If you are a beginner and just started your trading journey then you must choose a broker for your trading journey. And this decision is very important to make this trading journey more successful. If we talk about the UK market then it is very vast, with a lot of brokers offering their services. As you have a number of choices then choosing the right broker is a very difficult task. But if you are going to choose the broker you must have a knowledge and understanding of some factors about the brokers. These factors are important to know as a good broker provides you with a reliable platform, accurate price quotations, and a smooth trading experience. On the other hand, a bad broker can cause technical problems, higher costs, or even money loss. So I am here to tell you about those essential factors that must be considered while choosing a broker in the UK market.
Regulation and Security
The Financial Conduct Authority (FCA) is the regulatory body that oversees all forex brokers in the UK. The Financial Conduct Authority (FCA) is responsible for implementing strict laws with the objective of protecting client funds and promoting transparency in broker operations. Brokers subject to FCA regulation are required to provide investor compensation plans and keep separate accounts for client funds. This is why UK traders must choose a broker that is completely compliant with FCA laws. Whenever you choose a broker first verify these regulations and you can check this through the FCA register where all the registered brokers are listed.
Types of Forex Brokers
There are different types of brokers available in the market and offer different services. Here are three main types of available brokers.
Market Makers
Market makers provide buy and sell quotations and create their own market for traders. They often charge a spread on the difference between the purchase and sale prices. The simplicity of market makers makes them perfect for beginners, although their spreads could be larger than those of other brokers.
ECN Brokers
Brokers that operate on the Electronic Communication Network (ECN) connect traders with liquidity providers directly. ECN brokers are a great option for experienced traders that want a quick and transparent trading environment because they often offer faster order execution and reduced spreads.
STP Brokers
STPs also called Straight Through Processing brokers are experts to handle all your trades with liquidity providers directly without the need for a middleman. They provide quicker order execution and reduced spreads, like ECN brokers but they could also charge a trading commission.
What to Look for in a Forex Broker
Trading Platforms
The platforms offered by brokers vary but when selecting a broker make sure they provide all the features and tools you want for trading as well as user-friendly interfaces. Some most popular trading platforms are MetaTrader 4 (MT4), MetaTrader 5 (MT5), and cTrader. All these tools are very flexible to use and provide you with all the advanced charting tools and automated trading features. Whichever platform you choose just make sure the platform is compatible with your device and operating system like Windows, Mac, iOS, and Android.
Fees and Spreads
Then another important factor in choosing the best forex broker in UK is the fee structure. The main sources of earnings of brokers are spreads and commissions. Spread is the amount between the bid and ask price. Some brokers provide fixed spreads and some have variable spreads that change with market conditions. The commission is the price that brokers charge on each trade. Some brokers charge more commission with a higher spread and some low commission with tighter spread. And ECN brokers charge commissions in exchange for tighter spreads. Before choosing a broker first see his fee structure and then select the one who suits your trading style.
Leverage Options
Traders can control the larger positions with a very small amount of money and this function is called leverage. Leverage is limited in the UK by FCA regulations to 30:1 for major currency pairings. Here keep in mind that higher leverage can increase both the chances of profit and your risk. So whenever you choose a broker first see their leverage options and choose one that matches your risk tolerance.
Then another important thing is to make sure that the broker provides different ways of deposit and withdrawals like bank transfers, credit/debit cards, and e-wallets like PayPal or Skrill. Also, ensure that the broker handles withdrawals quickly and without charging high fees.
Customer Support and Educational Resources
Customer support helps you when any issue arises in your trading journey and you immediately need help to solve this issue. Make sure the selected broker is available 24/7 through multiple channels such as phone, live chat, and emails. This broker also provides additional educational resources like webinars, video tutorials, eBooks, and demo accounts that help beginners to know the ropes of trading.
