Your broker is your gateway to the markets. Picking the wrong one can cost you money before you even place a trade — through hidden fees, poor execution, or worse, dealing with an unregulated firm. This lesson walks you through everything you need to consider before opening an account.
Concept: FCA Regulation Matters
In the UK, brokers must be authorised by the Financial Conduct Authority (FCA). This means your money is held in segregated accounts, the broker follows strict conduct rules, and you are covered by the Financial Services Compensation Scheme (FSCS) for up to £85,000 if the broker goes bust.
Always verify a broker on the FCA register at register.fca.org.uk before depositing any money. If they are not listed, walk away — no matter how good the marketing looks.
Spread Betting vs CFDs
UK traders generally have two main options: spread betting and contracts for difference (CFDs). Both let you speculate on price movements without owning the underlying asset, but there are key differences.
Spread betting profits are currently tax-free in the UK — you pay no capital gains tax or stamp duty. CFDs, on the other hand, are subject to capital gains tax but losses can be offset against other gains. Spread bets have an expiry date (though most brokers offer rolling daily contracts), while CFDs do not expire.
For most retail traders starting out in the UK, spread betting is the simpler and more tax-efficient option. However, if you are trading from outside the UK or want to hedge an existing share portfolio, CFDs may be more appropriate.
Example: Key Factors to Compare
- Spreads: The difference between buy and sell price. Tighter is better. Compare on the instruments you actually plan to trade.
- Overnight fees: Holding leveraged positions overnight costs money. Check the daily financing rate — it adds up quickly.
- Platform quality: Does the charting work well? Can you set alerts? Is the mobile app reliable? Try the demo before committing.
- Execution speed: In fast markets, slow execution means slippage. Look for brokers advertising fast fill rates.
- Minimum deposit: Some brokers require £250+, others let you start with £1. Match the broker to your budget.
- Customer support: Can you actually reach someone when you need help? Test their live chat before funding your account.
Always Start with a Demo Account
Every decent broker offers a free demo account with virtual money. Use it. Do not skip this step because you are eager to start making money. A demo account lets you learn the platform, test your strategies, and make mistakes without financial consequences.
Spend at least two to four weeks on demo. If you cannot make consistent progress on a demo account, you will not magically perform better with real money. In fact, you will likely perform worse because emotions will be involved.
Popular FCA-Regulated Brokers
Some well-known FCA-regulated brokers include IG, CMC Markets, City Index, Pepperstone, and Interactive Brokers. Each has different strengths — IG has the widest range of markets, CMC has excellent charting, Pepperstone offers tight forex spreads, and Interactive Brokers is popular for share dealing alongside derivatives.
There is no single "best" broker — it depends on what you trade, how often you trade, and what features matter most to you. Open demo accounts with two or three and compare them side by side.
Warning: Offshore and Unregulated Brokers
Be extremely cautious of brokers registered in places like St Vincent, the Marshall Islands, or Vanuatu. These jurisdictions have little to no regulation. If something goes wrong — and with unregulated brokers, things often do — you have zero recourse. Stick with FCA-regulated firms. The protections exist for a reason.