[Tips] How to choose a broker and not lose money

Trading Discussion
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Inspired by a post that was recently published here about losing money because a broker disappeared under the pretext of a hacking attack, I decided to write an article.

You will find here some tips especially important for beginner traders. Simply put, something you need to know.

PS. What are your experiences in this topic?
PPS. Please do not ask us questions about a particular broker, our best knowledge is above.

Here we go…

How to choose a broker and not lose money.

Beginning traders often ask us how to choose a good broker. In this regard, a few tips.

Choose a good, big broker in your country. In case of a legal dispute you always have a chance.

The best are big brokers from USA, France, UK, Germany, Denmark, Switzerland - countries with strong financial regulations. Big brokers from Australia and Japan are also OK. I would avoid small countries, usually their financial regulations are worse and their execution is problematic. Definitely avoid brokers from unregulated countries.

Avoid brokers from tax havens and faraway countries. In case of a legal dispute - you will lose the case with a very high probability.

Many times I have heard stories about how brokers from tax havens disappear with clients’ money. This was, is and will be the case as long as they find clients willing to deposit money to an unknown company. Do not!

You should choose the best, big brokers with good reputation, from countries with good financial regulations and efficient law enforcement agencies. There are a lot of good brokers out there, there really is something to choose from and there is no point in taking any chances. Don’t just go by price/commissions!

If you still have any doubts add an additional condition - the broker must have been in business for more than 10 years. In well-regulated countries you can check whether the company has existed, for how long and what it does. For example, in UK the FCA regulates companies in the financial field.

That’s it, should help in most cases. :slight_smile:

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I do think it’s important to bring this to people’s attention, as I’ve been noticing more and more people deciding to get into trading lately and there are a lot of posts about people being scammed by brokers that never process their withdrawals.
There are a few things I disagree with in your post, starting with the need for regulation. Yes, I understand many don’t want to take the risk but there are times where going unregulated may be best. For example, if you need to use leverage higher than 1:30, an offshore broker may be the best choice. I personally trade with an unregulated broker and have never had any kind of issue.
Good reputation is important, so fortunately we can find many reviews for most brokers online. If there isn’t any information out about a particular company, it’s best to avoid them. I know that I don’t want to be one of the first to test out a new broker. I think true user reviews are one of the best ways to tell, and people should get that info from multiple sources to insure that none of it is manipulated.
Anyways, that’s just my input!

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Best tip - trade in the right direction.

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Thanks for the interesting read! :smiley: I was curious to see how long you’ve been trading, and when I checked your profile, it seems like you have pretty cool background on trading! Haha. :blush: It’s nice to have you here!

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Thank you for your feedback.

Unfortunately, broker reviews are one of the least valuable things to check. Why? Because any opinion can be false. It is very easy to buy reviews. Both positive about yourself and negative about your competitors. It works the same way as fake reviews on amazon or ebay. And theres’s no way to verify this.

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I’ve seen others who trade with unregulated brokers and have been for many years and are fine. I really think this is a YMMV case. It’s riskier but if it works out better vs a regulated one, then why not. Just harder for newbies who aren’t as discerning as they may fall for scammier brokers.

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It’s true that opinions can be false, but I feel that you can get a more accurate view by checking multiple sites. It can be a red flag if you notice multiple users complaining about the same issues and can help to quickly dismiss a shady broker. Alternately, if the broker has mostly positive reviews on various sites with no serious complaints, it can give peace of mind. I just feel like other real traders give the most accurate view of what dealing with a specific broker is really like.

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