Islamic Swap-Free Accounts

It should also be noted that the brokers who do offer swap-free accounts to all their traders, with no extra charges, are a great choice for non-Islamic traders as well, if they simply want to short the carry trade - just be careful, as most such brokers are not regulated

Islamic Swap-Free Accounts

Another factor could be a broker’s choice to offer Islamic accounts, which do not charge or pay any rollover or swap interest. Traders bound by Sharia Law are not allowed to conduct any business dealing with interest, so some brokers may be off your list as a result. Many brokers offer swap-free accounts, but many also do not. Moreover, some brokers that do offer swap-free accounts may do so only under certain conditions (read extra fees), since such accounts are susceptible to abuse, and brokers are very much aware of that.

Automated vs. Discretionary Trading Styles

Some broker platforms are also better suited to automated trading. For example, MetaTrader 4 (MT4) is a favorite among retail traders who program their own “Expert Advisors” or “EAs”. If that’s you, then this could be a determining factor when choosing a broker. On the other hand, if you are a discretionary trader who bases trading decisions on a combined technical and fundamental analysis approach, then it may not matter to you whether the broker offers MT4 or not, as long as the platform offers you good charting. You can visit our broker reviews page for details on which brokers use which specific trading platforms.

Timeframes

On the other hand, if you are a position trader, who makes 5 trades per year, then the difference amounts to only $10 per year. This is minimal and may very well be outweighed by other factors, such as perhaps higher overnight interest rates in a carry trade strategy, or better customer support or some other factor that gives you more than $10 of value added with the higher spread broker. So neither broker is better or worse, they are just better suited to different styles of trading.

Timeframes

OK, so your broker has passed the “legitimacy test”. They are regulated, well capitalized, and they don’t mix client funds with operating capital. Now it’s time to make sure that they provide the type of trading conditions that suit your trading style. Depending the timeframes that you trade, it may be important for spreads/commissions to be very low. Also, if you trade very short timeframes (scalping) you should make sure that your broker doesn't have a problem with that. Generally, brokers who are market makers will have a problem with it, while brokers that use straight-through processing or actual ECNs generally don't mind. Please read our "ECNs vs. Market Makers" article if you are not sure what that means. If you are a day trader, then your transaction costs can make you or break you. If you enter and exit the market several times per day, these costs really add up. Consider, for example, that you are trading 1 mini lot (10,000), 5 trades per day on EUR/USD. If the spread your broker offers you is 3 pips on average, then you are paying $3 per trade, $15 per day, $300 per month etc… you get the picture. If you instead had a broker that offers you an average spread of 1 pip on EUR/USD, then you would be paying $1 per trade, $5 per day, $100 per month! That’s a difference that anyone serious about their business should not ignore.

Regulation (the "Legitimacy Test")

Finally, as far as legitimacy is concerned, it is always prudent to check the WHOIS database for the broker's domain name. If the contact information they provide is misleading, such as a virtual office, or hidden using a privacy protection service such as PrivacyProtect.org, it should immediately raise flags. Any serious business should freely display their real contact information instead of hiding it.

Regulation (the "Legitimacy Test")

Furthermore, if the broker does keep client funds segregated, it is certainly a bonus, since it provides additional protection of client funds even in case of insolvency. FSA regulated brokers, for example, are required to keep client funds segregated. This of course begs the question, where are the funds being kept? Are they in a safe account at a large bank or some dodgy private bank in the Cayman Islands? You can find answers to these questions in our broker reviews section. Alternately, the broker’s customer support should be able to answer these questions. If they cannot, they may be hiding something (or the customer service rep may simply be incompetent - either way it's not a good sign).