Welcome to our trading brokers guide. Here you will find an easy to understand explanation of trading brokers including what they offer, the different types of trading brokers, what to look for, how to open a trading account and more.
Trading brokers provide an online trading platform and trading account for retail and institutional investors to buy and sell trading instruments such as stocks, shares, indices, forex currencies, cryptos, bonds, commodities, precious metals, energies, CFDs and ETFs. They act as an in intermediary between traders around the globe and the various markets that they are trading.
You can deposit and withdraw funds into your trading account through a trading broker using a variety of convenient methods such as bank transfers, credit/debit cards and online payment processors such as PayPal, Skrill, Neteller, etc.
Trading brokers also provide a range of additional services to support your online trading such as trading tools, educational materials, managed accounts, social trading platforms, daily market analysis and more.
ASIC, BVI, CBI, FFAJ, JFSA, FSCA, IIROC, ADGM FRSA
Min $100 Deposit
FCA, CFTC, NFA, BaFin, FINMA, ASIC, FMA, MAS, FSA, FSCA, DFSA, JFSA, METI, MAFF
Min $250 Deposit
ASIC, FCA, DFSA, SCB, CySEC, BaFin, CMA
Min $200 Deposit
ASIC, CySEC, IFSC, DFSA
Min $5 Deposit
In the 1990s when the internet was becoming more widely used, banks and small companies developed online systems that created automated quotes which made it possible for people to trade instantaneously.
Thus, these technological advancements and regulations put in place, generated a new category of trading brokers that allowed individuals to buy and sell assets online. These developments opened many doors for retail trading with online brokers helping traders located in various parts of the world to place their trades.
Online trading is now much easier compared to what it used to be in the past before there were so many trading brokers to choose from. In the past, the global markets were primarily traded by banks and organizations. Currently, anybody with an internet connection, trading platform and brokerage account can trade online. For more details an online trading, you can read our guide to how to trade online.
The establishment of different trading brokerages has given single individuals the opportunity to open a trading account and speculate on global markets at anytime from anywhere without the restrictions of past years.
The majority of trading brokers will offer clients a range of different asset classes to trade online. There are also brokers who specialize in specific markets. The most popular types of trading brokers are:
There are different ways in which trading brokers can handle client orders. Some brokers operate with a dealing desk policy which means that they process your trades themselves whereas a non-dealing desk broker offers direct market access (DMA). It is widely accepted that a non-dealing desk broker is often preferred due to the fact there is less likely to be any conflict of interest between the broker and trader. Below we will look at the different broker execution models.
A dealing desk broker is a market maker. Market makers provide their own spreads which can be fixed and incur an additional mark-up. Dealing desk brokers may decide to quote above or below the real market rates at any time they choose. They are counterparty for traders who don’t buy and sell assets directly with the liquidity providers. These brokers get their compensation through spreads or by taking the opposite side of the trade to their customers.
A no dealing desk broker offers traders direct access to the interbank market. They can commonly be STP or an STP/ECN broker. No dealing desk brokers more often than not will offer tighter spreads than a dealing desk broker. Some non-dealing desk brokers charge a trade commission for using their services whilst others will add a mark-up to the spreads to cover costs.
A straight through processing (STP) broker enables the total computerization of transactions and instant processing via the interbank market without requiring any interference from the broker.
ECN brokers offer and display order book data instantly. They commonly feature the processed orders and the price offered by banks in the interbank market, and therefore can be considered to make the operation more transparent. ECN brokers usually charge a commission for trades and process all transactions directly on the interbank market and do not require any dealing desk intervention. ECN brokers are widely considered by many experts and professionals to deliver the tightest spreads and fastest execution speeds with minimal slippage.
Multilateral Trading Facilities (MTF) brokers bring buyers and traders together in an exchange platform under non-discretionary rules. The exchanges used by these brokers are not regulated, but the manner of operation is similar to a regulated exchange. Multilateral Trading Facilities offer transparent trading rules and a fair-trading structure while at the same time providing efficiency of the pricing structure and the clearance of transactions.
There are some important factors worth considering when you are choosing a trading broker that you will open an account with to trade online. With so many trading brokers to choose from, this can seem overwhelming at first. You can also view our how to choose a trading broker guide for more information. Some of the key things to consider during your search are:
When choosing a trading broker, you should check if they are regulated by a respected and well-known regulatory authority. Some of the most respected “tier one” regulators to look for are the Financial Conduct Authority (FCA), Australian Securities and Investments Commission (ASIC) and Cyprus Securities and Exchange Commission (CySEC).
Regulated brokers must comply with strict rules and regulations that ae put in place to protect investors. Most experts and professionals would only ever trade with a regulated broker, avoiding unregulated and offshore brokerages. When using a regulated broker, you can have the peace of mind that there is some protection in place should things go wrong.
When you place an online trade through a trading broker you will usually have to pay the spread. The spread is the difference between the bid and ask prices of the instrument that you are trading. The tighter the broker spreads are, the more you can save on your trading costs in the long term. Some trading strategies are entirely dependent on tight spreads such as scalping strategies. It is thus imperative to ensure that the broker in question has suitable spreads for your trading strategy.
Most trading brokers will charge you a small commission fee for each position you place in the markets through them. The commission fee is usually relative to your position size. If you are swing trading then the commission fees may not be as important as they are to an investor who is day trading. However, whatever the trading strategy you are using is, it is worth considering the commission fees within your money management. The lower the brokers commission is, the more you can save in trading costs over the long term. You should also factor in any other broker fees that are applicable such as platform, charting, tools and accounting fees. if you are looking to save on trading fees, you may wish to view our best discount brokers.
It is important to have a reliable and knowledgeable customer support team on hand who are prompt, polite and accurate in their responses to any general, technical and account related questions that traders may have. You can always ask them some relevant questions prior to opening a trading account to test the quality of their support and response times.
Most trading brokers will offer email, telephone and live chat support. If they offer 24/5 support, that can be beneficial especially if you are located in a different time zone to the broker. Thus, make sure the broker you are considering has support available in ways and at times that are suitable for you and fit around your trading schedule. You would ideally want someone instantly available to offer support should you need them. It wouldn’t be great if you had an emergency and the brokers response time was up to 24 hours long.
Each trading broker will have a selection of trading accounts for you to choose from. There can be demo accounts to practice trading online along with real trading accounts that have differing features to cater to the needs of various clients. You would want to ensure that there is an account that meets your individual requirements. Things to look at for with the trading account types are execution policy, minimum deposit, spreads, commissions, leverage, instruments, etc.
Generally speaking, the majority of trading brokers usually offer a combination of forex currency pairs, stocks, indices and commodities. If you are looking for a specific asset class or trading instruments, you should check that these are available through the broker in question. It may also be worth considering what other markets the broker offers just in case you decide to diversify your investment portfolio in the future.
If you are already familiar with a specific trading platform then you may wish to ensure it is available through the trading broker. If not, then one of the most popular and user-friendly trading platforms you may wish to consider is the MetaTrader platform. MetaTrader is provided by most online brokers and used by millions of traders all over the globe. There are platforms for desktop, web browsers and mobile trading apps. Thus, check the compatibility of the platform with your preferred device.
The different trading platforms can have different features and functionalities. If you require certain order types, time frames, charting tools, automated trading or anything else, you may want to check that they are available from the brokers trading platform.
In addition to trading platforms, some brokerages can also offer a choice of standalone trading tools. These tools include trading calculators, economic calendars for fundamental analysis, sentiment data and more. If you incorporate a certain methodology into your trading strategy that requires such tools, you can check these are provided. If you do not currently use such additional tools, it can still be useful to have them at hand if and when they are required.
The best trading brokers usually have a vast range of educational materials to support clients and encourage informed trading. Within a trading academy you can expect to find trading guides, tutorial videos, webinars, seminars, quizzes, FAQ’s and trading glossary. These can be useful to traders of all experience levels, teaching beginners about online trading and improving the knowledge of the already seasoned investors amongst you. In addition to educational resources, a broker who provides expert daily market analysis can help to assist with trading decisions.
If you have read this far, you will hopefully have a clear understanding of trading brokers and may be considering opening an online trading account. You may wish to take a look at our best trading brokers to get some inspiration and choose a broker suitable for your needs. Furthermore, you can read our guide on how to open a trading broker account for a detailed explanation of the next steps.