LESSON 2 - FOREX BROKERS

A Forex Broker, also known as a retail broker, or currency trading broker,  is a  financial institution that allows traders to set up a margin trading account and lets you trade online through the MetaTrader 4  trading platform. 

DARA is an add-on to the MetaTrader 4 trading platform and before installing DARA you must choose and signup with a Forex broker and download your brokers MetaTrader 4 trading platform. 

There are hundreds of forex brokers out there and choosing the right broker for you can be challenging. Here are the TOP 5 most important questions you should be asking when choosing your forex broker.

 

QUESTION 1 -  WHERE IS THE BROKER LOCATED?

This is by far the most important aspect when choosing your broker. You should always choose a broker that is closest to your country of residence and ideally has an office in your country or city. Visiting your broker in person is an excellent way to build long-term relationships and is something you should be striving for from day one. Trading will likely be what you will do for the rest of your life  so it is important to start your journey with the correct partners. Search for your nearest forex broker online and go to visit them in person to get to know them. In a world that is increasingly online, it is great to see businesses that are happy to greet their customers face to face.

Having a broker in your local country also means that you will be protected by your local regulator and local laws in case things take a turn for the worst. If you're in Dublin and your broker is in Belize you have no hope of getting any help from your local regulator.

 

QUESTION 2 - WHO IS THE BROKERS REGULATOR?

This is a must. Using unregulated brokers is the same as just giving your money to a bloke you met in the pub. He gave you his word that he will look after your money…yikes…

Financial regulators give licences to Forex brokers and ensure they obey the rules of the law. This means client money is segregated and kept separate from the brokers own funds. Proper background checks are done to prevent money laundering and the trading conditions are fair to you as the trader.

Forex brokers that are regulated in the UK and the EU, fit under FSCS (Financial Services Compensation Scheme) and in case of the Forex brokers bankruptcy your trading funds will be protected up to €100,000.

Be sure to check that broker of your choice is regulated by your local financial regulator.

Here is a list of the best regulators in the world:

  • The regulator in the UK is the FCA (Financial Conduct Authority)

  • The regulator in AUSTRALIA is the ASIC (Australian Securities and Investment Commission)

  • The regulator in the US is the NFA (National Futures Association)

  • EU Maltese regulator MFSA (Malta Financial Services Authority) is known to be crypto friendly so we think it deserves a mention as well.

Are all unregulated brokers bad?

In most cases yes, however, there can be genuinely good brokers that are unregulated and still provide a good service. The only reason they are not regulated is due to the fact that they offer crypto trading ( still an unregulated asset class). If you trade cryptos with an unregulated broker make sure you tread carefully and don’t send large sums of your hard earned capital to them. Make sure to test the trading process and withdrawal process with a smaller test amount first.

 

QUESTION 3 - WHAT TIME ZONE CHARTS THE BROKER HAS? 

Trading with the proper chart time zone is a must. We all need to ensure that we are trading with the same looking charts. Not all forex charts you look at are going to be shown in the same way. If your broker uses a different time zone for their charts than the rest of the global traders around the world it can be extremely detrimental to your trading strategy and even produce false signals.

The universal chart time zone professional traders use is 5 PM ET NEW YORK TIME CLOSE CHARTS. This ensures 5 daily candles every week and a new candle starts every day  at 5 PM ET or 10 PM UK Time.

The chart time zone on Metatrader 4 is set by the broker and can’t be changed, so ensure that your broker uses the correct 5 PM ET close charts before signing up.

 

QUESTION 4 -  IS THE BROKER DEALING DESK OR STRAIGHT TROUGH PROCESSING BROKER?

A Dealing-Desk broker is a market maker that either matches your trade with another trader or takes the other side of your trade thus taking the risk and paying you if your trade is a winning trade.

While Straight Through Processing (STP) broker (sometimes called an ECN broker) sends out your orders directly in the open market. You might think that a dealing desk broker has a conflict of interest but it is not as simple as that. Regardless of what type of trading process they operate with, the brokers make their money from commissions so the more you trade and the longer you trade with them the more money they make. 

Our preference, of course, is to use straight through processing brokers. But if you trade in the US or in the UK with a Spread-Betting account (Tax-Free in the UK) a dealing desk broker is the only option for you. One advantage that Dealing-Desk brokers have is that they have instant execution and none, or very little slippage as the orders will be instantly matched with the order side. The order does not need to go into the open market to be matched and executed.

 

QUESTION 5 - WHAT ACCOUNT TYPE TO OPEN?

Brokers make this unnecessarily complicated. The simple answer is that you need the regular, standard, normal trading account. You don't need the PRO, RAW, RAZOR or whatever else they are trying to sell to you. 

Spread-betting account

Spread-betting is Tax-free in the UK so you may take advantage of this. Mind you, Spread-betting accounts are only offered by Dealing desk brokers and while it is tax-free for you, the Broker needs to pay gambling tax on your winnings, so your trading costs can be higher than a regular fx trading account.

Demo or Live?

Demo or practice account is a great way not only to test your trading skills but also test your broker. All FX brokers will offer a FREE demo account so make sure you create one before you trade on a Live account. Take your time and don’t succumb to broker pressures funding your live trading account instantly. If the broker closes your demo account after 30-days, just open a new one. 

Avoid the BONUS offer

Some brokers will try to lure you in with a Bonus offer on your deposit. This is a dirty trick to lure in new traders. Do NOT let this fool you. You will not be able to withdrawal the bonus and this is only offered to get those traders with a small amount of funds to trade with way more leverage than their account can handle.

 

WHICH BROKERS WE USE?

These are the brokers we trade with, all of which have passed our demanding questions and face-to-face scrutiny. 

 

 
TRADE WITH PEPPERSTONE    CLICK TO OPEN ACCOUNT

TRADE WITH PEPPERSTONE

CLICK TO OPEN ACCOUNT

 

Pepperstone

  • FCA and ASIC regulated with offices in London and Melbourne

  • Pepperstone has excellent chart data that we use for our testing

  • Straight through processing broker

  • 5 PM ET charts

  • Founded in 2010 and owned by one of the largest private equity firms Champ Private Equity

  • Offers to trade in FX, Commodities, Equities, Bitcoin CFD and other top Crypto CFD’s

  • MT4 Trading platform


 

 
TRADE WITH INFINOX    CLICK TO OPEN ACCOUNT

TRADE WITH INFINOX

CLICK TO OPEN ACCOUNT

 

Infinox

  • British FCA Regulated broker with offices in London

  • Trading fund protection of up to £1,000,000 (on top of the standard £50,000 FSCS) with insurance from LLOYD’S

  • SIPP Accounts available to trade with your UK pension

  • Straight through processing broker

  • 5 PM ET charts

  • Offers to trade in FX, Equities, Commodities, and Bitcoin CFD and other top Crypto CFD’s

  • MT4 Trading platform


 
 
TRADE WITH BLUEBERRY MARKETS     CLICK TO OPEN ACCOUNT

TRADE WITH BLUEBERRY MARKETS

CLICK TO OPEN ACCOUNT

 

 

Blueberry markets

  • ASIC Regulated broker with offices in Sydney

  • Boutique brokerage with a personal touch. Do you want to talk to your brokers managing director directly? Then Blueberry markets is your broker.

  • Straight Through Processing broker

  • 5 PM ET charts

  • Excellent spreads

  • Offers to trade in FX, Equities, Commodities

  • MT4 Trading platform


 
TRADE WITh TIER1FX     CLICK TO OPEN ACCOUNT

TRADE WITh TIER1FX

CLICK TO OPEN ACCOUNT

 

Tier1FX

  • MFSA regulated broker with offices in Malta

  • Straight through processing broker who specialises in institutional traders

  • 5 PM ET charts

  • Interbank STP spreads

  • Offers to trade in FX, Equities, Commodities and Crypto-Currencies

  • MT4 Trading platform

  • Excellent for trading in Cryptos


 
TRADE WITH OANDA    CLICK TO OPEN ACCOUNT

TRADE WITH OANDA

CLICK TO OPEN ACCOUNT

 

Oanda - Broker for US traders

  • Global FCA, ASIC and NFA regulated broker with offices in New York, San Francisco, Toronto, London, Tokyo, Singapore and Sydney

  • The only NFA regulated broker that has 5 PM ET charts thus the only option for US-based traders.

  • Market maker broker

  • Offers to trade in FX

  • MT4 Trading platform


 

 
TRADE WITH FXCM    CLICK TO OPEN ACCOUNT

TRADE WITH FXCM

CLICK TO OPEN ACCOUNT

 

FXCM - Broker for Spread-betting accounts

  • Global FCA and ASIC Regulated broker with offices in London, Berlin, Paris, Sydney and Hong Kong

  • 5 PM ET charts

  • Market maker broker

  • Offers Spread-betting accounts in the UK

  • Offers to trade in FX, Equities and Commodities

  • MT4 Trading platform

 

Whichever broker you choose ensure you do plenty of testing and practice on a demo and small live account to make sure your bots work as expected. Different brokers can use different market symbols and trading platform settings and this can affect how your bots operate.