Three things to take away
- Start with regulation: confirm the exact firm on the regulator's own register, then make sure the contact details match.
- Then check how your money is held, what you will really pay and how withdrawals work.
- A firm that contacts you first, guarantees returns or pushes a bonus fails before the comparison starts.
Learning how to choose a broker is mostly about ruling firms out, not picking a winner. The checks below work for forex and CFD providers, share-dealing platforms and crypto exchanges alike. Work through them in order: the early ones deal with whether your money is safe at all, and the later ones with whether the platform suits you. We do not recommend or rank real firms; the method is the point.
Checks 1 to 3: is the firm allowed to serve you?
1. Authorisation by a regulator in your country
Every serious broker names its regulator and licence or reference number, usually at the bottom of its website. Do not accept that at face value. Go to the regulator's own website yourself, not through a link the firm provides, and search its public register. Examples include the UK Financial Conduct Authority, the Australian Securities and Investments Commission, national regulators in the EU, and in the US the Commodity Futures Trading Commission with the National Futures Association for forex, and the SEC and FINRA for securities.
2. The right legal entity
Many trading groups own several companies in different countries. The one regulated in your country may not be the one that opens your account. Read the account agreement to find the name of the company you are contracting with, and check that exact name on the register. A group that moves customers to an offshore entity to offer higher leverage also removes the protections you thought you had.
3. Rule out a clone
Clone firms copy the name, address and registration number of a genuine authorised firm. The register entry will be real, but the website, email domain or phone number will not match. Contact the firm only through the details shown on the register, and check the regulator's warning list for the name you were given.
Checks 4 to 6: how your money is protected
4. Client money segregation
Regulated brokers must hold retail client money in separate bank accounts, apart from the firm's own funds. For share dealing, look for how your assets are held in custody. For crypto exchanges, look for a clear statement of whether customer assets are held separately and whether the exchange publishes independent evidence of its reserves.
5. Negative balance protection and compensation
In the UK and EU, retail CFD clients cannot lose more than the money in their account. Some countries also offer compensation schemes if an authorised firm fails and client assets are missing, up to a limit. Find out which, if any, apply to the entity you will use. Crypto holdings are rarely covered.
6. Leverage within legal limits
UK, EU and Australian retail leverage caps are 30:1 on major currency pairs, 20:1 on gold and major indices, 5:1 on individual shares and 2:1 on crypto CFDs. US retail forex is capped at 50:1 on majors. Much higher leverage offered to retail clients in those regions signals an unregulated or offshore arrangement. Use the margin calculator to see what leverage means in money.
Checks 7 and 8: what it really costs
7. The full cost of the way you trade
Look past the headline spread. Add together:
- The typical spread at the times you trade, not the minimum.
- Commission per lot or per trade, charged on both opening and closing.
- Overnight financing (swap) if you hold positions past the daily cut-off.
- Currency conversion if your account currency differs from the asset.
- Deposit, withdrawal and inactivity fees.
Our trading fees guide includes a worked example that adds these up for a single trade.
8. Honest marketing
Bonuses and other inducements for retail CFD clients are banned in the UK, EU and Australia. Promises of guaranteed or fixed returns are false anywhere. A regulated CFD provider must show a risk warning, often including the percentage of retail accounts that lose money; if it is missing, ask why.
Checks 9 and 10: getting money out and getting help
9. A withdrawal policy you can read before depositing
The firm should publish how withdrawals work: which methods are accepted, whether funds must return to the source they came from, how long it takes and what it costs. Treat any of the following as serious warnings:
- A request to pay a "tax", "unlocking fee" or extra deposit before you can withdraw.
- Withdrawal requests that are repeatedly "under review" without a clear reason.
- An account manager who tries to talk you out of withdrawing.
A sensible habit is to make a small withdrawal soon after your first deposit, to confirm the process works.
10. A complaints route and real support
Authorised firms must have a complaints procedure, and in many countries you can escalate an unresolved complaint to an independent body, such as the Financial Ombudsman Service in the UK. Check that support can be reached through the channels listed on the regulator's register, and be wary of support that only exists on a messaging app.
How to choose a broker: the ten checks in one table
| Check | Where to look | Pass looks like |
|---|---|---|
| 1. Authorised | Regulator's register | Firm listed, status current |
| 2. Right entity | Account agreement | Same company name as the register entry |
| 3. Not a clone | Register contact details, warning list | Website and phone match the register |
| 4. Segregation | Client money or custody policy | Clear statement of separate holding |
| 5. Protection | Terms, regulator guidance | Negative balance protection; scheme cover known |
| 6. Leverage | Product pages | Within your region's retail limits |
| 7. Costs | Fee schedule | Every cost published in numbers |
| 8. Marketing | Website, adverts | No bonuses or guarantees; risk warning shown |
| 9. Withdrawals | Withdrawal policy, small test | Method, time and fee stated; test succeeds |
| 10. Complaints | Complaints policy | Written process and an external route |
After the safety checks: fit and practicality
Only once a firm has passed all ten does it make sense to compare features. Consider which markets you want to access, the minimum trade size, the account currency, the quality of the charting tools and order types, and whether a demo account lets you learn the platform first. Our forex trading practice guide explains how to get the most from one. A platform that suits a long-term share investor may be a poor fit for someone who trades currencies a few times a week, and vice versa.
If something has already gone wrong
If you think you have paid money to a firm that fails these checks, stop sending funds, contact your bank or card provider straight away, keep records of every message and payment, and report the firm to your regulator and to the police or national fraud reporting service. Be very cautious of anyone who then offers to recover your money for a fee: recovery scams target people who have already been defrauded. More in how to spot trading scams.
Reader questions
Does a regulated broker guarantee I will not lose money?
No. Regulation governs how the firm behaves and how client money is held. It does not protect you from trading losses.
Is an offshore broker illegal?
Not necessarily, but if it is not authorised in your country you usually lose local protections such as leverage caps, negative balance protection, compensation and access to an ombudsman.
How do I know a website is the real firm and not a clone?
Search the regulator's register yourself and compare the web address, email domain and phone number with those listed there. If any differ, contact the firm only through the registered details.
Sources
- UK Financial Conduct Authority, Financial Services Register and warning list
- European Securities and Markets Authority, product intervention measures on CFDs
- Australian Securities and Investments Commission, CFD product intervention order
- US National Futures Association, BASIC registration database