How to Choose a Forex Broker (as a UK trader).
Top Forex Brokers in UK for Forex Trading. Britain has a long and proud history of trade and currency exchange. Known as a nation of merchants, the Brits have always seen trade as a way to increase their wealth. Top 10 UK Forex Brokers by TradersAsset. There is only one authority in the UK that regulates online financial trading. It is called the Financial Conduct Authority, or is more commonly referred to as the “FCA”.As with many other EU territories, UK Forex traders can deposit and trade with almost any broker that they will allow them to do so.
Higher leverage allows you to increase your profits significantly, but you also may suffer severe losses. Instead, they earn their profit through the spread, which, as you probably know is the difference between the buying and the selling price for a particular pair.
A tighter spread means that there is a bigger opportunity for traders to earn more money and minimise their losses. Leading forex brokers offer quite competitive spreads, as they are aware that traders can compare the spreads that are offered by different websites and always choose the ones that offer more competitive ones. As a trader, you are not prohibited from having accounts at more than one forex broker, therefore you can trade one currency pair with one broker and another with someone else, depending on the spreads that they offer.
In addition to the most important aspects which include the licencing, as well as the specifics of the trading offer, there are other things which every trader should consider before choosing the most suitable UK forex broker. These things may seem unimportant, and perhaps they are less important compared to the offered pairs and the licence which are quintessential, but the following are also significant.
Most brokers offer more than one trading platform. In addition to being able to trade on your mobile device, you may also have access to an advanced platform which includes more interesting trade features and options aimed at more experienced traders.
Many brokers offer a No Deposit, or a First Deposit Bonus to all new players, and some have few more regular bonuses which can be highly beneficial. A confirmed FCA authorisation is a sign that the broker offers secure financial transactions, but there are differences in terms of the number of accepted methods and the speed at which the transactions are processed. Some brokers charge fees on deposits made via some of the accepted methods.
Traders want to know that should any problems arise they will be able to get all the necessary help and assistance. Customer support is usually provided via phone, email and live chat. Last but not least, most reliable and respected brokers give you an opportunity to learn more and get better and trading, via a range of learning materials, including videos, e-books, webinars and other useful tools.
The Financial Conduct Authority is in charge of regulating various branches of the financial industry, including retail forex trading. This independent body has an official remit and a range of tools at its disposal. Am I only allowed to trade major pairs, or pairs that include the UK pound?
Most brokers usually provide their traders with a selection in order to cater to the different categories of traders in the online trading community. These platforms are usually in the form of a desktop application, web based platform or a mobile trading app. The platforms may also be proprietary built by the firm itself or for the firm or provided by a third party trading solutions provider such as MetaQuotes Software, the developer of the popular MetaTrader 4 platform.
The next thing that you need to be concerned about is the trading cost. This can take the form of commission charges or spreads or a combination of both.
Most forex brokers in the industry do not charge commissions on the trades that they execute unlike in the equity market. Instead, traders are required to pay a small spread in lieu of the absence of commission charges. Depending on the currency pair, it is usually less than 5 pips for the most frequently traded currency pairs. With spreads, you want to know if the broker offer fixed or variable spreads. Variable spreads on the other hand is dependent upon the market conditions. With this business model, the broker simply relays your orders to the interbank market where it will be matched.
For this service, the broker usually charges a commission on top of the spreads that you pay on the interbank market. Usually the commission is based on a small percentage of the trading volume. In addition to trading costs, check how much leverage is the broker offering.
The leverage ratio is simply the amount of capital which you can borrow from the broker to increase your market position. For example if a broker is offering a leverage ratio of 1: Take note that while it is possible to increase your profit potential with leverage trading, the risk of losing more than what you invested also increases when you use leverage.
The types of trading accounts that are available vary from broker to broker. Brokers who are beginner friendly and cater to small time traders often provide their traders with micro and mini trading accounts.
These accounts allow traders to trade in amounts that are smaller than a standard trading lot. A standard lot is equivalent to a market position of , units of currency. In addition, different types of trading accounts have different benefits and privileges. The higher ranking is the trading account, the more privileges will the account holder be entitled to. The type of trading account that traders can open is also dictated by the minimum initial deposit.
At the other end of the scale, we have the Premium or VIP trading account which usually requires a substantial amount of minimum initial deposit and can run into tens of thousands of pounds.
While it is easy to get distracted by all the bells and whistles offered by a broker, you should never neglect to check out their customer support services. This is because of the fact that no matter how experienced you are as a trader, there will always come a time when you will need the assistance of the customer support team.
When that time comes, you want to be able to get in touch with the support team without any hassles. Hence, check what are the methods that the broker has made available for communicating with the support team. In addition, take note of the hours that the support services are available. The size and deep liquidity of the forex market , along with hour trading 5 days a week, make it an appealing choice for traders.
For a step-by-step guide on everything you need to know on currency exchange see Forex Walkthrough. However, unlike stocks and commodities, forex trading has no central exchange or clearing house. The lack of transparency in the FX market has left it vulnerable to numerous instances of malpractice and manipulation.
FCA-regulated forex brokers must adhere to a number of industry standards. Of particular importance is the FCA requirement that firms keep client funds separate from company funds.
These segregated deposits cannot be used as company assets if the brokerage firm becomes insolvent.
While this means that only the established brokers stick around to offer their services, you still need to do all the due diligence to ensure that the forex broker that you partner up with is the right broker for you.
Please let us know how you would like to proceed. Even if you plan on sticking to the major currency pairs, or restrict yourself to pairs which include the UK pound, it is still good to have a choice if you decide to, so to say, broaden your trading horizons.