Safest Brokers

The safest online brokers are those that are transparent about how they prioritize the security of their customers. Many established traders will attribute their success, in part, to utilizing online brokerages that are regulated and provide a high level of customer service.

It is important to know what key traits to look out for when choosing a safe online broker. Read on for an analysis of some of the safest brokers in Europe, the UK, US, and worldwide.

Why ‘Safe’ Matters

Many brokers will offer eye-catching incentives, appealing commissions or promises of being the “most user-friendly” trading platform. However, these brokers don’t always provide the safest trading environment. Importantly, always ensure that you are absolutely certain about the reliability of your broker before you make your first deposit.

Protect Your Funds

In the same way that you wouldn’t hold money in an unsafe bank, you should think twice before depositing your capital onto the platform of an unregulated broker. Each brokerage should be regulated in the jurisdictions in which they operate or hold a license with a trusted offshore body.

Depending on the regulatory authority, your funds will be covered by relevant compensation schemes if your broker were to stop operating or fall victim to liquidity problems. In addition, regulators often make sure trading brokers follow rules and requirements on welcome bonuses, leveraged trading opportunities, plus the segregation of client capital.

Online Safety Concerns

As with any internet activity, there are risks involved with trading online. Threats to traders include malware and viruses, identity theft or even phishing.

One of the most prominent cases was the Equifax data breach in 2017, which saw the private records of just under 150 million US citizens compromised in an identity theft cybercrime. The company failed to install appropriate software upgrades to stop online impostors from obtaining access to the names, dates of birth and Social Security numbers of the victims. Choosing a secure online broker will reduce the chance of being compromised by such data leaks.

What Makes A Broker ‘Safe’?

There are several factors to consider when choosing a safe online brokerage:

Security Measures

Each brokerage uses different technology architecture and security products. All websites that support financial transactions should have a Secure Sockets layer encryption (SSL). This means third parties will not be able to intervene with files, personal data or information. The most commonly used is the 128-bit key to encrypt and decrypt data files.

To check if your brokerage site is using SSL, ensure a padlock is displayed in the web URL bar when you access the broker’s website. Users can click on the padlock to reveal the digital certificate information. Next, research your broker’s data privacy stance to ensure that your personal information is not being shared with alternative third-party institutions.

Additional security measures to look out for include two-factor authentication (2FA), one-time passwords (OTP) and face recognition which can be added to account profiles. The safest brokers will offer these as standard additions.

Regulation

One of the most important factors when choosing between the safest brokers is their level of regulation from a reliable and established authority. These financial authorities aim to protect retail clients, maintain industry stability and promote healthy competition between trading providers.

Brokers must comply with the guidelines and operational guidance provided by the regulatory body. This may include a level of fee transparency, maximum leverage and separated client funds. By completing a quick online search, you can check which authority your brokerage is regulated by.

Unregulated Brokers

Unregulated brokers will never be ranked as the safest. These brokerages often hold offshore licenses in jurisdictions where regulatory compliance is not deemed a requirement. It is a decision of the company where to establish its entity including branches and local offices.

The jurisdiction of the company will affect the regulations and laws that a broker has to comply with. But it can be cheaper for brokers to obtain an offshore license, as they save on costly registration fees and extensive requirements from an authoritative board.

Offshore regulations do not necessarily guarantee protection or have such strict safety measures in place to protect traders. Unregulated brokers are typically far less transparent when it comes to governing status.

Note, if the information is not readily available on their website, it’s likely that the broker does not hold membership with a top-tier regulatory body.

Reputable Regulators

The biggest and safest brokers in the US and around the world are usually regulated by a top-tier financial watchdog. Rules and stipulations for brokers to comply with do vary between each regulator. You can check the full details of the guidelines on the authority’s website.

Some of the most reputable bodies in the world include:

• The UK Financial Conduct Authority (FCA)
• The US Securities and Exchange Commission (SEC)
• The Securities and Exchange Board of India (SEBI)
• The Cyprus Securities and Exchange Commission (CySEC)
• The Australian Securities and Investments Commission (ASIC)

Investor Protection Schemes

Access to investor protection schemes will vary by regulatory entity. Essentially, should your trading broker go into financial insolvency, you may be at risk of losing funds held in a live account. The majority of regulated brokers with top-tier licenses will be covered by a local protection scheme, which means that you can get a percentage of your funds back.

The Financial Services Compensation Scheme (FSCS) and the Investor Compensation Scheme (ICS) are examples of reputable services. For instance, the FSCS provides compensation up to £85,000.

Negative Balance Protection

Negative balance protection ensures that retail clients’ account balances do not fall below zero. The concept rose to prominence in 2011 when the Swiss National Bank (SNB) stopped holding its currency against the Euro at a fixed rate. The Swiss Franc strengthened against the Euro, and many investors shorting the Swiss Franc ended up with a significant negative balance.

In today’s trading environment, negative balance protection is a standard part of the guidance from financial regulators. Negative balance protection is offered by the safest forex brokers in Europe, the UK and Australia under the ruling from the Australian Securities and Investments Commission (ASIC), the Cyprus Securities & Exchange Commission (CySEC), and the Financial Conduct Authority (FCA). Some of the top safest brokers offering this protection include eToro, XTB, CMC Markets and Pepperstone.

Let’s look at an example to show how negative balance protection works in practice…

Imagine that you deposit $500 to your live trading account and enter a trade using 1:5 leverage. Your available balance to open a position would be $2,500. If significant market volatility occurs and your position drops  by 50%, you will incur a loss of $1,250, $750 more than your original deposited amount. If the same situation were to happen when using a broker with negative balance protection, your losses could not exceed your original $500 deposit.

Reviews

Industry Reviews

Published industry reviews can be checked in order to validate the claims of brokers, and to obtain details on specific factors including fee transparency, platform security and payment method safety.

Regulatory bodies can also be verified. Many of the top authorities provide an online database where you can search license numbers and confirm that your broker is a member. For example, The Financial Conduct Authority (FCA) and the Cyprus Security and Exchange Commission (CySEC) both enable license verification searches.

Peer Reviews

Customer reviews are a good way to gauge the general operations and experiences of the broker within their existing customer base. Sites such as Trustpilot and Reddit are often used by past or present traders to share details of user experience and success rates when using a brokerage platform. Nevertheless, the online brokers with the most reviews are not necessarily the safest. Be thorough and look for specific reviews on fund protection, account login security and data privacy successes.

We have compared and ranked many of the top brands too. See our guide to choosing a broker here.

Customer Support

Access to a responsive customer service team is invaluable. The safest brokers will provide 24/7 human live chat for assistance and support. This will be essential to quickly deal with any concerns around potential scams.

For example, Interactive Brokers offers 24-hour customer service on business days via regional client service centers. This includes 7 AM to 4 PM (GMT) for UK investors and 8 AM to 8 PM (EST) for US traders. Brokers that offer live chat services are usually the best because it is the fastest and most convenient contact method.

Promotions

Promotions such as welcome bonuses can be an exciting prospect when choosing a new brokerage. Clear terms and conditions of the bonus should be stated on the website including eligibility, withdrawal terms and requirements to be successful. Don’t get caught out by unrealistic financial incentives. The safest brokers will have clear rules stating how to use these promotions and how these can be applied to your trading strategy.

Importantly, some brokers will require a deposit to invest or a minimum number of trades executed before being able to unlock a reward. ESMA rules stipulate that brokers may not offer any financial rewards, so be cautious of authorization legitimacy if you encounter any promotions of this nature.

Risk Management Tools

Whether it be the safest stock, crypto or binary options brokers, having risk management tools readily available should be an important consideration. Brokers that offer instruments to reduce risk and improve your chances of a profit should be explored.

Examples of tools to look out for include order types such as “stop-loss” or “take profit,” plus profit calculators and hedging capabilities. Having these available within a trading platform helps to ensure that you are prepared for potential market volatility and significant price movements.

Tips to Make Sensible & Safe Trades

As well as following the above steps to find the safest brokers, here are some top tips for safe trading:

Consider a Risk Rule

Many swing traders will implement a percentage risk rule, typically in the region of 1-3%. This rule states that you won’t invest any more than a set percentage of your account balance in a single trade. Alternatively, you could set a stop-loss order that will protect you from losing more than the pre-defined percentage. This strategy can minimize losses and help to control the level of risk.

Let’s say you have $10,000 in your trading account. Implementing a 2% risk rule would mean your total loss per trade is not allowed to exceed $200 ($10,000 x 2%).

Understand Assets & Markets

You should spend time researching the financial product that you are investing in. For instance, investing in CFDs will be different from trading spot shares.

Importantly, the safest brokers should provide educational content, tutorials and tips for trading specific assets. AvaTrade, for example, offers a high-quality educational program suitable for beginner and intermediate-level investors. The collection of materials includes articles, videos and e-books, and is free for customers to use.

Hold a Diverse Portfolio

Whether it be across multiple brokers, financial instruments or countries, one of the safest trading methods is to hold a diversified profile. In the case of one broker going bust, it won’t interfere with your other open positions.

Even the safest bitcoin brokers will sometimes offer extremely volatile assets. If your cryptocurrency portfolio plummets, whilst in the low, your forex trades could potentially mitigate the losses. Remember that even if the broker is deemed one of the “safest”, that does not mean guaranteed profits or risk-free trading.

Bottom Line on the Safest Brokers

Once you have established your individual trading style, there are several factors to consider to help you determine the safest brokers for you. Take the time to research online brokerage sites to ensure that you are utilizing the most secure trading environment. The best brokers will offer a reliable platform that has security protocols at the forefront of all customer activities. Don’t risk your personal capital with an unsafe broker.

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