10 Things to Check Before Opening a Trading Account

How to choose a broker is less about finding the best one than about eliminating the unsafe ones. We do not rank providers; instead, this module gives ten checks in a sensible order. The early checks are pass-or-fail. The later ones help you compare the providers that remain. The same approach works for forex and CFD providers, share brokers and crypto platforms.

Checks 1 to 3: is the firm who it says it is?

1. Authorisation on the regulator's own register

Go directly to the regulator's website and search its register; do not use a link supplied by the firm. Look for the firm's authorisation status, the services it is permitted to provide and whether it may hold client money. In the UK that means the Financial Conduct Authority register; in Australia, ASIC's professional register; in the EU, the national regulator's list or ESMA's registers.

2. The legal entity behind your account

Many brands run several companies in different countries. The one that matters is the entity named in the client agreement you would sign. A well-regulated group can still onboard you through an offshore subsidiary with lighter rules and fewer protections. Read the first page of the terms, where the contracting entity is named.

3. Clone firm warning signs

Fraudsters copy the names, register numbers and addresses of real firms. Compare the website domain, phone number and email on the register entry with what you have been given. Regulators publish warning lists of clones and unauthorised firms; check them too.

Checks 4 to 6: what protects you?

4. Client money and negative balance protection

Regulated providers must keep client money separate from their own. UK and EU rules also give retail CFD clients negative balance protection, so losses cannot exceed the money in the account, and require positions to be closed when equity falls to half of the margin in use. Offshore entities may offer none of this.

5. Compensation schemes

Some jurisdictions run compensation schemes that step in if an authorised firm fails and client assets are missing, up to a set limit. Find out whether the scheme applies to your entity and your product; many crypto activities fall outside them.

6. Leverage and marketing that stay within the rules

Retail leverage in the UK and EU is capped at 30:1 on major currency pairs and lower on everything else. Bonuses and other inducements for retail CFD clients are banned in the UK, EU and Australia. A firm offering both high leverage and a deposit bonus to a UK or EU resident is either using an offshore entity or ignoring the rules.

Checks 7 and 8: costs and execution

7. The complete cost schedule

Headline spreads are only one component. Find the commission per lot, overnight financing rates, currency conversion charges, deposit and withdrawal fees and any inactivity fee. An illustrative example of why the small print matters: a $10 monthly inactivity fee adds up to $120 a year, which is 12% of a $1,000 balance left untouched. Our trading fees module shows how to total a round trip.

8. Execution model and order handling

The provider's order execution policy explains whether it deals as principal (taking the other side of your trades) or passes orders on, how it handles slippage, and whether it applies price improvement as well as price deterioration. Look for a clear policy, not marketing phrases like "no dealing desk" left undefined.

Checks 9 and 10: money in, money out, and behaviour

9. Deposits and withdrawals

Legitimate firms accept payments into accounts in their own name and return money to the source it came from. Be cautious of requests to pay individuals, to use crypto for a regulated product, or to pay a "tax" or "unlock fee" before withdrawing. Once an account is funded, request a small withdrawal early and note how long it takes.

10. How the firm communicates

Watch for cold calls, messaging-app contact, an assigned "account manager" who pushes larger deposits, or profit screenshots. A good provider can be boring. Pressure is a signal.

A one-page summary you can reuse

The same list, condensed, is on our homepage. The scam module covers the tactics used by firms that fail these checks.

Documents worth reading before you sign

A regulated provider gives you a set of documents that answer most of the questions above if you read them in the right order. Start with the client agreement, which names the legal entity and sets out how disputes are handled. Then read the order execution policy, the costs and charges disclosure, and any key information document for the products you plan to trade; in the UK and EU, retail CFD providers must also display the percentage of their retail accounts that lose money. Finally, read the conflicts of interest policy, which explains how the firm manages situations where it profits when you lose.

These documents are dull by design, which is exactly why they are useful. Marketing pages are written to persuade; legal documents are written to be enforceable.

Questions to put to any provider

• Which legal entity will hold my account, and which regulator supervises it?
• What happens to my money and positions if the firm becomes insolvent?
• What were typical spreads on the instruments I plan to trade at the daily rollover and during major releases?
• How long do withdrawals usually take, and are there any circumstances in which they are delayed?
• Is there a guaranteed stop, and what does it cost?

A reputable firm answers clearly and in writing. Evasion is itself an answer.

After you have chosen: keep checking

Due diligence is not a one-off. Firms change ownership, move clients between entities, and alter their fees and terms. Re-check the register entry once in a while, read any notice about changes to your agreement rather than accepting it by default, and keep copies of statements and key documents outside the provider's platform. If withdrawals begin to slow, if support becomes evasive, or if you are asked to move your account to a different company within the group, treat that as a reason to reassess, not a formality.

Sources

• UK Financial Conduct Authority, Financial Services Register and warning list
• European Securities and Markets Authority, CFD product intervention measures
• Australian Securities and Investments Commission, CFD product intervention order