10 Things to Check Before Opening a Trading Account

How to choose a broker is a question that invites shortcuts: a top-ten table, a friend's recommendation, a slick advert. We do not publish rankings of real firms, and we would suggest treating anyone else's with caution, because many are paid for by the brokers they list. Instead, here are ten checks that work on any firm, whether you are looking at shares, currencies or crypto. Each one is based on evidence you can see for yourself before you open a trading account.

Checks 1 to 3: who are you really dealing with?

1. A licence you have confirmed yourself

Find the firm's regulator and reference number, then look it up on the regulator's own public register, reached by typing the regulator's address yourself rather than clicking a link from the broker. In the UK that is the Financial Conduct Authority's register; in Australia, ASIC's professional register; in the EU, the national regulator's register; in the US, the NFA's BASIC system for futures and forex firms and FINRA's BrokerCheck for securities brokers. Check that the permissions cover the products you want.

2. Not a clone

Fraudsters copy the names and reference numbers of genuine firms. A clone passes a lazy check because the licence is real; it just belongs to someone else. Compare the website address, phone number and email on the register with the ones you are using. Regulators also publish warning lists of known clones and unauthorised firms; search them too.

3. The legal entity on your contract

Large brokers often run several companies under one brand, some licensed in strict jurisdictions and some offshore. The entity that would hold your account depends on where you live and sometimes on which box you tick. Read the client agreement to see which company you would contract with. An offshore arm may offer higher leverage precisely because it sits outside the stricter rules, and it usually offers weaker protection.

Checks 4 and 5: what protects your money?

4. Client money and compensation

Regulated brokers in major markets must keep client money in segregated accounts, separate from their own. Some countries add a compensation scheme if a firm fails and money is missing, up to a limit. Find out whether such a scheme applies to your account with this particular entity, and what it covers. For shares, ask how they are held; a nominee structure with a named custodian is standard.

5. Retail protections

In the UK and EU, retail CFD clients get leverage caps (30:1 on major currency pairs, down to 2:1 on crypto), a margin close-out at 50%, negative balance protection and a ban on bonuses and other inducements. Australia has similar rules. A firm offering you 500:1 leverage and a deposit bonus is telling you, clearly, that those protections do not apply.

Checks 6 and 7: how orders are handled and what they cost

6. The execution model

Brokers broadly work in one of two ways. A market maker quotes its own prices and takes the other side of client trades, managing the risk internally. An agency model, often marketed as STP or ECN, passes orders to external liquidity providers or a trading network and usually charges a commission on top of a thinner spread. Neither is automatically better. A market maker has a conflict of interest to manage; an agency broker's quality depends on where it routes orders. Look for a published order-execution policy and ask how it handles slippage.

Lists claiming to name the best ECN brokers deserve extra scepticism. "ECN" is a marketing label with no legal definition, and a list cannot tell you how a firm executes your orders on a busy morning. Its policy document and your own small test trades can.

7. The full cost, not the headline

Compare costs per round trip, in money, for the size you actually trade. An illustrative example on one standard lot of EUR/USD, where one pip is worth $10:

Then add what the table leaves out: overnight financing for positions held past the daily rollover, currency conversion if your account is in a different currency, and fees for inactivity or withdrawals. For long holding periods, financing often matters more than the spread. Our trading fees guide explains each one.

Checks 8 and 9: getting money out, and what you are buying

8. Deposits and withdrawals

Read the withdrawal policy before depositing. Legitimate firms return money to the same method it came from, in a stated time, and do not ask for a "tax", "release fee" or extra deposit before paying out. A useful habit: deposit a small amount, make a small trade, and withdraw it. How that goes tells you more than any review.

9. The products and platform

Check whether you would own real shares or trade CFDs on them, whether crypto means actual coins or derivatives, and what software you would use. Many firms license the same third-party platform, so a familiar interface proves nothing about the company behind it; our guide to MT4 brokers explains why. A demo account lets you test the software without risking money.

Check 10: how the firm behaves

The last check is about conduct, and it often gives the fastest answer. Be wary of any firm, or anyone claiming to represent one, that:

• contacts you first, especially through social media or messaging apps;
• assigns an "account manager" who urges you to deposit more;
• promises returns, guarantees or a win rate;
• offers a bonus that locks your money in until you trade a set volume;
• asks you to install remote-access software "to help";
• has no clear complaints procedure or independent ombudsman you can escalate to.

Regulated firms are required to handle complaints and, in many countries, to accept the decisions of an ombudsman or dispute scheme. Find out which one applies before you need it.

Questions worth putting in writing

Much of the evidence above sits in documents that brokers publish but few clients read: the client agreement, the order-execution policy, the key information documents for each product, the fee schedule and the risk disclosure. If something is unclear, ask the firm by email rather than by phone or chat, so the answer is on record. Useful questions include:

• Which legal entity would hold my account, and which regulator supervises that entity?
• Which compensation scheme, if any, would cover my money, and up to what amount?
• Do you take the other side of my trades, or pass them on? Where is your execution policy?
• What would I pay, in total, to open and hold a one-lot position for a month?
• How long do withdrawals take, and are there any fees or conditions?

A regulated firm should answer plainly. Vague replies, a sudden change of subject to bonuses, or a push to "just try it" are answers of a kind too. The whole exercise takes an evening; it is time well spent before handing over savings.

How to choose a broker: the checklist

1. Licence confirmed on the regulator's own register.
2. Contact details match the register; firm not on a warning list.
3. The legal entity in your client agreement is the regulated one.
4. Client money segregated; compensation scheme identified.
5. Retail protections apply to your account.
6. Execution policy published and understandable.
7. Round-trip cost calculated, including financing.
8. Small test withdrawal completed without conditions.
9. You know whether you own the asset or a contract.
10. No pressure, promises or bonuses; complaints route known.

Sources

• UK Financial Conduct Authority, Financial Services Register and warning list
• Australian Securities and Investments Commission, professional registers
• National Futures Association, BASIC
• FINRA, BrokerCheck
• European Securities and Markets Authority, CFD product intervention measures