In the wake of the FXCM shenanigans, here's my top tips for choosing a broker

Sponsored by FXC....joking.

The FXCM news gives us an opportunity to offer some advice about choosing a broker.

It's important to know who you can trust but nearly every broker will have positive and negative reviews from people using them. A lot of that is down to how differently people trade, so you need to find a broker to suit your style AFTER you find one that offers the best protection for your money. However, even then, the buck stops with you on that front.

Here are some tips I have offered up previously.

Do the legwork and research

The most important factor is to research the brokers. Don't just take the reviews on their sites, go to independent reliable sources and forums. Trade2Win, Forex Factory, Forex Peace Army are well respected sites that also have forums and are well policed to stop erroneous comments.

Read the T&C's. We all do it, sign up with something and gloss over or ignore the terms and conditions. How many of us now wish we'd read the terms before the SNB move? Read them and keep a copy somewhere to refer back to, and to hold the broker too if there's any problems.

Check firms with the regulators. Make sure they are regulated and that you are happy that they fulfil all the requirements. Just because a broker is regulated in one area doesn't mean that your money isn't going to an account in another company name or jurisdiction. Do the research.

The research shouldn't stop when you find an account but should continue while you have an account. Forex Magnates and Leap rate are very good at bringing us the broker news, good and bad.

If you want a gift, write a letter to Santa

Special offers, cash back, a dozen red roses, a date with Angela Merkel. I would never pick a broker just because they were offering me a gift. If you do your research, make a choice and they just happen to offer something then that's a bonus. Don't make it a deal clincher or breaker

Leverage is the work of Satan, or is it?

Leverage is not there so you can trade like Mr Charlie Big Potatoes. You should only be trading sizes within the context of your real trading equity. If you only have £2k then you shouldn't be trading as if you have £20k.

Use leverage as a money management tool. I'll assume that 99% of people have worked hard to gather money to trade, so why sign it all over to a broker? Keep the money in your bank, put the minimum amount into a trading account and use the leverage to trade up to the full amount. Transfer out any profits straight away, and all you'll need to do is cover any extra margin requirements, which again, you transfer out when it's not needed. It keeps you in control of your money.

Ask yourself why you want to trade

A big problem is that people don't really ask themselves why they want to trade and what they actually want to achieve. Saying you want to trade so you can become rich is pie in the sky stuff. Get some reality and decide what would make a difference to your life. As this post suggests "Why do you trade" it may not be as much as you think it needs to be, and therefore you don't need to commit as much to a trading account.

Don't believe the hype

There is a lot of negativity towards brokers. Some is justified but the majority of it isn't. There are bucket shops and there are decent firms. A big chunk of complaints come from people who don't understand how the market works and haven't researched properly and so get caught out on their trades. The easy option is to blame someone else and that's usually the broker. You can't buy experience, you can only learn it.

In nearly all cases a broker does not want you to go bust. If they're earning on the spreads or from commissions then you are their bread and butter. They want you trading long term, not blowing up in 5 minutes. Find a broker that suits your style of trading (some don't like scalpers)

If in doubt, pull out

If something doesn't seem right, or you are hearing about problems at your broker then pull out. Protect your money first. You can always put it back in again if you're happy that everything is ok.

Don't be shy

Lastly, don't be afraid to ask. As well as bringing you the breaking news, we at ForexLive also want to help you in all aspects of trading. Ask any questions you want. If we don't know the answer there's a good chance one of our readers will, or we can point you in the right direction. ForexLive isn't just a site for news it's a community and everyone is welcome to be a part of it.

Stay safe folks.