Choosing a broker is one of the most consequential decisions a trader makes, yet it is often rushed. A bad choice does not just mean a poor user experience; it can mean frozen withdrawals, inflated spreads, and in the worst cases, loss of deposited funds. Going through a methodical checklist before depositing protects against most common pitfalls.
What does FCA regulation actually mean for you?
The Financial Conduct Authority (FCA) is the UK’s primary financial regulator. When a broker is FCA-authorised, it has met a set of enforceable legal obligations — not just ticked a box. Understanding what those obligations are explains why FCA regulation matters more than a licence from an offshore jurisdiction.
FCA-authorised brokers must hold client money in segregated bank accounts, completely separate from the firm’s own operating funds. If the broker goes insolvent, your deposit is not available to creditors. Brokers must also maintain minimum capital reserves to ensure they can meet their obligations to clients, and must provide negative balance protection to retail clients — meaning you cannot lose more than the amount you deposited regardless of how far a market moves against you.
Beyond these structural protections, FCA firms must follow conduct rules: treating customers fairly, providing clear and not misleading communications, and offering access to a formal complaints process. If that process does not resolve your complaint, you can escalate to the Financial Ombudsman Service, which makes independent, binding decisions.
Finally, FCA-authorised investment firms participate in the Financial Services Compensation Scheme (FSCS). If a broker becomes insolvent and cannot return your funds, you may claim up to £85,000 per eligible person from the FSCS. This is a last-resort protection, not a guarantee that you will receive funds quickly — an insolvency process can take months — but it is a meaningful safety net that offshore brokers cannot offer.
How to verify a broker’s FCA registration number
Do not simply take a broker’s word for it. The FCA maintains a public Financial Services Register at register.fca.org.uk where you can search any firm by name or registration number. Here is how to do it properly.
- Find the FCA registration number on the broker’s website — it is usually in the footer or the “About” or “Legal” section.
- Go to register.fca.org.uk and search using that number.
- Confirm the legal entity name on the register matches the name of the firm you are dealing with. Fraudsters sometimes display a real FCA number but use a different company name — a tactic known as clone fraud.
- Check that the status shows as Authorised, not merely Registered. Authorised firms hold direct investment permissions; Registered firms (such as some payment services) carry much more limited permissions that do not cover investment activity.
- Review the permitted activities listed. Look for permissions that cover the type of product you intend to trade — dealing in investments as principal, arranging deals, or similar. An FCA-authorised money transfer firm has no permission to offer CFD trading.
The FCA also publishes a Warning List of unauthorised firms. Checking this list before depositing with any unfamiliar broker takes less than a minute and can prevent a serious loss.
Market maker vs ECN/STP: how broker type affects you
Brokers are not all structured the same way. The two main models are market makers and ECN/STP brokers, and each has a different relationship with you as a client.
Market makers act as the counterparty to your trades. When you buy, the broker sells to you from its own book; when you sell, it buys. The broker profits primarily from the spread and from client losses that exceed client wins on its own book. This creates a structural conflict of interest: a market maker has a financial incentive in you losing. Most market makers operate entirely legally and many are FCA-authorised, but the conflict is real and worth understanding. Market makers typically offer fixed or tighter quoted spreads during normal hours, and they set their own prices, which may deviate slightly from the interbank market.
ECN (Electronic Communications Network) and STP (Straight-Through Processing) brokers route your orders to external liquidity providers — banks and other market participants — rather than taking the other side themselves. They make money on commission per trade or a small markup on the spread, not on client losses. Spreads are typically variable and reflect real interbank liquidity, which means they can be very tight during peak hours but can widen sharply during news events or thin market conditions. The absence of a conflict of interest is a genuine advantage for clients who trade frequently or in size.
In practice, the distinction matters most for active traders. For a beginner making a few trades a month, either model is workable as long as the broker is properly regulated and costs are transparent.
Red flags that should stop you depositing
Some patterns reliably identify problematic brokers. None of these signals is conclusive on its own, but two or three together should prompt you to walk away regardless of how attractive the offering looks.
- Unregulated or offshore-only regulation: No FCA, ASIC, CySEC, or equivalent tier-1 authorisation. Operating solely under a Seychelles FSA or Vanuatu VFSC licence with no tier-1 oversight is the single most consistent predictor of problems.
- Promises of guaranteed returns: No legitimate broker can guarantee trading profits. Any communication implying otherwise — “our traders average X% per month” — is either misleading or fraudulent.
- Pressure to deposit more: Legitimate brokers do not cold-call clients and press them to increase deposits or participate in “exclusive” opportunities.
- Withdrawal difficulty: Research withdrawal experiences on independent platforms — Trustpilot, Forex Peace Army, and relevant Reddit communities — before depositing. A pattern of delayed, reduced, or refused withdrawals is decisive evidence of a problem.
- Bonus terms designed to lock funds: Bonuses requiring 20–30x the bonus amount in trading volume before any withdrawal is permitted effectively trap your own deposit alongside the bonus.
- No verifiable physical address or legal entity: Legitimate brokers are registered legal entities with verifiable addresses and company registrations. If this information is absent or cannot be verified independently, treat it as a serious warning.
Account types: spread-only vs commission plus raw spread
Most brokers offer at least two account types, and understanding the difference prevents you from defaulting to whichever one is marketed most prominently.
Spread-only accounts (sometimes labelled Standard or Classic) carry no separate commission charge. The broker’s profit is built into the spread. These accounts typically have wider spreads than ECN accounts. For lower-frequency trading, or for traders with smaller account sizes where per-trade minimums make commission accounts expensive, spread-only accounts can be cost-effective.
Commission plus raw spread accounts (sometimes labelled ECN, Pro, or Raw) have very tight spreads — sometimes 0.0 pips on EUR/USD — but a fixed commission is charged per lot, per side, typically between $2 and $7 per standard lot. For traders making frequent trades or trading larger sizes, the total round-trip cost is often lower than on a spread-only account. The arithmetic depends on your typical trade size and frequency, so calculate the total round-trip cost before choosing.
For a more detailed breakdown of how to calculate the true cost of a trade and compare accounts properly, see the guide to spreads and commissions.
Demo account testing checklist before depositing
Opening a demo account before depositing is standard practice, but the useful version of this involves specific checks rather than casual exploration. Run through these before committing real capital.
- Set the demo balance to the amount you intend to deposit for live trading, not the broker’s default of £50,000 or £100,000.
- Place every order type you expect to use: market orders, limit orders, stop-loss orders, take-profit orders. Confirm they work as expected.
- Check execution speed and spread behaviour during a significant news event (non-farm payrolls, Bank of England rate decisions).
- Verify that the platform works reliably on the devices you plan to use — desktop, mobile, tablet.
- Review contract specifications for each instrument you plan to trade: margin requirements, overnight financing rates, minimum position sizes.
- Practise the process of modifying and closing positions. Errors under time pressure are most common when traders have not rehearsed the steps.
- Examine the deposit and withdrawal interface. Identify what documentation will be required before your first withdrawal request.
For a full discussion of what demo accounts replicate and where they fall short, see the guide to demo accounts: what they simulate and what they do not.
Fund segregation
Regulated brokers are required to hold client funds in segregated accounts, separate from the firm’s own operational funds. This means that if the broker becomes insolvent, your money is not pooled with the company’s assets and creditors. Ask explicitly whether client funds are segregated and which bank holds them.
Spreads and total trading costs
The spread is the difference between the buy and sell price: your immediate cost on each trade. Low spreads advertised on the front page may be minimum spreads during peak liquidity; actual spreads during news events or off-hours may be significantly wider. Check average spreads on the instruments you plan to trade. For CFD and forex brokers, also check overnight financing rates — these can materially affect any positions held beyond a single trading session.
A broker due-diligence checklist
- Regulation: verify the broker’s licence directly on the regulator’s public register. Confirm the licence is active and covers the correct permitted activities.
- Fund segregation: confirm in writing or in the broker’s terms and conditions that client funds are held in segregated accounts.
- Spreads: check the actual spread on the instruments you plan to trade, not just the headline EUR/USD figure. Understand how spread and commission costs affect your returns before you start.
- Overnight financing: review swap or rollover rates for any positions you expect to hold past the daily close. These costs accumulate and are rarely prominently disclosed.
- Withdrawal: test the process with a small amount before committing serious capital. Many experienced traders do this routinely when opening a new account.
- Platform: use the demo account for at least two weeks before depositing. Demo accounts have real limitations, but they give you time to learn the interface under no financial pressure.
- Support: contact the support team with a genuine question before you deposit. Assess the quality and speed of the response.
- Reviews: check independent sources including Trustpilot, Forex Peace Army, and relevant Reddit communities. Note how the broker responds to negative reviews, not just the ratings.
No broker will pass every check perfectly, but the checklist quickly surfaces serious problems. A broker that fails on regulation verification, fund segregation disclosure, and support responsiveness is not worth your capital regardless of how good the spreads look. You can find a full breakdown of what different licence types actually mean in our guide to broker regulation and which regulators matter.
Related reading
- Broker regulation: what the licence types mean and which regulators matter
- Spreads and commissions: how broker costs affect your trading returns
- Demo accounts: what they simulate and what they do not
- How financial markets work: a guide for complete beginners
- Trading psychology: how fear and greed affect decisions
Frequently asked questions
Is my broker regulated by the FCA?
Go to register.fca.org.uk and search by the broker’s legal company name or its FCA registration number, which should appear in the footer of the broker’s website. Confirm the entity name matches and that the status shows as Authorised with permissions covering the type of trading you intend to do. Do not rely on the broker’s own website claim alone.
What is FSCS protection and does it cover trading losses?
The Financial Services Compensation Scheme (FSCS) covers eligible clients of FCA-authorised investment firms for up to £85,000 per person if the firm becomes insolvent and cannot return client money. It does not cover trading losses — if you lose money through your own trading, FSCS does not apply. It applies only when the broker itself fails to return funds it holds on your behalf.
How much should I deposit to start trading?
Start with an amount you can afford to lose entirely without affecting your financial position. For most retail traders, this means a genuinely modest sum relative to their savings — typically £500 to £2,000 for a first live account. The minimum deposit required by the broker is not necessarily a sensible starting point; adequate risk management requires enough capital to size positions proportionally to the risk you intend to take per trade. Start small, understand how costs and execution work on live accounts, and increase capital only once you have demonstrated consistent execution.
Are broker bonuses worth taking?
Generally, no. Bonuses typically come with withdrawal restrictions requiring you to trade a specified multiple of the bonus amount — often 20–30x — before withdrawing any funds, including your own original deposit. On a £500 bonus with a 20x requirement, you would need to generate £10,000 in trading volume before a withdrawal is permitted. Read the bonus terms carefully and in full before accepting. If the terms are unclear or the requirements seem excessive, declining the bonus is almost always the better option.
