Broker, demo account, and costs

This lesson explains how to choose a broker, verify its licence, and measure the costs that turn a good strategy into a losing one. It is designed for someone who has chosen an instrument and now needs to pick the execution venue without confusing marketing with safety.

What to check at a broker

Before depositing anything:

• Supervision and jurisdiction (KNF or an EU authority versus offshore). Verify the licence number and issuing authority, not the brand logo. A public register should list the legal entity, not just the marketing name.
• Costs: spread, commission, overnight swap, withdrawal fees, and currency conversion.
• Execution quality and platform reliability (MT5, cTrader, custom web or app).
• Client protection: fund segregation, negative balance protection for retail clients where required (CFD conditions are in the documents).
• Instruments aligned with your path: CFDs versus stocks or ETFs in a brokerage account.

Popular routes for beginners include local and European CFD brokers as well as ETF and stock platforms. Always compare the current offer and cost disclosure documents, not marketing banners. This course does not recommend any specific firm.

Broker ranking: see our ranking of brokers available in Poland and the measurement method — the same criteria (supervision, KID, leverage, PLN (Polish złoty) deposits) as in this lesson. Each entry includes a score, sources, and a list of things to watch out for.

Protocol before deposit: licence in register -> KID or cost disclosure -> demo in your own session window -> round-turn cost expressed as a fraction of R. Supervision filters red flags; it does not guarantee an edge.

How to verify a licence in five minutes

This is a concrete procedure, not the generic advice to check supervision:

1. Go to the broker’s footer and find the legal entity name, licence number, and issuing authority. Do not stop at the marketing brand.
2. Open the register of that authority and search for the legal name, not the brand.
3. Check whether the licence scope covers the products the broker offers you. A licence for brokerage is not the same as a licence to offer CFDs.
4. Check the authority’s public warning list to see whether the entity or related names appear there.
5. Record the result in a sheet with the check date. Registers change; verification without a date is useless.

If the broker provides only a trade name, a licence in another country without a number, or a licence of a related entity rather than the one you signed with — that is a signal, not a formality.

Pre-deposit checklist

Costs that kill edge

Even a sensible strategy dies when:

• spread is too wide on entry and exit,
• overnight holding is frequent and unplanned,
• overtrading multiplies commission,
• hidden currency conversion eats profit.

Educational example: 1R equals 100 units. A round-trip costs 12 units in spread and commission. That is already 0.12R of market tax before the setup wins. With twenty trades per month, costs are part of expectancy — measure them, do not guess.

Calculate this once per month using the table below. Fill in your own numbers:

The last row is the most important. If monthly cost is 1.5R, you must earn at least 1.5R per month just to breakeven — and that is a threshold most retail strategies struggle to cross. That one number explains more than a week of reading about trading psychology.

Criteria for moving from demo to live

Demo teaches platform mechanics: orders, charts, position sizing, partial close. It does not teach the fear of real money. Instead of going live because you feel ready, use hard thresholds:

If you do not hit the thresholds on demo, you will not hit them on live either — the only difference is that it will cost you real money. The discipline of moving from demo to live is a separate lesson in the strategies track. Here, remember: green PnL on demo without a checklist is not proof of edge.

Warning signs when choosing a broker

Several things should raise caution immediately, regardless of how attractive the advertisement looks: promises of guaranteed profit or 90 per cent accurate signals, missing licence number and regulator, pressure to deposit quickly for better conditions, and lack of publicly available cost disclosure. Under a regulated broker in the EU, these red flags should not be normal — but supervision does not prevent aggressive marketing or poor service quality. Treat the list as a safety filter, not a quality guarantee.

One issue appears rarely and is serious: an offer to switch status to professional. Professional status means giving up part of regulatory protection, including hard position limits and negative balance protection. A broker that offers this for convenience without asking about your experience and knowledge is not acting in your interest.

15-minute checklist

1. Open the instrument table for your pair or ETF.
2. Record the spread in a calm hour and just before high-impact news.
3. Check long and short swap.
4. Calculate: at your typical size, how much is that as a per cent of 1R.
5. Note jurisdiction, account status (retail), and the verification date in the register.

Next step

Understand leverage and margin — because they decide whether costs will kill you before the strategy matures.

Exercise

On a demo account or using the instrument table, choose one symbol. For three different hours of the day, record spread, swap, and commission. Calculate the average round-turn in account currency for a size matching 1 per cent risk on a hypothetical 10,000-unit capital, and enter the result into the monthly cost table. Finally, run the licence verification procedure and record the result with the date.

When the account and costs say do not trade

The conditions below are a filter before you deposit and before your first live trade: if any of them applies, the decision waits for the missing number, not for a better mood.

1. You cannot see the licence number or the legal name that signs the contract. You check the entry in the public supervision register by legal name, not by the brand on the banner. A missing entry stops the procedure; it does not merely delay it.
2. You do not know the round-turn cost for your size. If spread and commission are not calculated as a fraction of R, you do not know the threshold the strategy must beat on every entry. The account for a single trade is broken down in the lesson round-trip cost.
3. Monthly execution cost reaches 1R or more. At twenty trades and a cost of 0.05R per trade you get 1R, which is the entire monthly risk budget. A number like that invalidates the plan before the market has a chance to test it.
4. The spread before a data release is several times wider than in your plan. If you measure cost only in a calm hour but trade around an announcement, your plan describes a different market. Measure the spread in both conditions and separate them in the plan.
5. The criteria for moving from demo to live are not met. No thirty plan-compliant trades or no recorded cost means you do not have the data yet. Going live at this point is changing the stake without changing the method.
6. Broker materials promise a result or list the licence of a related entity. A profit promise and a licence somewhere else are two signals that do not occur together at a supervised EU broker. Until both are explained, you do not deposit funds.

Measurable exercise

Choose one demo instrument. Record: capital, 1 per cent risk in USD, distance to invalidation, the resulting size, and whether you end the session after a −2R limit. One row in a sheet beats three hunches from a chat.

Common questions

Is demo enough before going live?

Demo is enough for mechanics. You move to live after meeting measurable thresholds: the number of plan-compliant trades, recorded cost, a drawdown limit, and an exit reason for every position. Details are in the lesson From demo to live.

Why check the KNF if the broker has a nice app?

An app does not replace client protection and enforceable disputes. The public supervision register is the first filter, not a guarantee of profit. Check the legal name and the scope of the license, not the brand.

What is the difference between spread and commission, and what goes into the cost?

Both are entry and exit costs, just charged differently. In the round-turn cost column you enter the sum: spread in points converted to USD plus commission in both directions. Separating them makes sense when comparing brokers, but expectancy uses the sum.

How do costs relate to capital gains tax?

Capital gains tax usually applies to the capital gain, and the conditions depend on the account type — that is a separate layer after PnL. Broker costs reduce gross profit earlier. Both affect the net result; this is not tax advice.