Hi guys, hi from Andrea Unger! Today I want to give you some pieces of advice that may help you in choosing your broker.
What Instruments Do You Want To Trade?
As a first thing, you should choose someone who is supposed to do what you want him to. So, ask yourself on which markets and instruments you want to trade. The answer to this first question will help you a lot in your selection process.
However, the answer might depend on the size of the capital you dedicate to trading. If you are not willing to dedicate a big amount of money to it, you are sort of compelled to choose a broker who offers Forex and CFDs.
If you want to work with $2,000, you need somebody who allows you to trade Forex or CFDs, because on these markets you can scale down your position as much as you need. So, actually, you have to choose among all the Forex brokers out there.
If you want to trade futures, because you have a large amount of money to dedicate to trading, you should choose a broker who offers futures. In addition, you also have to identify which markets you want to trade.
Do you want to trade Italian futures? The Eurex Germany? The CME Globex futures? Or maybe the Hong Kong futures? The Nikkei? Or the Kuala Lumpur futures, or whatever?
Actually, if you have something that works on some markets, make sure the broker you choose can offer you access to those markets.
This is pretty much obvious, but not everyone verifies it at the beginning of the selection process. Some people think about it when it is too late, so they need to adjust and operate on markets that are not their first choice.
What About Technology?
Now, as we are systematic traders, we should obviously pay great attention to technology. So, ask yourself if the technology of the broker you would like to choose is good enough.
How can you know it? Read reviews. There are plenty of them on the internet, where they are available to everyone. When you read a review, try to understand whether it was the broker who had it written, or it is a serious review about how things work.
In addition, also try to figure out if it was written by somebody whose needs and experience are in line with yours. If the review was written by a high-frequency trader who wants a millisecond execution, he might be looking for something different from you.
So, even if in his opinion the broker’s technology is not good enough, it might be good enough for you, depending on your needs and objectives.
Is It a Honest and Reliable Broker?
To sum it up, the market assets and the technology have to be good. Then, there comes the most important question: is your money in good hands? Is it safe?
Again, read the reviews and make sure that whoever you open your account with is willing and capable of giving you the money as soon as possible, when you withdraw the whole amount or a part of it. Read the reviews and try to understand if deposits are given back in a very short time after the request, because this is very critical.
Unfortunately, I must say that, most often, those brokers who offer you a tutor (or mentor) who can follow you in your decisions are the least serious ones.
Of course, I don’t mean that if there is a mentor, the broker is not serious. I don’t want to say that, but I’ve read about many cases of brokers who offered mentorship or tutoring services to traders and were then identified as scammers.
Normally, tutoring is a good service. However, if it’s intended the wrong way, it can be very dangerous. So, be very careful when a broker says “If you don’t know what to trade, don’t worry! My experts can tell you what to do!”. If you don’t know how to trade, don’t trade and don’t open any account.
Remember that those who tell you that they would give you the moon, may take your money and run to the moon!
Please notice that this is just what could happen. It isn’t an equation and I don’t mean to offend anybody by saying this. I’m just telling you to be very careful.
Prefer the Big Names
Where is my money going to? Is it at the broker or in a bank? And if it is in a bank, what bank and where? All these pieces of information might help you in your selection process.
It could happen that a broker sends your money to a Hong Kong bank, so you would have to declare that money in Hong Kong, but you don’t want to have your money in Hong Kong, do you? So, these pieces of information are also critical for your decision.
That being said, always keep in mind that there are many scams out there. That is why I always suggest that you stay with big brokers.
The big names are okay, because we know them. I am not sponsoring anybody, but there are many big names (such as CMC Markets, IG Markets, IC Markets, Saxo, PepperStone, TickMill, and so on and so forth) with whom the chances of being in good hands are much higher.
My Experience With a Big Broker
I had an account with one of these big players – you might be aware of it, if you’ve been following my story – when the Swiss Franc fact occurred.
From one day to the other, due to a recalculation of the exit level of a stop-loss on the Singapore Dollar against the Swiss Franc – not even the Euro – I found over 100,000 euros less on my balance. I immediately connected to the broker, claiming that what had happened was absolutely outrageous.
They didn’t give my money back to me, but they gave me an address I could send my claims to, it was the Ombudsman in the UK, and they should have taken care of my claims.
They did. I went through the whole path and I must say that after two years I was right, and the decision was that there was no reason to take that money from my account. The money was entirely given back to me, plus an 8% interest per year and a small sum for the disturb, or something like that.
So even though the first decision of this big broker was against me, which was absolutely unpleasant, that broker, in the end, was very serious, because they followed the decision of the Ombudsman and gave the money back to me plus some interests.
I was lucky because I was in good hands. It took two years and was not pleasant, but all’s well that ends well. That’s why I always suggest that you stay with bigger brokers.
My Favourite Broker
Sometimes, people ask me to suggest them a broker. I’ve always said that I trade at Interactive Brokers. I think they offer what I need as an automated trader. For instance, the connection to Interactive Brokers through the platform I use to develop my systems (MultiCharts) is good.
This is another important thing to take into account. When you have something specific to do, make sure that you can properly connect to the broker and interact with it the right way to do what you want to do. I can do that with Interactive Brokers, so there is no problem for me.
I suggest Interactive Brokers to all the Unger Academy’s students who are supposed to do what I do, because I think that’s the best solution for me and, therefore, for all those who want to do what I do.
I’ve no interest in getting accounts opened at Interactive Brokers and nobody is paying me or the Unger Academy to do it. I’m just saying that this is what I use, and I think it is the best solution. People can go independently to the site of Interactive Brokers.
I Am Not Trying To Make Money Together With Brokers
Some people also told me that they noticed my face on some brokers’ webpages and that I recommend them. I think that there are only three brokers on whose websites there is my face: Metatrader Brokers or ForeEX brokers – they are Purple Trading in the Czech Republic – TMS in Poland and Two-Trade in Germany.
The reason why I recommend them is that I know the managers of these three companies and I am pretty much confident that they are serious and honest guys, which is very important in this business.
So, I don’t mind putting my face there, because I believe that if you give them your money to trade, they will give it back to you when you ask for it. This is just my opinion; I might be wrong, of course, but I have been knowing these guys since about 2005, we are friends and I like them.
Having my face on their websites is fine with me, because I think they are honest. I don’t know if they offer the best conditions; maybe they don’t, maybe they have a spread of 20 pips; I don’t know and I don’t care too much about that.
My purpose is not that of sending them people to make money. I’m just saying I believe that those guys are honest, so if you want to sleep at night without taking care of all the doubts you might have, I think those guys are serious.
If you find a link anywhere from me, sending you to their sites, be sure that that link has no tracking cookies or so, because I’m not getting any benefit from somebody opening accounts with any of them.
Gather As Many Pieces of Information As You Can
To sum it up, read as many reviews as possible. When you plan a holiday, you read reviews of the hotel, cruise or places you want to go to. Do the same for Forex and futures. Look for reviews and whenever you are not convinced that the broker is really good, simply ignore it. It’s not that difficult.
I’m sorry that some new brokers don’t offer many reviews. Perhaps they are the best brokers in the world, but I’d rather wait for a while to see how they establish their business, before giving them my money.
Reviews can be very useful also when it comes to technical aspects, so dig into the internet about anything you can read and learn to identify fake reviews.
Finally, make sure that the economic condition is in line with what you expect. Economic condition means both spreads, costs of trading and other costs that might be there. In this case, it doesn’t really matter if they are market makers or ECN brokers, because it’s not automatic that the former is evil and the latter is good.
Everything depends on how they run their business, so you might have a benefit in working with a market maker or you might have a benefit in working through an ECM broker.
Please, never make choices resting upon what you heard at the pub. Make a proper choice and make sure that what you choose is in line with your purposes and needs. That’s the most important thing.
I think that honesty and seriousness are the first things you must look for in a broker. You entrust your money to them, so you want it to be in good hands, as you certainly worked hard to earn it.
That’s it guys, see you next time, ciao!