The short version
- Start with the regulator's own register, not the provider's website, and confirm the exact company you would contract with.
- Compare total costs and withdrawal terms, not headline spreads or bonuses.
- Pressure, guaranteed returns and unregulated offshore entities are reasons to walk away.
How to choose a broker is a question most people answer by comparing apps, spreads and sign-up offers. Those matter, but only after a more basic question: can this company be trusted to hold your money and deal with you fairly? The ten checks below answer that question in order. We do not rank or recommend firms; this is a method you can apply to any of them.
Checks 1 to 3: who you are really dealing with
1. Is the firm authorised, according to the regulator?
Every serious broker is authorised by a financial regulator, such as the UK Financial Conduct Authority, a national regulator in the EU, the Australian Securities and Investments Commission or, in the US, the Commodity Futures Trading Commission and the National Futures Association for forex. Search the regulator's own public register for the firm's name and licence number. A logo or licence number on the broker's website proves nothing by itself.
Compare the website address, phone number and email on the register with the ones you have been given. Clone firms copy the details of a real authorised company and change only the contact information. Most regulators also publish warning lists of firms known to be operating without permission.
2. Which company would hold your account?
Many broker brands operate several legal entities: one licensed in a strict jurisdiction and one offshore, where leverage is higher and protections weaker. The brand name is the same; the rules are not. Check the client agreement for the name of the entity you are contracting with, and confirm that entity (not just the brand) is on the register.
3. What happens to your money if the firm fails?
In major jurisdictions, brokers must keep client money in segregated accounts, apart from the company's own funds. Some countries add an investor compensation scheme; in the UK, for example, the Financial Services Compensation Scheme can cover eligible claims up to a limit. Ask directly: "Is my money segregated, and which compensation scheme, if any, applies to my account?"
Checks 4 to 6: the terms of trading
4. Leverage and negative balance protection
In the UK and EU, retail CFD leverage is capped at 30:1 on major currency pairs, 20:1 on other pairs, gold and major indices, 10:1 on other commodities and minor indices, 5:1 on individual shares and 2:1 on crypto. Retail clients there also get negative balance protection and an automatic margin close-out at 50%. A firm advertising 500:1 to a retail client is telling you it operates under different rules.
Be cautious if you are invited to become a "professional client". The label removes leverage caps and some protections, and firms must check you meet strict criteria. Do not let anyone help you "qualify".
5. The full cost of a trade
Ask for the typical spread (not the minimum) on the products you would trade, any commission per lot, and the overnight financing rate. Add currency conversion, inactivity and withdrawal fees. Our guide to trading fees shows how to add these up for a realistic month.
6. How orders are executed
Some brokers take the other side of your trade (market making); others pass orders to banks or other liquidity providers. Regulated firms must publish an order execution policy explaining how they get you a fair price. Read it for how the firm handles slippage and whether price improvements are passed on as well as losses.
Checks 7 to 8: getting money in and out
7. Deposits and withdrawals
A legitimate broker names its payment methods, fees and processing times, and returns funds to the account they came from. Warning signs include being asked to pay into a personal bank account, send crypto to an address supplied by a "manager", or pay a fee or "tax" before a withdrawal is released.
Withdrawal fees matter more than they look. A $25 fee on a $200 withdrawal is 12.5% of the amount (illustrative numbers). Test a small withdrawal early, before you add more funds.
8. The products and the platform
Check that the products you want are actually available in your country. Crypto derivatives cannot be sold to UK retail consumers, for example, so a UK-facing firm offering them to you is either misclassifying you or operating from elsewhere. For platform software, see whether a demo is available; our MT5 demo account guide explains what practice accounts can and cannot tell you.
Checks 9 to 10: behaviour and accountability
9. How the firm sells to you
In the UK, EU and Australia, regulators ban bonuses and similar inducements for retail CFD clients. A regulated firm there should not offer you a deposit bonus. Cold calls, messages on social media, time-limited "offers" and staff who push you to deposit more are serious warning signs, whatever licence the firm claims.
10. Complaints and disputes
Regulated brokers must run a complaints procedure and, in many countries, give clients access to an independent dispute body, such as the Financial Ombudsman Service in the UK. Find the complaints page before you need it. A firm with no clear complaints route and no regulator above it leaves you with nobody to appeal to.
How to choose a broker: a quick scoring sheet
| Question | Where to find the answer | Red flag |
|---|---|---|
| Authorised? | Regulator's public register | Not listed, or contact details differ |
| Which entity? | Client agreement | Offshore entity for your country |
| Money protected? | Client money policy | No segregation stated |
| Costs clear? | Pricing pages, key information documents | Only "from" prices shown |
| Withdrawals? | Payments page, your own small test | Fees or "taxes" demanded first |
| Complaints? | Complaints policy | No external dispute body |
If any answer is missing, ask in writing and keep the reply. A firm that will not answer before you deposit will be harder to reach afterwards.
What a checklist cannot tell you
A firm can pass every check above and still not suit you. Regulation governs how a provider treats your money and your orders; it does not make a leveraged product appropriate for someone who cannot absorb losses. Regulated firms must assess whether complex products are appropriate for you and warn you if they are not, and it is worth taking that warning seriously rather than clicking through it.
Questions to send before you deposit
Copy these into an email to any provider you are considering. The answers, and how readily they come, tell you a lot.
- What is the full legal name and registration number of the company I would contract with, and which regulator authorises it?
- Is my money held in segregated client accounts, and at which banks or custodians?
- Which compensation scheme, if any, would cover me, and up to what amount?
- What are the typical spreads, commissions and overnight financing rates for the products I plan to trade?
- What fees apply to deposits, withdrawals, currency conversion and inactivity, and how long do withdrawals take?
- Do you act as counterparty to my trades?
- How do I make a complaint, and which external body handles disputes?
A regulated firm answers these routinely. Vague replies, pressure to deposit before answering, or a switch to phone or messaging apps are all reasons to stop.
Applying the same checks to crypto platforms
Crypto exchanges are licensed in some countries and not in others, and investor compensation rarely applies. The same questions still work: which entity holds the assets, where it is registered, how withdrawals are handled and what happens in insolvency. Read our guides to how crypto works and spotting trading scams alongside this checklist.
Reader questions
How do I check if a broker is regulated?
Search the financial regulator's own online register for the firm's name or reference number, then confirm the website, email and phone number match the register entry. Do not rely on licence numbers shown on the broker's own site.
Is an offshore broker illegal?
Not necessarily, but offshore entities usually offer weaker protection, higher leverage and fewer ways to complain. Some also solicit clients in countries where they have no permission to operate.
Should I choose the broker with the lowest spread?
Not on spreads alone. Regulation, client money protection and withdrawal terms matter more, and the total cost includes commission, financing and other fees.
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
- Financial Services Compensation Scheme, investment protection