Our guide on how to choose a broker has all the information that will help beginners, intermediaries, and advanced traders locate their best brokers.
The financial market has become so competitive, and everyday traders are looking for reliable brokers to help them achieve their trading goals. Note that there are thousands of brokers dominating the financial market. However, how certain are you that a broker will meet your trading interests?
We understand the challenge that most traders go through to find the best brokers. That is why we decided to chip in and make the search process simple for you. This ultimate guide lists the key factors that you must look for in a broker before you decide to take a plunge. So, without further ado, let’s jump into it.
In This Guide
How to Choose a Broker
Tips on Choosing the Best Broker
Our advice for online traders is that you need to be very keen when it comes to choosing a broker. This is because the financial markets host both legitimate and illegitimate brokers. Therefore, if you want to be sure of the credibility of a broker that you are choosing, it is best to rely on expert recommendations.
Here at Tradingguide.co.uk, we also recommend the best brokers for UK traders. We have conducted all the research and tests on these brokers, so you do not need to worry about whether they are legitimate or not. All you have to do is compare their offerings and features with your trading needs and see if they match.
Below, we have stated the essential factors that will guide you to choosing the best broker. Brokers do not have the same features. Therefore, with these elements, choosing one will not be something to worry about.
1. License/Regulations
Without a doubt, regulations and licenses are the first things that you must consider if you want to trade successfully. Most countries – especially in the UK, the EU, and North America – consider trading legal only if you are using a licensed and regulated broker.
When we say a regulated broker, it means that the broker must comply with the stringent conditions of world-class authorities. These conditions include ensuring they have adequate capitalisation and securing your trading funds through segregated accounts that even the brokers themselves cannot access.
A broker adhering to tier-one authority’s conditions will give you peace of mind while trading, since there are many fake brokers in the market waiting to scam you off your hard-earned cash. Additionally, you are guaranteed to get your funds back in case a broker becomes insolvent.
Let’s look at some of the examples of regulatory agencies with strict principles that regulate brokers globally.
- The Financial Conduct Authority (FCA) – UK’s leading financial regulator
- The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) – United States regulators
- Australian Securities and Investment Commission (ASIC) – Australia
- Cyprus Securities and Exchange Commission (CySEC) – Cyprus
Note that different regions or countries have their own financial regulators. Therefore, confirm which authority represents your region and what brokers they regulate. If you are a foreign trader, it is also best to consider choosing a broker with easy access to your local financial markets.
2. Identify your Market Securities
There are many securities to trade in the financial markets, such as forex, stocks, commodities, cryptocurrencies, ETFs, CFDs, and more. Therefore, conduct the required due diligence on a broker and ensure that they offer the securities that you are familiar with.
Some brokers will allow you to access local markets while others foreign markets. There are brokers that will also let you trade on both local and foreign markets. So for that reason, you should also choose a broker based on your area of speciality.
Our advice is that you should consider a broker that hosts a wide range of securities, especially if you are a beginner. This gives you a platform to test different markets before you narrow down your final choices. It is also a good way of diversifying your trading portfolio, thereby reducing your risks for losses.
3. Charges
Before you start any form of trade, regardless of the security you want to invest in, you should expect to pay broker charges. Generally, trading charges can either be charged as commissions or spreads. These trading charges vary on every broker depending on the type of assets they offer and the markets you will have access to.
In most cases, a broker will charge you high trading fees because of their advanced trading tools and advanced platforms. So, find a broker that not only hosts appropriate resources for your trade but an affordable one as well. It’s all about balancing the assets available, resources, and trading charges.
Apart from trading charges, brokers also have additional fees, which also vary with a broker. You will find some brokers with a minimum deposit requirement while others do not have.
In addition, inactivity fees should also be an essential factor to look into because some of the set periods for the inactivity fee to kick can be tight for most traders. You do not want to be caught by surprise and pay an inactivity fee simply because you do not confirm this feature.
4. Deposit and Withdrawal Methods
When looking for a good and reliable broker, you should make sure that they allow you to make deposits and withdrawals without too much hassle for currency exchange.
Unfortunately, some traders choose to turn a blind eye on this element only to find out that the payment methods on their broker of choice are not what aligns with their preference. This forces them to exchange currencies every time they want to make a deposit, which consumes time and money.
The typical payment methods that you are likely to find on any broker are credit/debit cards, bank transfers, and e-payments such as PayPal and Neteller. However, you will not find all these payment methods on all brokers. While some allows all, others will only accept one or two.
Besides the payment methods, it is recommended to make sure that these transactions are done in a speedy and efficient manner using various currencies, including the US dollar, which should be accepted globally.
5. Trading Platform
Every broker must provide you with a trading platform since this is the place where trading activities take place. Therefore, novice traders should pay keen attention to finding a trading platform (MT4, MT5 brokers UK, Ninja trading platfrom) that they will use with ease.
The trading platform of any broker needs to support its traders with trading materials and educational resources, which they can use to boost their knowledge and strategies. Most brokers provide such resources for free so depending on your level of expertise, choose the one that will keep you trading for a more extended period.
Some brokers do not have demo accounts on their platform. However, it shouldn’t be a determining factor when you’re learning how to open trading account. Such brokers mostly do not have a minimum deposit requirement and their trading charges are also extremely low. Therefore, if you find such a broker to have all the qualities that align with your needs, we advise you to go for it.
Demo accounts are an essential tool on any broker’s platform. New traders can take advantage of such accounts and practice trading for as long as possible before committing to the actual trading accounts.
In our guide about “Best Crypto brokers in the UK 2024” you find out about How to choose a crypto broker in the UK, list about the most popular crypto brokers etc.
6. Customer Service
Like any other business, trading brokers are not perfect, and there are times that traders will experience trading issues. When such problems occur, you need a reliable customer service to help you with the matter as quickly as possible so that you can get back to managing your activities.
Note that some brokers will give you the best service when you create an account with them. However, when it comes to trading issues, they are hardly available, leaving you frustrated and unable to focus entirely on managing your trades.
Through demo accounts, you will be able to gauge a broker’s customer service fully. Start by checking their availability, whether they operate 24/7 or only five days a week. This allows you to schedule your trading days successfully.
Lastly, customer support services are mostly reachable via email, phone calls, and live chats. Do not forget to confirm the communication channels a broker allows since you will be able to decide if it works best for you or not.
7. User Comments
It is a good idea to go into the internet and search for what users of your preferred broker are saying before you give it a try. Search for these reviews on Google Play, App Store, and TrustPilot because most brokers in today’s financial markets are backed up with mobile apps.
Conducting further investigations on a broker clears any doubts you had, making you fully concentrate on managing your trading activities.
Broker’s Business Model
The kind of spreads you will be charged, whether fixed or variable, will depend on a broker’s business model. A broker’s business model can be described in various forms, including:
- Non-Dealing Desk (NDD) brokers
- Market Maker
So what do these brokers mean, and how is your trading level associated with each of them. Let’s take a look.
Market Makers
These brokers are also known as Dealing Desk brokers, and they process their customers’ trading instructions using their dealing desk. They provide buy and sell quotes, and they are indifferent to individual trader’s decisions.
Dealing Desk brokers offer all market securities. Therefore whether you are a trader with a forex trading interest or stocks, Desk Dealing brokers might be worth your consideration.
Non-Dealing Desk Brokers
Unlike Market Markers, Non-Dealing Desk brokers pass your trading activities to third parties. They comprise two types of brokers, namely Electronic Communication Network (ECN) brokers and Straight Through Processing (STP) brokers.
- ECN Brokers: ECN brokers use an electronic communication network to connect traders with other participants. They can’t trade against their clients but can consolidate the other participants’ price quotations leading to tighter bid-ask spreads. Simply put, with ECN brokers, you get more liquidity and direct access to stock and currency markets.
- STP Brokers: These are Non-Dealing Desk brokers that send your trade to another party without the dealing desk interference. These brokers have various liquidity providers that generate their own bid and ask prices.
- DMA Brokers: Direct Market Access (DMA) trading enables individuals to trade directly on an exchange without the need for an intermediary. Instead of relying on a broker to execute trades, DMA allows traders to access the market directly, including direct access futures for those looking to trade futures contracts.
STP brokers trade against their clients, which can cause a conflict of interest in the long run. However, their order execution is fast and easy, making it a good choice for frequent traders.
On the other hand, ECN brokers in the UK are very flexible with their pricing and have a transparent trading platform. They are also great for experienced traders looking for a more advanced platform to challenge their trading skills.
Most brokers globally offer both ECN and STP platforms. The difference between these two platforms is minimal, making such brokers a target by most expert traders. Remember that trading with an ECN and STP broker is better than choosing a Market Maker broker. But, it goes down to a trader’s preferences.
You can read about The Best Brokers for Bitcoin Trading in the UK 2024 in our other article.
Risk Management
To ensure the safety and legitimacy of your trading endeavours in the UK, it is paramount that you verify the membership of your chosen trading platform with the FCA. This can be easily achieved by locating the FCA reference number at the footer of the platform’s website. Then, confirm a platform’s official registration status using this number at the FCA register and ensure its details have been consistently updated within the past year.
With so many unregulated trading platforms in the UK, it is essential to exercise caution for an exciting trading experience and to safeguard your funds.
We always advise our readers to identify the type of traders they intend to be before entering the trading markets. If you want to be a long-term trader or investor, a broker must have essential risk management tools.
Risk management tools protect you from incurring huge losses in cases where the market behaviour does not go according to what you had envisioned. So as a beginner, learning how to manage the risks that you might encounter in your trade is essential.
For example, margin trading is a risk itself. So when a trader is applying leverage to their trade, not only are they risking their potential profits but the entire investment.
Simply put, leverage trading is a great strategy to make a good amount of money. However, when you lose on leverage, the loss is huge, which can end up affecting your entire trading activities.
If you apply risk management strategies on such trades like stop loss or take profit, you minimise the risks of losing a lot of money. This is an essential detail that newbies must be aware of before choosing a suitable broker.
Bottom Line
One thing to note is that many brokers nowadays entice traders with promotional offers and bonuses for you to sign up for a trading account with them. Do not be driven by rewards and offers without confirming how legitimate a broker is and if they fully complement your trading interests.
If you are new to the trading industry and are looking for a reliable broker or trading app for long-term activity, simply follow our guidelines above.
Expert traders seeking to find a good broker should also consider the trading platforms that are supported with advanced trading tools.
Some brokers do not have advanced trading platforms like the MetaTrader 4 and MetaTrader 5, or advanced charting packages to fully support your trading needs. So if you do not check such features, you will only choose a broker that will not give you the experience you deserve.
Additionally, you can consider exploring cTrader platform for alternative trading platform options.
7 Replies to “How to Choose a Broker”
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25,000 hours of testing 70+ brokers. Our recommended broker is Plus500.
Our recommended broker is Plus500.
Choosing a broker is one of the most important decisions you'll make, so it really is worth taking the time to be organized, compare brokers thoroughly, and carry out the due diligence that is needed.
Almost all brokers say they offer tight spreads... Check their site if they have access to deep liquidity pools and they get prices directly from liquidity providers. This will minimize slippage, get you the best quotes, and allow you to react in real-time to market events. Happy bidding!
I want to start investing and needed advice on how to choose a broker in the UK. Do I need to open an investing account?
When choosing a broker it is better to pay attention to the actual performance indicators, rather than advertising tricks, so you do not regret the choice later
For the lowest pricing, Fidelity is the best day trading platform thanks to $0 trades with no payment for order flow. Fidelity aside, TradeStation and TD Ameritrade offer the most trading tools and platform customizations. Finally, for the lowest margin rates and most order types, the trading platform from Interactive Brokers is best.
Assuming the brokers you’re choosing between are reputable, the next point to consider is whether they offer all of the features you require to trade. This can be broken down into three categories:
- Services & instruments
- Platforms & account types
- Trading features, risk management tools & funding methods
- Services and Instruments
If you are a beginner in trading, and just choosing broker I recommend brokers with classical trading platform like MT4! with I can say that Metatrader 4 is a universal trading platform that allows to trading of any financial instruments using several types of market orders, including sell and buy stop or limit orders. You can open as many charts in your Metatrader as you wish - this possibility is limited by the calculating power of your computer. I really like the big advantages of this platform is that they support customized technical indicators - the feature that can’t be found on other platforms.