Is it normal for brokers to ask whether I am a beginner?

Question

I know that a broker would try to do their best to help a customer learn if they are beginners so that they stick with them. Apart from that, do you think there might be other reasons behind doing it?

I have noticed how many beginners are attracted by the low spreads and even such statements as "1 click trade!!", which lead me to the conclusion that beginners can be easily misled. Hence, the broker knowing from the start whether their customer is a beginner or not may help them obtain larger profit margins (by factors that the beginners are not well aware of), and harder if the customer has some experience. What I am trying to say is that they will not try to fool the experienced traders because they may lose their business. That, in general, doesn't sound like a good broker to me.

So, is it normal for brokers to ask whether I am a beginner?

P.S. if that's going to help, the broker that asked me is activtrades.bg, which is the Bulgarian version of activtrades.com.

UPDATE: For the more curious of us, it's worth registering at Forex Factory to check this thread out. Definitely worth reading.

Answer 1

Brokers need to assess your level of competency to ensure that they don't allow you to "bite off more than you can chew" and find yourself in a bad situation. Some brokers ask you to rate your skills, others ask you how long you've been trading, it always varies based on broker. I use IB and they gave me a questionairre about a wide range of instruments, my skill level, time spent trading, trades per year, etc.

Many brokers will use your self-reported experience to choose what types of instruments you can trade. Some will only allow you to start with stocks and restrict access to forex, options, futures, etc. until you ask for readiness and, for some brokers, even pass a test of knowledge. Options are very commonly restricted so that you can only go long on an option when you own the underlying stock when you are a "newbie" and scale out from there. Many brokers adopt a four-tiered approach for options where only the most skilled traders can write naked options, as seen here.

It's important to note that all of this information is self-reported and you are not legally bound to answer honestly in any way. If, for example, you are well aware of the risks of writing naked options and want to try it despite never trading one before, there is nothing stopping you from saying you've traded options for 10 years and be given the privilege by your broker. Of course, they're just looking out for your best interest, but you are by no means forced into the scheme if you do not wish to be.

Answer 2

In Canada, for example, they are expected or required to find out.

They call it, The “Know Your Client” rule, part of which is knowing your "Investment knowledge and experience". They say it is, "to ensure their advice is suitable for you".

I have always been given that kind of form to fill in, when opening an account.

Answer 3

Legal requirements

In many places there are legal requirements to do so, essentially made to prevent brokers from selling high-risk products as if they were deposits with guaranteed safety of your funds.

There also may be prohibitions on offering high-risk/high-return products to beginner customers, e.g. requiring accredited investor status claiming that yes, you really know how this works and are informed of the involved risks or you're not allowed to invest in that product.

Making untrue claims of being not a beginner may limit your options if your broker does cheat you in some manner, as it gives them a solid argument that you confirmed that you understand how their pump-and-dump scheme works and are yourself responsible for losing your money to them.

Answer 4

Yes, this is common and in some cases may be required. They may use it for marketing at some level, but they also use it for risk management in deciding, for example, how much margin to offer and whether to approve access to "riskier" products like stock options.

Answer 5

Actually, yes — brokers usually ask about a client’s level of experience for several reasons:

Regulatory requirements. In many jurisdictions, brokers are obliged to assess a client’s knowledge and experience to determine which services and instruments are appropriate. For example, in the EU this is a requirement under MiFID II.

Marketing strategy. As you correctly noticed, beginners are often more sensitive to flashy offers like "1-click trading!" or tight spreads. Knowing a client’s experience level allows brokers to target different offers: one type for beginners, another for experienced traders.

Broker’s risk management. Especially for brokers working as market makers, it’s important to understand client behavior. Beginners tend to make more mistakes and lose deposits, which can generate profit for the broker. Experienced traders, on the other hand, might be more cautious and profitable themselves. So the broker’s approach to these categories differs.

Reputational risks. As you pointed out, trying to deceive experienced traders is risky — they will quickly recognize shady tactics and can seriously damage a broker’s reputation through reviews and complaints.

As for ActivTrades specifically — it’s a fairly well-known European broker with an FCA license (at least for their London office), so most likely, their question about your trading experience was part of their standard KYC (Know Your Customer) procedure.

So yes — this kind of question is normal practice. But if after that they start aggressively pushing you towards high-risk trades, overleveraging your account, or “hot” instruments — that’s definitely a red flag.

Thanks for the link to the Forex Factory thread — I’ll check it out!

Answer 6

Brokers ask about your experience to match you with appropriate products. If you're new, they may restrict access to leveraged instruments like futures or options until you're ready. It’s standard—better than being overexposed by accident.