Not all Forex brokers are equal. Within the large universe of Forex brokerages seeking your business, there are both bad guys and good guys. There are several questions you need to ask and set criteria to be met when determining which Forex broker is one of the good guys.  

The first criterion relates to trustworthiness. Unfortunately, fraud has been known to happen within the currency trading arena. It is imperative that you protect yourself from unscrupulous and fly-by-night operators within the Forex realm. Several Forex brokers have long track records and are subject to the stringent regulations found in North America and the EU.

Examples of highly regulated Forex brokers with long histories and reputations include Interactive Brokers (which, as a U.S. publicly traded company, has even additional layers of regulation), MG Forex, Oanda, and MB Trading. Although it is impossible to paint all Forex brokers in a given category with a broad brush, it is prudent to avoid Forex brokers domiciled in locales associated with weak regulation such as Cypress.

The next facet that must be reviewed is the minimum account balance required. This can range from just $1 to open an account with Oanda all the way to a $50,000 minimum balance needed to open a higher end account with Duckascopy Swiss. You often will find that accounts with a higher required minimum balance charge less fees via the spread.

Another important criterion to review is the amount of leverage that a given Forex broker will allow you. Increased leverage allows you to greatly amplify your return on invested capital; however, it can also exacerbate losses when a given position goes against you.  Conservative Forex brokers such as Interactive Brokers limit your leverage to the 50:1 range.  Forex brokers, which allow you to more aggressively employ leverage, include FXCM and CMS Forex, which permit up to 400:1 leverage.

The next important factor is what is termed the “spread.”  Larger spreads insidiously detract from your profits in a subtle fashion, and many traders never realize how much is being lost to them. You should ideally have a Forex broker with spreads in the 1-3 pip range for major currencies. Forex brokers with spreads which go beyond this range can be considered among the “bad guys.”

Finally, you should select a Forex broker with a good reputation for providing a high level of customer service and support. Forex brokers that consistently rate at the top of customer satisfaction surveys include Interactive Brokers, MIG investments, and Varengold Bank.

When it comes time for you to begin your exciting journey into the currency markets, do not make the mistake of just opening an account at the first Forex broker that catches your eye. Make sure you scrutinize all the applicable terms and conditions as referenced above. Selecting one of the “good guy” Forex brokers is a critical first step toward your future Forex trading success.