The top trusted Forex brokers will share several common features including the regulation, trader guarantees, Negative Balance Protection, segregated accounts, KYC/AML guidelines, and GDPR compliance. At the same time, they will provide opportunities for low-cost trading on the Forex market with tight spreads and low or no commission fees, flexible leverage and margin requirements, promotional campaigns or other traders’ benefits, and free educational packs and trading tools. Some of these features are crucial to the successful trading performance of an individual and should never be overlooked. We will discuss the significance of each of the mentioned characteristics of a trusted broker in greater detail below.
License & Regulation
You will not be able to find any trusted Forex brokers in the US who do not have licenses or are not regulated by the local authorities such as the Commodities Futures Trade Commission (CFTC) or the National Futures Association (NFA). Similarly, there are dozens of regulatory authorities within different jurisdictions across the globe that monitor the performance of individual Forex brokers. Therefore, it is highly recommended to trade with a broker that holds a regulation from your regional market regulator.
In Europe, the main market regulators are Cyprus Securities and Exchange Commission (CySEC) and the Financial Conduct Authority in the United Kingdom (FCA). If you come across a European broker with no licenses from any of these two regulatory bodies it is better to avoid trading with the broker. The most trusted Forex brokers list in Europe will feature only FCA or CySEC regulated companies.
The same applies to other regions, as well. In Asia, the notable regulatory authorities are the Financial Services Agency in Japan (FSA), the Dubai Financial Services Authority (DFSA), the Monetary Authority of Singapore (MAS), the Securities and Exchange Board of India (SEBI), etc. On the other hand, Africa and Australia are two regions with a single renowned regulatory authority for each. The brokers based in South Africa should hold a license from the Financial Services Conduct Authority (FSCA) of South Africa and the Australian-based brokers must be regulated by the Australian Securities and Investments Commission (ASIC). The most trusted Forex brokers list in the world will feature brokers that are regulated in multiple jurisdictions by several regulatory authorities.
Trader guarantees are usually the protections from the losses that are caused by anything else other than the trading performance of an individual. No one can guarantee that you will profit from your trades. However, the brokers will offer investor protection programs that cover any losses arising from the company’s insolvency or financial crisis-induced losses. The best thing is that traders do not have to pay any fees for their fund’s protection. If the broker is a member of any protection fund whatsoever, the program automatically covers eligible losses.
For instance, the top ten trusted Forex brokers in Canada will provide trader guarantees under the Canadian Investor Protection Fund (CIPF). The CIPF covers up to 1 million US dollars for all general accounts registered with its member broker under its coverage policy. Hence, those individuals trading with a CIPF member broker will have guaranteed protection of the funds in case the company goes broke or there is a financial market crash.
NBP – Negative Balance Protection
Negative Balance Protection is a relatively new concept that became a strong requirement of numerous regulatory authorities after the financial crisis of 2008-2009. Many traders were losing much more financial resources than they had available in their account balance due to the rapidly moving market against their trades. Not all Forex brokers provided NBP back then. Hence, these traders were burdened by heavy loans eventually.
Negative Balance Protection ensures that no matter how strong the market movement is against your trades your account balance will not enter a negative zone. On the person’s loss-making trades as the balance of the account rapidly falls, margins call will save the trader from going into debt. The margins will automatically close such trades. NBP is a strong requirement for the regulated Forex brokers in many jurisdictions globally.
The notion of segregated client accounts also came into light quite late in the Forex industry. However, nowadays all the companies on the list of trusted Forex brokers have segregated client accounts. The regulatory authorities oblige brokerage companies to hold the funds of their customers on separated accounts from the company’s account. Account segregation ensures that the financial resources of a client deposited on a broker’s account remain untouched no matter how the broker performs financially. Even if the brokerage company goes broke and goes into liquidation the funds on client accounts will be returned to traders.
Account segregation is one of the first signs of the reliability of the brokerage company. Furthermore, it will be impossible to find any regulated Forex broker that does not keep traders’ funds on a separate account. All the brokers from the top 100 Forex brokers list keep company accounts separate from the traders’ accounts.
KYC and AML are the most important guidelines that regulated and trustworthy Forex brokers implement. KYC stands for the ‘Know Your Customer concept, whereas AML is a term for Anti-money Laundering. These two concepts carry different meanings and purposes but remain integral parts of Forex trading globally. KYC is important for verifying the identity of the trader to avoid identity theft or related crimes. Whereas AML is a requirement of regulatory authorities which employ legal processes to avoid cyber-crimes and scam schemes.
Both AML and KYC have to be in place to prevent the unlawful usage of financial services by various individuals or organizations. Hence, the top 10 Forex trading platforms will feature AML and KYC during the registration procedures. During the registration, the brokers will require the trader to upload supporting documents verifying the identity of the individual (such as IDs, Driver’s licenses, or Passports). Whereas AML procedures (placement, layering, and integration) are carried out independently not involving the trader.
GDPR is a General Data Protection Regulation which was enforced in the European Union in 2018. It became a requirement for Forex brokers to comply with GDPR. The regulation covers everything related to the digital safety of the users from e-privacy to data encryption. The most trusted forex brokers in the UK, for example, follow the best-practice guidelines provided by the NIST cybersecurity framework. This framework operates with five pillars of identifying the risk, protecting against the potential events, detecting incidents quickly, responding to the occurring cyberattacks, and recovering seamlessly.
GDPR is an extensive 88-page guide on how to protect the private data of clients. All Forex brokers must comply with GDPR since the traders provide the most sensitive private information online such as the bank account or card details, personal identification documents, information on private equity, etc. Hence, be it trusted Forex brokers in Nigeria, the Philippines, or the United States the company must have GDPR compliance in place.
Industry Standard Features
The Forex industry is the largest financial sector in the world. Therefore, the competition between the participating companies is extremely high. This competition has a very positive effect on the quality of the brokerage services available on the market. It sets out certain market standards that the brokers are obliged to follow to attract customers and retain the existing ones on their trading platforms. However, it also causes a significant diversity on the market in terms of various fee structures, available financial instruments, account types of the brokers, and trading platforms offered to the clients.
Some brokers will be operating with commissions, while others will implement the cost within the spreads. The best Forex broker for beginners, for instance, would offer commission-free trading on special Micro, Cent, or Ultra-low trading account types. Furthermore, they will be providing free educational resources, promotional campaigns, flexible trading conditions, and other trader benefits, which we will cover below.
Spreads and commissions are two main revenue resources of brokerage companies. Therefore, you cannot expect an ultra-tight spread Forex broker to operate completely commission-free. However, most of the brokers have now switched to commissioned trading accounts to attract more traders and their spreads are not inconvenient, as well. For example, you would easily come across trusted Forex brokers in SA that offer spreads from 1 to 3 pips on Forex currency pairs. Some international brokers might even offer spreads starting as low as 0.6 pips on the Forex assets while not charging any commission fees.
When choosing a broker it is important to calculate your trading costs. Several options allow you to trade with 0 pip spreads on currency pairs but if they come with a commission rate of $10 or more per lot per trade, eventually, your 0 spread trading would be much more costly than commission-free with average spreads.
Many regulatory authorities restrict or introduce a leverage cap in the Forex trading industry, or otherwise have strict margin requirements that reflect on maximum leverage available for the traders. For example, in the European Union, there is a regulation that restricts leverage on Forex currency pairs up to 1:30. The cryptocurrencies can be traded with a maximum leverage of 1:2, etc. However, since the top 10 Forex brokers in the world operate in multiple jurisdictions globally they will offer different leverage limits to traders from different countries.
Those brokers with the regulations from the Australian Securities and Investment Commission (ASIC), or the Financial Services Conduct Authority in South Africa (FSCA) will often offer flexible leverages that can go maximum of up to 1:1000. Hence, depending on the region where you are currently residing you might trade with leverage from 1:30 up to 1:1000 on Forex currency pairs.
Bonuses & Promotions
Bonuses and promotions are the favorite part of Forex traders. However, some regulatory authorities restrict the bonus offerings in Forex, as well. The European Union has one of the strictest regulations regarding promotional campaigns. The brokers are not able to offer bonus schemes or encourage and reward traders monetarily in the EU. But it is not the case in every jurisdiction worldwide. For instance, the best Forex broker in South Africa will offer several promotional campaigns which will include deposit bonuses, no deposit bonuses, loyalty programs, performance-based trading contests, rescue or support margin bonuses, referral programs, etc.
However, it has to be noted that these bonus programs come with complex terms and conditions frequently. None of the trading bonuses are withdrawable immediately and instead require traders to satisfy trading volume requirements before they can withdraw any profits generated with bonus money.
Free Education & Tools
Knowledge and experience are some of the key factors that decide the performance of every individual trader. Without education or understanding of market movements, platform functioning, and usability of the tools, Forex trading would very much be like gambling. That is why every company from the top Forex brokers list will put a great effort into developing the educational resources and tools for its clients. Some of the best brokers will provide numerous materials such as eBooks on Forex trading, webinars held by experts in the industry, video tutorials on how to use the MetaTrader or proprietary platforms, glossaries and terms, infographics, and so on.
It is an absolute necessity that the broker provides these educational resources free of charge for its registered clients. That is why frequently you will come across questions related to your trading experience during the registration process with the broker. The absolute best brokers will assess your knowledge and experience in advance to later support you in any way they can.