can be declared. What matters most in working out whether or not a reversal has occurred is what a trader’s overall context looks like. For a day trader, a reversal in the space of minutes could be significant. For an investor looking to make a profit over the course of months, charts which are week-by-week could be more useful.

Finding out and confirming whether or not a reversal has occurred can be tough. Some traders use what is called a moving average to work this out: a moving average takes into account relevant past price action movements within a given timeframe to reveal and emphasise the most relevant ones in the form of a trend. There are other methods available, though, and it may be worth experimenting to see which one provides the most accurate identification and flagging of reversals.

In terms of profiting from this strategy, there’s no surefire way to do it. Many traders, however, use it as a signal. Once a reversal has been rigorously established, a trader might make a decision to close a trade which – if the trend the reversal has created continues – would cause them to lose out. It can also be used in the other direction, too, with traders using reversals to identify trends in assets and then snap them up.

Momentum trading

Anyone who has ever traded an asset of any sort will know that there’s a lot to be said for purchasing it at a low price and then doing something (either adding value, or waiting for time to elapse) before selling it on for a profit. So, it may come as something of a surprise to learn that some traders, especially in the foreign exchange world, don’t adhere to this as a strategy.

In fact, there are plenty of traders who instead focus on buying up stocks that were already performing well, and then aiming for them to become even more valuable. “Momentum investing”, as it is known, relies to some degree on the idea that if an asset is already valuable, there must be a reason why that has occurred – and hence there is some “momentum” behind it which can propel it forward even further. The strategy also relies on the idea that stocks which are dipping in value should be sold off, which – in theory, at least – enhances the overall value of the portfolio.

Often, momentum trading is somewhat short term in nature. That’s because it relies on volatility, which is by its very nature of unpredictability a short term phenomenon. In fact, it relies entirely on avoiding long term volatility: by making the most of short term up but excluding long term down downs, the momentum can be protected. This is, of course, a risky strategy – although some momentum traders would perhaps argue that it’s not necessarily any more or less risky than any other forex trading strategy, and that no strategy is perfectly risk-free.

Perhaps one other dimension to consider is volume. The momentum is what makes the profit, but the momentum can also be what can harm the potential for profit in the long term if too many other investors have the same idea. In the event that lots of traders attempt to follow the same trend, it’s in the interest of the momentum investor to be sure that they can get out of the market on time before the large volume of other traders leave and cancel out the momentum gained. For this, a momentum trader needs to have complex tools at hand to be sure that price charts are accurately analysed all the time – and that the risk is kept in mind.

Position trading

A position trader is someone who relies on the speculative prediction that an asset in a foreign exchange market will eventually move in favour of the speculative position. In this sense, they are perhaps the diametric opposites of day traders: by leaving assets to mature for weeks or even months on end, position traders are often hopeful that time will be on their side.

For new foreign exchange traders, this might seem like an appropriate and even advisable way to trade an asset. After all: other assets, such as properties, are traded on the basis that they need to be left for the long term in order to appreciate in value (whatever the long term might look like in that specific context). But it’s worth remembering that the foreign exchange market does not necessarily work in the same way as other asset markets, and a forex trading position which falls in value can lead to continued falling that could wipe out an investor’s entire stake.

It’s not unheard of to come across situation in which a position trader is agonising over whether or not to cut their losses as they watch the value plummet: according to their strategy, time is required – but if time is going by and a position is getting worse and worse, the decision about what to do can be tough. This comes back to discipline: by setting a stop loss which is based on the amount the trader can afford to lose (and nothing else), the strategy’s riskier elements can remain contained.

It also requires leaving money concentrated on a particular asset for a particular length of time. If that happens and then a stronger, more appealing trend appears, the position trader is unlikely to be able to do anything about it given that the cash has all been diverted elsewhere.

However, it’s not all disadvantages for this strategy. Usually, position traders follow a trend line: if a trend can be noticed, or so this strategy goes, so can the ability to determine whether or not that trend is sustainable. If it is predicted to be sustainable, then it is worth holding on to for a particular period of time.

Swing trading

Swing trading is perhaps one of the most interesting trading strategies out there. It relies on a period somewhat in between the potential months involved with position trading or the minutes involved with scalping: in practice, many swing traders choose to use periods of around a few weeks or a few months.

Swing trading can be popular to forex traders who want to avoid risk. The reason for this is that it avoids volatility altogether – which, as outlined above, is a common aspect of many forex trading strategies. It doesn’t aim to profit from the entirety of a price change: on the contrary, it instead aims to make some revenue from just a small part of the price change. In that sense, swing traders can be characterised as being on the more manageable end of the risk-reward spectrum as they are often keen to make a respectable profit before finding another trade to open.

One of the key characteristics of swing trading is that many traders who follow this strategy choose to use technical analysis as opposed to fundamental analysis. Fundamental analysis refers to the practice of looking at broader macroeconomic conditions, such as the decisions of central banks or any upcoming data releases, in order to inform the opening and closing of positions. For swing traders, the so-called “pure” technical analysis – which focuses on price charts, i.e. the decisions of other traders to open or close their positions on a cumulative basis – is often the area of focus.

The downside to leaving a position open for a few weeks, however, is that fees charged by brokers to keep it open overnight or on the weekends can be very high. Traders might start searching for a broker by looking at the highest rated and those with affordable overnight fees. However, they must keep in mind that they will often have to factor in the amount charged by that broker to leave a position open overnight. If this could wipe out or even significantly dent the profits made from swing trading, it may not even be worth pursuing.

Forex scalping strategy

The practice of scalping is something of a controversial one in the foreign exchange world. It refers to attempting to make a large volume of tiny profits in a short space of time by opening and closing positions very regularly, and profiting from the tiny movements in price that this can lead to. In this way, it’s the opposite of many of the other types of trading strategies – some of which are focused almost exclusively on the idea of making large profits on less frequent occasions.

Forex scalping is a very real-time strategy: it requires the trader to be in front of the computer for the entire duration of the position, and to concentrate hard on the price movements in front of them. It can also be somewhat repetitive, especially if similar forex assets are being traded day in and day out. It can be a hyperactive process, with many trades needing to be opened and closed over the course of a day – or even within an hour. It’s not uncommon for a scalper to open a position and then close it again within minutes or even seconds.

One key problem that many scalpers end up running into is the issue of rules and regulations from the broker. Some brokers ban scalping outright, and traders who pursue a scalping strategy on a site where it is not permitted might find themselves getting banned or even losing some of their upfront capital. In part, this is because scalping is relatively easy – or, perhaps more accurately, not within the spirit of many of the established trading rules.

Retracements

Most forex traders need to be basically numerate in order to do well at this strategy. But for those who have a particular aptitude for mathematics and patterns, the retracement strategy is often a particularly popular choice. This strategy relies on the Fibonacci sequence (or of a variation on it).

Put simply, a Fibonacci retracement is a way to find out what the support and resistance levels for a particular forex asset are at one particular point in time – and then to use that data to work out what trades to place. Often, Fibonacci retracements are only calculated when there has been a significant move in market value – perhaps has a result of a big shift for an economic or political reason, or perhaps due to market overcrowding, or for some other reason altogether. Fundamentally, what matters most from a retracement calculation is that the currency in question has approved its support or resistance point on the price chart.

The aim here is to work out how much the market might move back in its former direction – or “retrace” – once the market has shifted, and before the trend settles down. This works on the assumption that the price of the asset may go up and down a little once it settles into its new position on the price chart. When a Fibonacci retracement is drawn on to a graph, it is often drawn with a mind to calculate certain percentage intervals – and in particular 38.2%, 50% and 61.8%. Most forex currency broker platforms will offer tools and software packages that allow the trader to do this, such as MetaTrader.

Perhaps the most appealing element of the Fibonacci retracement strategy is the fact that it is so maths-oriented. For traders who are worried about their vulnerability to emotional trading decisions, this can be a godsend. It can make all the difference between whether or not knee-jerk reactions occur – which

The downside is that it does come with a higher barrier to entry in the form of skills and knowledge – but if that can be overcome, this strategy could work well.

Pivot point

The “pivot point” is the term given to the location, which indicates the overarching trend of many different time periods in a particular part of the foreign exchange market. It’s especially useful when trying to work out how a market has performed, on the whole, in between lots of different ways of measuring time. Usually, it’s worked out by adding together the highest price, the lowest price and then the price at the time of market closure within a given period, and then dividing it by three to find the average. The idea here is that there is a benchmark to use the next day, which can, in turn, be used to inform strategic decisions about where the market is likely to go next. Ultimately, the aim is to identify where those all-important support and resistance lines lie: once that is worked out, the trader can make informed choices off the back of that.

Sometimes, the pivot point strategy is confused with the Fibonacci retracement strategy – and it’s easy to see why. Both of them are highly technical strategies, and they each aim to bring together different points on the price chart. But they are different. Fibonacci retracements can be worked out using a whole host of different areas on the chart, whereas a pivot point strategy has to be decided on the basis of the three fixes points outlined above. It’s often down to the individual trader which one to go for, and may depend to some extent on the experience and technical knowledge. With the pivot point strategy, there’s no need to worry about choosing the points to feed into the calculation – and while this may be a little bit more restrictive, it can also be freeing for those who are just starting out

How has tech shaped forex strategies for the better?

These strategies all reflect the foreign exchange world as it looks at present, in the here and now. But it does not reflect what the forex market will necessarily look like in five, ten or even twenty years’ time – and that’s because of the impact of technology on the sector.

The first key thing to think about when assessing the potential impact of technology on forex trading is artificial intelligence, or AI. AI refers to computing technology which has been designed to mimic human thinking and behaviour, and this has played a crucial role in the forex sector in recent years. One of the key benefits of this technology is its supposed ability to predict the future based on events that have happened historically. For a forex trader who is using price charts, this can be a very useful tool. Of course, the usual caveat for any trading strategy ought to apply here: past performance is not necessarily an indicator of future performance. However, what AI can potentially do is built up data-fuelled forecasts. By outsourcing all of this work to a computer, a trader can both save time (and hence reduce their opportunity costs) and also reduce the risk of human error, which is a noted aspect of forex trading.

Often, navigating the intense volume of data on offer can be where a forex trader falls down: despite the fact that data is often the best way of building out a strategy, there it can be extremely time-consuming to do so. But there’s also a salience dimension, too. As well as just analysing whole clumps of forex market price data, though, AI can go one step further. It can also work out which parts of a price chart are particularly relevant, and which ones are not. Some of the most successful forex traders are those who can filter out some of the irrelevant materials, information and indicators they come across, and filter in – or emphasise – those of which are more relevant. By facilitating the management of this data, artificial intelligence is often seen as a way around some of the barriers to achieving this goal.

Another distinctive way in which technology has opened up new opportunities is in the realm of social trading. Social trading refers to the practice of a new forex trader selecting a more experienced forex trader and committing their trading capital to automatically mimic the trades of the more experienced trader – either in its entirety or on a proportional basis. Usually, the more experienced trader in this situation will receive some sort of financial reward which increases the more popular they get. Social trading is a tech-focused forex strategy which comes with a variety of benefits. One such benefit is that it means the new trader is not on their own; with so many different strategies on offer, it can seem very overwhelming to select one and get started. Social trading allows a newer trader to find a more experienced person who can guide them, and who has already accrued the expertise to trade the forex markets well. So, in essence, the newer trader is paying for a forex information product and service rolled into one.

Sites which bring together newer traders and more experienced ones tend to offer the newer trader a chance to filter the pool of potential traders to copy based on a series of characteristics. The newer trader may decide, for example, that they want to only consider traders who match their own risk profile. Or they may want to copy traders who have a certain length of experience already under their belts – or, indeed, traders who have a track record of delivering a certain amount of profit when averaged out. The search functions built into many of the most prominent social trading sites permit this to be done easily, meaning that the customer experience for the newer trader is often smooth and simple.

Words of warning

However, technology has not been relentlessly kind to foreign exchange traders – and, unfortunately, there is evidence to suggest that it has on some occasions, enhanced the risk of fraud. Fraud has always been a problem for traders of any asset – but as this article has demonstrated, some foreign exchange trading strategies have been packaged up by fraudsters and marketed as “get rich quick schemes”. This is especially true for day trading strategies, but it’s also true for some of the others as well. In the technological age, the all-pervading and snappy nature of web advertising means that there’s only room for fraudsters to promote the positive sides (such as profit and independence), and not the less appealing sides – like hard work and risk management.

Before even deciding on a strategy, it’s usually best to read broker reviews and unearth any hint of “get rich quick” or a similar message before depositing cash. If something seems too good to be true, it usually is. Another way to reduce the risk of this problem is to check out the websites of the relevant regulators in the country in which the broker is operating. These often contain freely available lists of information about potential scams in the forex markets and can alert even the savviest of traders to potential scam elements (such as registration violations) which they might not have even noticed. While some traders could perceive this as a time drag, it’s best construed as an investment in the security of trading capital.

While the rise in social trading makes it easier for traders who want to access experienced communities along their trading journey, it’s worth remembering that it doesn’t necessarily lead to a situation where the newer trader makes as much money as an experienced trader. There could be many variables which help the more experienced senior, copied trader which do not necessarily apply to the new, copying trader. The copied trader may be using risk capital rather than a large chunk of their trading capital, for example, and hence any potential losses may affect them less. And, as ever, the copied trader may have a good track record – but this does not mean their record will hold forever. There are cases of even the most experienced and successful traders finding that their portfolios are wiped out and that they incur significant losses. So, while it could save the newer trader time and energy to copy a more experienced trader, it could also end up being wiser to invest the time in learning the strategies for themselves after all.

As this comprehensive guide has demonstrated, foreign exchange traders who want to get ahead of the game have a wide range of tools at their disposal. There are many different ways to make it in forex – although there are many different ways to lose out as well, which is why a judicious assessment of the strategies on offer is pretty much vital.

One thing is for certain: strategy is an essential part of the process – and without it, the whole enterprise may be fruitless. In terms of which strategies work best, that’s for the individual foreign exchange trader to decide. From the margin-based, leverage-focused world of contract for difference trading to the tiny profit accumulation aim of foreign exchange scalping, there are lots of different ways that a trader can delve into the forex world.

By trying out each of the distinctive trading methods over time, a trader can identify which one works best for them – and, ultimately, which one is delivering them the most sustainable, consistent and healthy profit margins. There’s no silver bullet in forex trading, and – despite the rhetoric and promises of some of the forex trading websites out there – there’s no one single strategy that is guaranteed to avoid losses and prioritise big gains. Fundamentally, choosing a strategy comes down to a person’s own hard work, resilience and rigorous thinking.

Compare Online Brokers

Allyson Brooks
Contributor, Benzinga

If you’ve never traded stocks before, you might imagine trading to be like the old cliché: dozens of brokers in suits yelling at clients over the phone. It may be difficult to picture yourself in the chaos, especially if you’re a beginner.

Online stock trading removes you from the scene. You don’t have to deal with phone calls, broken promises, and mayhem. Instead, you can trade from the comfort of your own home or on-the-go.

Like many other industries, brokerages anticipated the need for great online experiences and delivered. Firms created desktop platforms and mobile experiences with built-in trading tools, education, and analytics at your fingertips.

You Invest by J.P. Morgan

You Invest by J.P. Morgan

Enjoy up to $625 when you open and fund a new You Invest Trade account with $25,000 or more in new money within 45 days. New money is cash or securities from a non-Chase or non-J.P. Morgan account. Maintain the balance for 90 days and we’ll add your bonus in 10 business days. Find out how.
INVESTMENT PRODUCTS: NOT A DEPOSIT • NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE

JP Morgan Chase
Commissions
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1 Minute Review

Chase You Invest is the retail brokerage arm of JP Morgan Chase, the largest bank in the United States. While most of the firm’s products are targeted toward wealthy clientele, You Invest gives novice investors a chance to learn about markets, select the best securities and plan for future goals like retirement. No futures, forex, or margin trading is available, so the only way for traders to find leverage is through options.

Not all investors will appreciate the basic setup and simplistic trading suggestions, but plenty more want to learn about markets but just don’t know where to get started. Chase You Invest provides that starting point, even if most clients eventually grow out of it.

Best For
  • Investors using Chase banking products
  • Mobile traders
  • Retirement savers
  • Easy to navigate
  • Functional mobile app
  • Cash promotion for new accounts
  • No forex or futures trading
  • Limited account types
  • No margin offered
TD Ameritrade
Commissions
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Commissions
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1 Minute Review

This publicly listed discount broker, which is in existence for over four decades, is service-intensive, offering intuitive and powerful investment tools. Especially, with equity investing, a flat fee is charged, with the firm claiming that it charges no trade minimum, no data fees, and no platform fees. Though it is pricier than many other discount brokers, what tilts the scales in its favor is its well-rounded service offerings and the quality and value it offers its clients.

Best For
  • Novice investors
  • Retirement savers
  • Day traders
  • World-class trading platforms
  • Detailed research reports and Education Center
  • Assets ranging from stocks and ETFs to derivatives like futures and options
  • Thinkorswim can be overwhelming to inexperienced traders
  • Derivatives trading more costly than some competitors
  • Expensive margin rates
TradeStation
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1 Minute Review

TradeStation is for advanced traders who need a comprehensive platform. The brokerage offers an impressive range of investable assets as frequent and professional traders appreciate its wide range of analysis tools. TradeStation’s app is also equally effective, offering full platform capabilities.

Best For
  • Advanced traders
  • Options and futures traders
  • Active stock traders
  • Comprehensive trading platform and professional-grade tools
  • Wide range of tradable securities
  • Fully-operational mobile app
  • Confusing pricing structure to leave new traders with a weak understanding of what they pay
  • Cluttered layout to make navigating TradeStation’s platform more difficult than it should be
Firstrade
Commissions
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Commissions
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1 Minute Review

Easy-to-use and quick to master, Firstrade offers new and veteran traders alike a simple way to start investing with rock-bottom pricing. Firstrade’s platform is simple and streamlined, and it extends this convenience to its mobile app. The company’s $0 commissions on stocks, ETFs, mutual funds and even options make Firstrade especially appealing for frequent traders. Firstrade also offers margin trading, though rates are a bit more expensive than some competitors. Firstrade also currently doesn’t offer access to futures or forex trading, and some more advanced traders may dislike the broker’s simple platform.

Best For
  • New traders looking for a simple platform layout
  • Native Chinese speakers seeking research and education tools in Chinese
  • Mobile traders who needs a secure and well-designed app
  • Simple platform easy enough for even complete novices
  • Quick Bar tool for easy trading throughout the day
  • Free access to Morningstar trading reports and other news in both English and Chinese
  • Secure mobile app with enhanced security and trading features
  • Simple brokerage platform doesn’t include as many charting tools as competitors
  • No access to futures or forex markets
eTrade
Commissions
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1 Minute Review

E*TRADE is an online discount trading house that offers brokerage and banking services to individuals and businesses. One of the first brokers to embrace online trading, E*TRADE not only survived both the dot-com bubble and Recession — it thrived. You can choose from two different platforms (one basic, one advanced). E*TRADE is a suitable broker for traders of most skill levels, whether you want to buy mutual funds and hold them for decades or dabble in options swing trading. E*TRADE offers a library of research and education materials to help you out.

Best For
  • Active traders
  • Derivatives traders
  • Retirement savers
  • Sophisticated trading platforms
  • Wide range of tradable assets
  • Exceptional customer service
  • Limited currency trading
  • Higher margin rates than competitors
  • No paper trading on its standard platform
Vanguard
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1 Minute Review

Vanguard was the first to offer low-commission trading on inexpensive index funds based on consumer-friendly investment principles. Day traders might not find Vanguard’s old-school style appealing, but retirement savers, buy-and-hold investors and companies that seek employer-sponsored programs might want to take a gander. Vanguard is a sensible choice for common-sense investment advice and efficient products. It’s a company that sticks to the morals of its hardy pioneer, Jack Bogle.

Best For
  • Retirement savers
  • Buy-and-hold investors
  • Investors looking for a simple stock trading platform
  • Large family of inexpensive ETFs and mutual funds
  • Strong stock research selections
  • Non-intimidating platform and mobile app
  • Only 10 technical indicators available for charts
  • No futures or forex trading
  • Not ideal for day traders
Interactive Brokers
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1 Minute Review

Interactive Brokers (IBKR) is a comprehensive trading platform that gives you access to a massive range of securities at affordable prices. With access to over 125 global markets, you can buy assets from all around the world from the comfort of your home or office. Options, futures, forex and fund trading are also available — and most traders won’t pay a commission on any purchase or sale. IBKR is geared primarily toward experienced investors. The platform offers limited assistance and can be a challenge for new users to become acclimated to. The broker’s tiered pricing strategy can also be frustrating for traders who focus on hourly or daily price movements.

Best For
  • Access to foreign markets
  • Comprehensive mobile app that makes trading simple
  • Wide range of available account types and tradable assets
  • Comprehensive, quick desktop platform
  • Mobile app mirrors full capabilities of desktop version
  • Access to massive range of tradable assets
  • Frustrating and confusing tiered pricing
  • Bloated website that makes finding information a challenge
eOption
Commissions
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Commissions
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1 Minute Review

eOption is a stock, fund and option trading platform that focuses on low-cost options trading. Its options trading is very affordable at just $0.10 per contract and $1.99 per transaction. The broker also offers a comprehensive options trading course that’s free and educational for both novice investors and advanced traders alike. eOption’s platform is less usable than its competitors, especially for new traders.

Futures and forex trades aren’t currently available, daily market updates are full of jargon and the platform includes very few intuitive features and explainers. Customer service options are also lackluster, and mutual fund transactions are expensive. While eOption might be a great choice for options traders, we recommend other platforms for beginner traders primarily interested in stock and ETF investing.

Best For
  • Options traders looking for low-cost options contracts
  • Beginner and advanced traders looking for options education
  • Advanced traders who don’t need a lot of platform guidance
  • Unbeatable options contracts pricing
  • Mobile app that mirrors capabilities of desktop app
  • Free and comprehensive options education
  • Confusing platform has limited assistance tools
  • Expensive mutual funds and bond trading
  • Limited stock and general investing education
  • Lackluster customer service options

What is Online Stock Trading?

With online stock trading, you’re able to buy and sell securities over an online platform. It takes the place of the traditional method of making phone calls. There are three types of brokerages.

The first is a full-service brokerage, which provides comprehensive services, tips, and education. A beginner may want to choose this. The second is a discount brokerage.

They provide their services for a lower fee but do not provide advice or research. The last is robo advisors. Robo advisors collect client information and make trades based on algorithms. They’re usually inexpensive, but will lack the personalized service of other brokers. These brokerages provide services on the web and mobile applications.

Why Should I Trade Stocks Online?

Whether you’re just starting to trade or thinking of making the switch to an online brokerage, there are a few things you should know.

  • They normally have lower fees than brick-and-mortar brokerages. This is because online platforms save the brokerage both time and money. This savings is passed to onto the trader through low or no fees of commissions.
  • Access to the latest trading news and trends. So, you won’t have to pay for another news subscription service. Education can come in the form of live news alerts, weekly news roundups, and more intensive trading guides. Brokerage firms also integrate this information into their platforms, providing a seamless trading experience.
  • Because all of the trades happen online, they happen instantly instead of taking minutes. Over time, instant trades can make a huge impact on your portfolio, especially when trading volatile stocks.

But, if you have a great relationship with your current brokerage or are new to trading and want a more personal relationship with your broker, it may not be worth it to make the switch.

Who Trades Stocks Online?

Anyone from beginning traders to seasoned investors trades stocks online. With the recent improvements in online brokerage technology and lower fees, making the switch to online trading is easy. It can save money and time.

But online stock trading might not be right for everyone. While it’s true that you can make money trading online, you have to be willing to put in the work. It isn’t a get rich quick scheme; you have complete control of your success. If you’re not willing to put in the research, time, and money, you won’t see a return on your investments.

How to Start Trading Stocks Online

First, you’ll have to choose a brokerage. You’ll have to consider the following:

  • If you want your account self-managed or managed by an advisor. If you’re confident in trading, a self-managed account is worth the savings. If not, you’ll want an advisor. You will pay more in fees, but it may pay off if you have a great advisor.
  • What types of securities you’ll be trading. You can pick from stocks, mutual funds, options, forex, bonds, ETFs, and futures. If you’re new to stock trading, know the risks and rewards associated with each type of security before you commit.
  • Commissions and fees. How much are you willing to pay? Many online platforms will have low fees, but you’ll need to do the math before you start trading, especially if you can’t commit a lot of money to stock trading. Consider annual fees, discounts for balances, and fees per share.
  • Think about account minimums. Some brokerages offer $0 minimums. Others may have higher account minimums, but more perks. If the brokerage does have account minimums, make sure to look into any penalties.
  • How much market data will you need? Certain brokerages will offer platforms with market data fully integrated into their user experience. Whether you’re a beginner or advanced trader, this may be crucial to your success.
  • What platform you see yourself trading on. At the minimum, brokerages offer access to a desktop platform. Most offer a mobile application. Some platforms are designed better than others, though. Watch out for reviews of clunky, slow, and hard-to-use platforms.
  • Customer support. 24/7 live customer support is the gold standard. Look out for supports via email and live chat as well.

Once you choose a brokerage, you can usually sign up for an account online. You’ll need to collect a few things first.

  • Social Security Number or Individual
  • Taxpayer Identification Number
  • Foreign tax id, passport or visa number if you aren’t a US citizen or permanent resident
  • Proof of identity
  • W-9
  • Your employer’s information
  • Method of funding your account

Now, you’re ready to go. You should be able to sign up through the brokerage’s online portal. Depending on the brokerage, you may even be able to start trading on the same day.

Final Thoughts on Trading Stocks Online

Online stock trading makes investing accessible to the masses. Brokerages provide low-to-no fees, user-friendly platforms, and educational content to make trading simple – even for the beginning investor. But you still have to work hard, do your research, spend money, and be willing to put in the time to see a return on your investments.

Interactive Brokers Review 2020: Pros, Cons and How It Compares

Interactive Brokers attracts active traders with low per-share pricing, an advanced trading platform, a large selection of tradable securities — including foreign stocks — and ridiculously low margin rates. Its new offering, IBKR Lite, offers commission-free trades of stocks and ETFs.

At NerdWallet, we strive to help you make financial decisions with confidence. To do this, many or all of the products featured here are from our partners. However, this doesn’t influence our evaluations. Our opinions are our own.

Our Take

The bottom line: Active and casual traders alike will benefit from Interactive Brokers’ advanced execution, strong trading platforms and rock-bottom pricing.

Best Broker for Low-Cost Investing, Best Broker for Stock Trading Platform and Research

on Interactive Brokers’s website

Interactive Brokers IBKR Lite

on Interactive Brokers’s website

Account Minimum
Promotion

No promotion available at this time

Pros & Cons

Large investment selection.

Strong research and tools.

Over 4,300 no-transaction-fee mutual funds.

NerdWallet users who sign up for IBKR Pro get a 0.25 percentage point discount on margin rates.

Website is difficult to navigate.

Inactivity fees on IBKR Pro.

Compare to Similar Brokers

Account Minimum
Account Minimum
Promotion

No promotion available at this time

Promotion

minimum trade cost

Best Online Brokers

Full Review

Interactive Brokers has long been a popular broker for advanced traders, but in 2020 the company launched a second tier of service — IBKR Lite — for more casual investors.

With IBKR Lite, you get unlimited free trades of stocks and exchange-traded funds that are listed on U.S. exchanges. If you’re interested in trading other investments, including options, futures, mutual funds, fixed income and more, you can do that on 125 markets in 31 countries with a Lite account, but the trading costs will be the same as what IBKR Pro investors pay.

As the name implies, IBKR Pro is geared toward advanced traders. If that’s you, you’ll probably like the broker’s per-share pricing of $0.005 per share (the minimum is $1), advanced trading platform, unmatched range of tradable securities — including foreign stocks — and ridiculously low margin rates.

Both tiers of service have a $0 account minimum and offer fractional shares of stock. IBKR Lite has no account maintenance or inactivity fees. IBKR Pro charges an inactivity fee, though it’s possible to skirt that if you trade relatively frequently.

Interactive Brokers is best for:

Casual and advanced traders.

Research and data.

Interactive Brokers at a glance

Stock trading costs

• IBKR Lite: Unlimited free trades on U.S.-listed stocks and ETFs.

• IBKR Pro: $0.005 per share; minimum $1 and maximum 1% of trade value; volume discount available.

IBKR Lite and IBKR Pro: No base commission; 65 cents per contract with $1 minimum. Volume discount available.

Account fees (annual, transfer, closing, inactivity)

• IBKR Pro: $10/month commission minimum for accounts with $100,000 or less, and a $20/month commission minimum for accounts with $2,000 or less.

Number of commission-free ETFs

• IBKR Lite: Unlimited commission-free trades on all available ETFs.

• IBKR Pro: 98 commission-free ETFs.

Number of no-transaction-fee mutual funds

Over 4,300 no-transaction-fee mutual funds.

• Stocks. • Bonds. • Mutual funds. • ETFs. • Options. • Futures. • Forex. • Metals.

IBKR Lite and IBKR Pro customers get access to Client Portal trading platform and powerful Trader Workstation platform.

Advanced features mimic the desktop app.

Research and data

Extensive research offerings, both free and subscription-based.

Customer support options (includes website transparency)

24-hour phone, email and chat support, available six days a week.

NerdWallet users who sign up for IBKR Pro get a 0.25 percentage point discount on margin rates.

$1,000 worth of commission credits for 1 million new customers who participate in IBKR’s simulated sports betting exchange.

Where Interactive Brokers shines

Low commissions: If you’re a casual investor, it’s hard to beat the free trades you’ll enjoy with IBKR Lite. But even advanced traders who opt for IBKR Pro will like the low stock and ETF commission structure at Interactive Brokers, which favors frequent, high-volume traders at just $0.005 per share. There’s a $1 minimum trade commission and a maximum of 1% of the total trade value, and exchange and regulatory fees are included. The broker also offers tiered pricing to lower rates even more: Investors who trade more than 300,000 shares a month can pay $0.002 or less per share, depending on trade volume, although exchange and regulatory fees are extra on this plan. Rates can go even lower for truly high-volume traders.

Options trading , too, is offered at competitive pricing, for both Pro and Lite customers, with a 65 cent charge per contract and no base, plus discounts for larger volumes. The minimum options trade commission is $1 per order.

Margin rates: Margin traders will also benefit from the low rates at Interactive Brokers. For IBKR Pro customers, the maximum margin rate is the benchmark rate plus 1.5% — and NerdWallet users get an extra 0.25 percentage point discount. For IBKR Lite, it’s the benchmark rate plus 2.5%. Those rates apply on balances up to $100,000; the rates drop at higher balances. The broker charges a blended rate based on the size of the margin loan, and has a calculator on its website to help investors quickly do the math based on their balance.

Interactive Brokers also offers an integrated cash management feature, which allows investors to borrow against their accounts with a debit Mastercard, also at low interest rates.

Fractional shares: The ability to purchase a portion of a company’s stock, rather than a full-priced share, makes it easier to invest in companies that have lofty share prices. That, in turn, makes it easier to maintain a diversified portfolio, especially for investors with smaller accounts. For example, rather than paying more than $260 for one share of Apple, you can divvy up that money among different companies.

Trading platform: The casual traders who find IBKR Lite appealing will find the Client Portal platform adequate for their trading needs. But both IBKR Lite and IBKR Pro traders seeking something more powerful can now enjoy access to Interactive Brokers’ Desktop Trader Workstation, which is considered one of the best trading platforms available for advanced traders. (Until recently, only IBKR Pro traders had access to the advanced platform.)

The platform is fast and includes standard features such as real-time monitoring, alerts, watchlists and a customizable account dashboard. An options strategy lab lets you create and submit both simple and complex multileg options orders and compare up to five options strategies at one time.

Other tools include a volatility lab, advanced charting, heat maps of sector and stock symbol performance, paper trading and a mutual fund replicator, which helps users identify ETFs that replicate the performance of a selected mutual fund but offer lower fees. InteractiveBroker’s For You notifications offer customized alerts about events that could affect a trader’s investments.

Worth noting: Another broker we review, Zacks Trade , offers its customers access to white-labeled versions of Trader Workstation. Zacks Trade charges higher trade commissions, but offers clients free calls with support reps, who are licensed brokers. It’s an option worth considering for traders who want the power of Interactive Brokers’ trading platforms alongside a bit more personal support.

Mobile app: The IBKR mobile app, available to both Lite and Pro customers, is Trader Workstation on the go, with advanced trading shortcuts, over 50 data columns, option exercise and spread templates, news, research, charting and scanners. Users can create order presets, which prefill order tickets for fast entry. Presets set up on Trader Workstation are also available from the mobile app.

Research: Interactive Brokers provides access to a huge selection of research providers and news services, many for free, including Fundamentals Explorer, which offers fundamentals data from Thomson Reuters on over 30,000 companies, plus more than 5,500 analyst ratings, and reports and newswires from 82 companies. Other research providers available to all clients include Zacks Investment Research, Morningstar Equity Ownership, Market Realist, 24/7 Wall Street and Seeking Alpha. Over 100 additional providers are also available by subscription.

Investment selection: Interactive Brokers offers something for everyone here: Advanced traders will love the huge selection of products, from standard offerings of stocks, options and ETFs to precious metals, forex, warrants and futures. The retirement-investor set will be happy with the broker’s impressive list of no-transaction-fee mutual funds — over 4,300 in all — and respectable selection of 98 commission-free ETFs (and Lite customers get to trade all U.S.-listed ETFs commission-free).

Interactive Brokers also has a robo-advisor offering, which charges management fees ranging from 0.08% to 1.5%. The service offers about 70 portfolio options, and 41 of those portfolios require just $1,000 to get started. (The management fees and account minimums vary by portfolio.)

Where Interactive Brokers falls short

Interactive Brokers’ shortcomings are primarily due to the company’s focus on advanced traders:

Inactivity fees: Interactive Brokers caters to active traders, and that focus shows up in its inactivity fees for IBKR Pro customers. Accounts with balances of $100,000 or less must meet a minimum of $10 a month in trade commissions, or Interactive Brokers will charge the difference as a monthly fee. Accounts with an equity balance of $2,000 or less must meet minimum trade commissions of $20. IBKR Lite doesn’t charge inactivity fees.

There is a break here for clients 25 or younger, who have a minimum monthly trade commission of just $3.

» Don’t trade that much? View our best online brokers roundup

Website ease-of-use. Interactive Brokers provides a great deal of information on its website, but finding and interpreting the information you want isn’t always easy. For IBKR Pro customers, the various commission and fee structures can make it hard to quickly identify what your costs will be. Portions of the website are dedicated to institutional, broker and proprietary trading accounts, and that can be confusing.

Is Interactive Brokers right for you?

Interactive Brokers has always been a great choice for active traders, especially those who can move into the broker’s cheaper volume-pricing setup. Now, with the availability of free trades with IBKR Lite, even casual traders might find Interactive Brokers a strong contender. But beginner investors might prefer a broker that offers a bit more hand-holding and educational resources.

Compare Brokers

Compare the best Forex brokers on the market right now. Below you will find our highest rated Forex brokers who have all undergone our rigorous review process. For a list of the criteria we look for, see below our in-depth broker table.

We are consistently on the lookout for top-performing brokers and bringing them to you. We don’t just review a broker once, but we will go back to check that their client base are happy with the service they are supposed to be getting.

We understand that every trader is different, which is why despite this list being the our preferred brokers right now, it might not suit you and your needs.

You might want to focus on the brokers that offer the highest leverage or only those that offer CFD derivatives, therefore we have also compiled lists of different types of brokers. Here is a breakdown of the categories that you can start your broker search from:

100ForexBrokers Top FX Brokers 2020

100ForexBrokers Broker Review Criteria

To understand our thorough process when it comes to analysing brokers and their performance, you need to know that whilst brokers all offer similar products, their delivery can vary a huge amount.

We have devised a set criteria that we look for when comparing brokers, below are the major things that we look to when reviewing a broker.

Minimum Deposit

This is hugely important, especially for beginners because we don’t want a new trader to have to invest a lot of money the first time they deposit. When you start trading you need time to build your confidence, which is why only starting with a small amount is always advised for first time traders.

Fees – Spreads & Commissions

Brokers are clever in the way they charge their clients, by charging on the spread, they earn money every time a trader takes a trade. For those traders that like to scalp, the brokers will earn considerably more than those who hold trades for weeks on end.

Therefore it is imperative that you are aware of the spreads the broker charges and especially how much they are likely to change. Spreads often widen dependent on the volatility of the market, so we make sure we understand how brokers charge and how wide their spreads go rather than just how small they are, which is usually how they’re advertised.

Regulation

Regulation has been put in place to protect users. Therefore any brokers that do not have the relevant regulatory certification have not passed the procedures put in place to protect a user and is the reason why we would always recommend staying away from non-regulated brokers.

We have compiled a list of brokers that are regulated by the most sought after regulatory bodies, see here.

Customer Service

Like any business, customer service is hugely important for the retention of clients. If there are any problems then you will be forwarded to the customer service department who are in place to try to sort out any issues you have. In an ideal world, you would not need to contact a brokers customer service but realistically there are sometimes things that crop up. Even if there isn’t an issue, they can still be on hand to help guide you through the platform.

Therefore it is important for a broker to have a good team of customer service personnel. For every broker we review, we call up their team and see how long it is to get certain issues resolved, this is what we base our main judgement on when it comes to customer service.

Other Traders Feedback – Consumer Experience

Whilst we do a thorough review of each broker, there will always be things that are missed which is why customer feedback is imperative for our reviews. We look to see other users experience with the brokers and platforms to help form a judgement of the broker and in turn a ranking.

There are forums located across the web that discuss broker performances and we’re active in these groups to get an idea about how users are finding certain brokers and their platforms.

Platform & Software Ease

Most users that are looking for a broker are either new to trading or are not happy with their current provider. But primarily it is new traders, which is why an easy to use platform is important. No user wants an overcomplicated platform that could create errors when trading. Not understanding a platform can cause significant mishaps, taking larger than expected trades, not placing stop losses plus much more. This essentially can cost you money, therefore a platform that you can get to grips with quickly is important.

For the reasons above, we also do recommend choosing a broker with a demo account, this way you can practice with the platform before going live. Getting used to it in demo will reduce any human errors that are related to the platform.

Trading App

A trading app isn’t a necessity however it does make life easier. Trading apps are basically another execution platform, similar to a brokers webtrader however they tend to have less functionality, you can normally do a lot more on a desktop webtrader. For this reason we would advise against doing your analysis and decision making on a trading app, rather just use it to execute at predetermined levels or manage positions (moving stop losses, take profit levels or closing out positions).

As mentioned it’s not essential to have one but it does show that a broker wants the best for its users and that it is willing to invest in user-friendly functionality. We find that those brokers that do have an app tend to out perform those that don’t but that isn’t always the case.

Trading Education

Education in trading is very important, simply put you cannot be a successful trader if you’re not educated about the financial markets, risk management and analysis techniques. Therefore brokers that offer education material should have users interests first.

We look at brokers educational content and assess the quality of it because we want to make sure that traders are being taught the correct procedures!

Broker Age

Judging a broker by its age is slightly bias but there is rationale behind it. Brokers that are found to be scams have normally not been around for a long time, they tend to be set up with the sole purpose of making some quick cash and then getting out. Which is why we look to those more established brands and brokers that have been going for 5+ years, they will have developed a following and you can also get good feedback from regular users.

Saying this can be unfair on new brokers that are legitimate but that does not mean that we discount any broker if they’re only been trading for a short period, we will still go through the same process and should they reach our standards, we’re more than happy to recommend to our readership.

Withdrawal Process

A Brokers withdrawal process is very important. This is where you will begin to get a feeling whether a broker is looking to scam you. Those that make it very difficult to withdraw your money will give you numerous reasons why you shouldn’t; ‘you can make more with more in your account’, ‘we can manage your money for you’. All these types of reasons should have alarm bells ringing.

A good broker will have a quick process to withdraw your funds, at the end of the day, the whole reason you deposit into a trading account is to withdraw your profits from the account. Therefore this should be easy and seamless from the broker. Traditionally for security reasons, brokers will only allow you to withdraw to the account or card that you deposited with, this is common and a good security measure.

Opening an Account Processes

There is a balance between opening an account quickly for convenience versus opening one slowly as you’re going through several security procedures. Obviously you want your money to be secure and the broker needs to know that the person depositing is the person they claim to be but an easy process to opening an account is ideal because it can put people off, having to find a load of documents to prove you are who you say you are.

Risk Management Tools

This should be a staple for any broker, the ability to place stop loss and take profit orders. If a broker does not offer this then you should definitely not use that broker, even if everything else they offer is good, the fact that you can’t place stop-loss orders and in turn, manage your risk means that you are more likely to blow your account. Stop losses are key!

Trade Execution

Trade execution refers to the ability to enter the market at the price or market level that you intended. Sometimes brokers have delayed execution, which means that if you hit the ‘buy’ button, the market moves up and then the broker enters you into the market, you will have missed out on the initial move. Quick execution is more relevant for those who are very active in the markets and are looking for short quick moves.

Execution can also be affected by the speed a market moves, sometimes the broker simply cannot get you in at the price you wanted, this is referred to as slippage and does occur with all brokers. The amount of slippage is difficult to pin down, which is why for execution we will take trades ourselves to check but also read other users experience when it comes to trading in volatile market conditions.

Number of Instruments on Offer

The number of instruments on offer is important because you want to have the choice of which market you want to trade. When it comes to trading Forex, your broker will offer the major currencies (EURUSD, GBPUSD, USDCAD, USDJPY, AUDUSD, USDCHF, NZDUSD), but they should also offer the crosses of these as well as a number of minor currency pairs, these might include the USDZAR and USDCNY.

Most brokers don’t offer just Forex but also several other asset classes, commodities, stocks, cryptocurrencies plus many more. This is very useful for those who want to diversify their trade portfolio and trade other markets as well as FX.

Additional Features

Additional features are definitely a plus when looking at choosing a broker, thing like having social trading on their platform is a huge plus for beginner traders because not only can they copy experts but they can learn from them and try to understand why they’re taking certain trades, it acts as a great educational tool as well as being profitable.

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