What makes Forex traders choose one broker over another? And what makes traders stick with their favorite brokers over the long haul, rather than jumping from one broker to another?
Some of it comes down to simple convenience. Traders have to pick brokers that accept customers from their regions, and offer lot sizes, minimums, and policies that work for their needs.
But with hundreds of Forex brokers in existence, there is always competition to attract and retain traders. Let's explore some of the ways in which Forex brokers market effectively to traders and build long-term loyalty.
Low commissions and spreads
A lot of it comes down to simply offering a good deal. Trading Forex isn't free. There are several different structures that are common for commissions and spreads:
- Fixed spreads
- Variable spreads
- Commissions that are calculated from volume using a percentage
Forex brokers that offer low spreads and commissions make it less expensive to trade. The less traders spend on spreads and commissions, the less they have to make up for in order to profit. So, brokers who make trading affordable do a good job attracting traders and keeping them trading.
Trading tools and features
While Forex brokers love enticing traders with affordable commissions and spreads, they also market their special tools and features. Here are some examples of some of the types of tools and features that traders may find attractive.
- Trading platform: Many Forex brokers, but not all, offer their own trading platforms. If a broker's platform runs well and includes advanced charting features, it can attract traders.
- Third party platform compatibility: Traders who prefer a third party platform such as MT4 or MT5 may prefer opening an account with a broker that lets them use that platform. Otherwise, they would have to go to the trouble of learning to use a whole other platform.
- Indicators and drawing tools: Along with charting platforms, Forex brokers typically make a large number of indicators and drawing tools available for traders to use. They might even offer some exclusive indicators that are not available outside their platforms. These indicators may add significant value when they fit into winning strategies.
- Calculators: Forex brokers may offer calculators to make traders' lives easier and increase transparency on their platforms (i.e., calculators for margin requirements).
- News and analysis: Brokers that put out quality news feeds and economic analysis promote loyalty and satisfaction among traders who benefit from those resources.
- Copy trading: This feature allows traders to copy the trades of others who are using the same broker in their accounts. It is an automated form of trading. While traders of all skill levels may find a use for it, copy trading is especially appealing to beginners.
- API support: Traders who are also developers can make use of API support to automate their trading strategies.
While those are some common examples of trading tools and features that can help brokers to attract and retain customers, you may run into others as well.
Bonuses and promotions
One of the biggest ways that Forex brokers entice prospective traders is by running bonuses and promotions. While bonuses are generally not "free money," and have rollover requirements attached, they do offer value to traders.
Beginners can practice with bonus funds, risking less of their own money. More experienced traders can build upon bonus funds, meeting the rollover requirements to eventually claim them as cash (novices can too, but are more likely to blow their account along the way).
Here are some common types of bonuses and promotions offered by Forex brokers.
- Welcome bonuses: This refers to any type of bonus offer that is made available exclusively to new traders. Most of the time, Forex welcome offers take the form of deposit match bonuses or no deposit bonuses. A lot of new customers will sign up just for a chance to claim a welcome bonus.
- Deposit match bonuses: With a deposit match bonus, the trader makes a deposit into their Forex account. The Forex broker then matches that amount with a percentage, up to a maximum cap. So, for example, if there is a 50% match on deposits up to $1,000, and the trader deposits $1,000, they will receive $500 in bonus funds.
- No deposit bonuses: This type of bonus does not require the trader to make a deposit. It is usually for a much smaller amount of money, and has more rigid requirements and terms. It may also be a "sticky bonus," which is a type of bonus that is not possible to withdraw.
- Reload bonuses: Reload bonuses are bonuses that traders get when they replenish their funds. They act as an incentive to keep depositing money and trading. They usually are deposit match bonuses.
- Cashback: Traders may be able to earn cashback on their commissions and spreads. Brokers who offer rebates often do so through a VIP program. Climbing the tiers in the VIP program lets traders earn higher amounts of cashback, along with additional rewards and benefits. To move up to a higher tier, a trader usually needs to meet certain activity and turnover thresholds. This incentivizes traders to keep placing orders.
- Drawings: Forex brokers may offer traders the chance to take part in drawings for cash or other prizes. Entry is sometimes automatic so long as a trader is active. Often, this is also a basic requirement for eligibility.
- Referral bonuses: There are usually refer-a-friend programs at Forex brokers which offer existing customers a chance to earn bonuses through successful referrals. This is a great program for keeping current traders engaged, while also drawing in new ones.
Similar to referral bonuses, Forex brokers may also employ affiliate programs to attract new traders. But these do not pay bonus funds, and they are open to anyone who wants to apply, not just current customers. They simply pay in cash for successful referrals.
Trading contests
Forex brokers can also attract traders and compel them to stay active by hosting trading contests. These can take either of two forms: demo contests, or live contests.
- Forex demo contests: During a Forex demo contest, participants each trade individually in their demo accounts using virtual funds. The contestants who are in the lead are tracked in a leaderboard, often publicly. After the contest period is over, the broker awards the top winners and runners up in the leaderboard with prizes, typically bonus funds. There may or may not be rollover requirements, depending on the broker. Demo contests are a great way for new traders who have no money to open an account to get what they need to start trading live.
- Forex live contests: These contests work just like demo contests. The difference is that instead of traders using demo accounts to participate, they participate by placing trades in their live, funded accounts.
Contests offer exciting opportunities for traders at all levels to put their skills to the test, and potentially win money they can use for future trading.
Jurisdiction and regulation
Some traders may prefer brokers that are domiciled in their home countries, or in countries that have a reputation for strong regulatory frameworks.
A broker that is based in a region like Europe may advertise that fact to attract traders. Those that are registered on tropical islands with looser regulations may not announce their locations so readily.
Brokers that have serious, legitimate government regulators will usually make that fact as obvious as possible since it reassures and draws traders.
What about brokers that do not have strong regulators? These often list either offshore regulators (legit regulators, but not necessarily ones that are particularly strict), or "regulators" that are not legit at all, but turn out to be independent organizations.
It is worth noting that some Forex brokers may also lie about their regulatory status. That is why traders should always look up the company directly on the regulator's website to make sure they really do have a license to operate.
Status
Some FX brokers promote themselves through their status as full STP (Straight Through Processing)/NDD (No Dealing Desk), and not a market maker. What this means is that they are not trading against their customers. You are receiving fair, rapid, transparent trade execution. Some traders look specifically for this status when selecting brokers.
Age
Companies that have been around for a long time will prominently state their years in business on their websites (i.e., "[Broker] was founded in [year], has been in operation for over 15 years.").
Those that have not been around for as long will sometimes still find ways to make it sound like they have. A common way to do this is to say that the company has "15 years of combined experience" or such, referring to the staff's past Forex experience.
Fast, reliable execution
Another thing that Forex traders look for when choosing a broker is reliability. Brokers that are known for their rapid execution speeds are popular among traders, as they can be counted on even during times of volatility to keep slippage to a minimum.
People who trade the news or who do any form of short-term trading such as scalping particularly benefit from fast, reliable executions of their trades.
Unfortunately, only few brokers pay attention to this parameter. Probably, because it is difficult to optimize and depends a lot on third-party infrastructure. For traders, this is a very important parameter and they should definitely pay attention to it when deciding whether to stay at their broker or switch.
Overall reliability and support
One more way that Forex brokers retain customers and build loyalty is by operating in a way that is transparent and reliable. They process deposits and withdrawals in a timely manner, and charge only the fees they list on their website. When traders don't have to deal with unwelcome surprises and can easily access their money, they are more likely to keep coming back.
Forex brokers also build loyalty among traders by providing top-tier customer service. Nobody likes having to wait on hold for ages to talk to an agent, or getting stuck with someone who is unhelpful or incompetent. When that happens, traders typically move on, because they need to work with a broker they can trust with their money.
Good customer service, on the other hand, sets traders at ease. It is reassuring to know that if you pick up the phone, someone will be there to assist you within a few minutes. It also builds loyalty when the agents are knowledgeable, friendly, patient, and helpful, working hard to resolve problems quickly.
Find FX brokers that go above and beyond to earn your loyalty
Now you know some of the ways Forex brokers attract traders and retain them. If you want to discover Forex brokers that offer exciting trading features and tools, bonuses, promotions, and contests, and excellent support, take a look at our reviews and recommendations.
