| Updated: December 16, 2024Forex is the largest and most active financial market in the world with a daily volume that dwarfs even the biggest stock exchanges out there. Millions of market participants indulge in foreign exchange trading each day, facing an astonishing variety of brokerages. With thousands of forex brokers on the web, making an informed choice is, unfortunately, both laborious and time-consuming. Below you can find the top 8 forex brokers that we selected based on several ranking factors including: regulation, spreads, trade execution, currency pairs available, deposit methods and withdrawal speed.
Fusion Markets74-89% of retail CFD accounts lose money
FP Markets73.85% of retail investor accounts lose money
Pepperstone75.5% of retail investor accounts lose money
Global Prime74-89% of retail CFD accounts lose money
AvaTrade76% of retail investor accounts lose money
eToro51% of retail investor accounts lose money
Plus50082% of retail investor accounts lose money
Admirals73% of retail investor accounts lose moneyAt BestBrokers.com, we are committed to easing this process and assisting you in your decision-making. With years of experience behind our back, we have tested and evaluated hundreds of forex brokers to spare you from going through this challenging task yourself. We summarize our findings in thorough reviews, bringing you a shortlist of forex brokers you can trust.
You have every right to be wary as there are many shady trading operations out there. But fear not, we’ve got your back. We firmly believe preparation is the key to success and this holds true in all aspects of life, trading included. It is in this spirit that we have compiled a detailed guide with all the key factors you have to consider during your brokerage selection process. But first, let’s give you a glimpse at our standards and the methodology we use when rating forex brokers.
Best Forex Brokers
- Min Deposit$0Min Spread0.00 pipsTradable PairsOver 90 pairsRegulationsASIC (Australia), VFSC (Vanuatu)SoftwareMetaTrader 4, MetaTrader 5, WebTrader (MT4), Myfxbook Auto Trade, DupliTrade, Fusion+ Copy TradingBanking MethodsMastercard and Visa (debit and credit), FasaPay, Jeton, Neteller, PayPal, Skrill, Perfect Money, Doku, OnlineNaira, Interac Online, Tether, Bitcoin, Litecoin, Ethereum, Broker-to-Broker Funds Transfer, TransferWise, Bank Wire TransfersRisk Warning: Gleneagle Asset Management Limited (ABN 29 103 162 278) trading as Fusion Markets, is the issuer of the Fusion Markets Products described in this communication. Trading in Fusion Markets Products involves the potential for profit as well as the risk of loss which may vastly exceed the amount of your initial deposit and is not suitable for all investors. You should read all of these Financial Product Service Terms, the Product Disclosure Statement (PDS) and the Financial Services Guide (available on our website) carefully, consider your own financial situation, needs and objectives for investing in these Fusion Markets Products and obtain independent financial advice.
Launched by a group of financial experts, Fusion Markets is geared predominantly to the needs of Aussie forex traders. The company holds licenses from ASIC and Vanuatu’s VFSC, delivering a smooth and low-cost trading experience in a highly regulated environment. Speaking of low costs, the minimum forex spreads at Fusion Markets start at zero, averaging 0.02 for some major currency pairs.
The acclaimed broker allows you to trade more than 90 pairs, with the added benefit of NDD order execution that gives you direct access to interbank prices. Two account types are available to forex traders at Fusion Markets, both sharing the same financial products and instruments.
The Classic account is a viable option for forex novices looking to keep things simple and have their trading costs automatically calculated. The Zero account offers tighter spreads with nominal commissions and is best suited for more seasoned traders who know how commission sizing works.
Aussies may be the target customer group of Fusion Markets but clients from other jurisdictions are also welcome, with few exceptions like the United States and New Zealand. Fusion Markets caters to its motley customer base with a vast range of payment methods, including digital wallets, cryptocurrencies, cards, and bank transfers.
- 2. FP MarketsMin Deposit$100Min Spread1.0 pips on Standard Accounts, 0.0 pips on Raw AccountsTradable PairsOver 70 pairsRegulationsASIC (Australia), CySEC (Cyprus)SoftwareMT4, MT5, cTrader, TradingView, WebTraderBanking MethodsVisa, Mastercard, Skrill, Neteller, PayPal, Bank TransferRisk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72.92% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
FP Markets is an online broker that was established in 2005, making it a well-experienced player in the Forex scene. With regulators like ASIC and CySEC, FP Markets has been authorized to offer its services to a wide range of traders, allowing them to explore a variety of CFD markets, including Forex, Indices, Commodities, Crypto, ETFs, and more.
The two main types of accounts that traders can open are Standard and Raw, each offering competitive prices on over 70 currency pairs. While the Standard account does not include any commission fees, the Raw account can significantly reduce the overall trade price by applying tight spreads that may start from 0.0 pips.
Forex traders will be able to choose from a wide range of trading platforms, including the popular MT4. Trading on the go is also possible through the FP Markets app. To start trading, you will need to fund your account with at least $100. Luckily, FP Markets supports a variety of payment methods that ensure instant and fee-free deposits. What is more, you can quickly withdraw your money, with the same range of banking options being available for withdrawals.
- 3. PepperstoneMin DepositNo minimum depositMin Spread1.0 pips min spread on Standard Account, 0.0 pips min spread on Razor AccountTradable Pairs100RegulationsCySEC (Cyprus), ASIC (Australia), DFSA (Dubai), BaFin (Germany), FCA (UK)SoftwareMT4, MT5, cTrader,TradingViewBanking MethodsVisa, Mastercard, Bank Transfer, Apple Pay, PayPalCFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.5% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Pepperstone is an Australian-based Forex broker that can offer a top-shelf trading experience to its customers, catering to the preferences of a wide range of traders. Performing every trade with integrity and the utmost care, Pepperstone strives to ensure safe and fair trading, following guidelines imposed by top-tier regulators like CySEC, ASIC, DFSA, BaFin, and FCA. Combining the quality of its financial services with competitive prices is what makes Pepperstone one of the top picks of numerous Forex traders.
In addition to markets like Crypto, Indices, ETFs. Commodities, and Share CFDs, Pepperstone offers a wide selection of Forex instruments, with 100 major, minor, and exotic currency pairs available to trade. As for supported platforms, Pepperstone has made sure that every type of trader will be able to pick the software that offers them the ultimate trading experience, with options like MT4, MT5, cTrader, and TradingView available to those who wish to analyze markets and place orders.
The broker has not imposed a mandatory deposit minimum, allowing its clients to begin their trading with as little funds as they feel comfortable investing. Convenient payment solutions like credit/debit cards, bank transfers, PayPal, and ApplePay are available to Pepperstone customers, offering them fast and secure payments.
- 4. Global PrimeMin Deposit$0Min Spread0.9 pips Standard, 0.0 pips RawTradable Pairs40RegulationsASIC (Australia), VFSC (Vanuatu)SoftwareMT4Banking MethodsVisa, Mastercard, Neteller, PayPal, Skrill, MiFinity, Jeton, Perfect Money, PayID, Interac, Astropay, POLi, Crypto, bank transfers, and moreGlobal Prime is a trading name of FMGP Trading Group Pty Ltd (ABN 74 146 086 017) and is regulated by ASIC and licensed to carry on a financial services business in Australia under Australian Financial Services License No. 385620. Gleneagle Securities Pty Limited trading as Global Prime FX, is a registered Vanuatu company (Company Number 40256) and is regulated by the VFSC. The website is owned and operated by FMGP Trading Group Pty Ltd, ABN 74 146 086 017.
Founded in 2010, Global Prime is a Forex broker capable of catering to the preferences of various investors, bringing them competitive costs on a wide range of assets. With 40 major, minor, and exotic currency pairs available to trade on the innovative MT4 platform, Global Prime clients can customize their experience to match their trading style.
When creating their accounts, traders can choose between the Standard and Raw account options. While the first one does not charge any commissions on Forex trades, it does come with slightly higher spreads that start from 0.9 pips on major currency pairs. Meanwhile, those who opt for the Raw account will be able to reduce the trading cost by trading currency pairs with lower spreads that may start as low as 0.0 pips.
Global Prime is regulated by ASIC and VFSC, authorizing the broker’s operation in several jurisdictions. There is no specific minimum traders are required to deposit to activate their Global Prime trading accounts. What is more, the broker accepts various payment methods that allow traders to handle their trading budgets in a fast, secure, and budget-friendly manner. You can practice your trading skills by opening a Demo Account or you may opt straight for a Live Account if you are confident in your trading.
- 5. AvaTradeMin Deposit$100Min Spread0.9 pipsTradable Pairs60 pairsRegulationsCySEC (EEA), FRSA (Abu Dhabi), FSA (Japan), FSCA (South Africa), ISA (Israel), ASIC (Australia), FCA (United Kingdom), FSC (British Virgin Islands), CBI (Ireland)SoftwareMetaTrader 4, MetaTrader 5, WebTrader, AvaTradeGO, AvaOptions, ZuluTrade, DupliTrade, AvaSocialBanking MethodsVisa, Mastercard, Skrill, PayPal, Neteller, WebMoney, Wire Transfers, MoneyGram, Perfect Money, POLi, KlarnaCFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
AvaTrade is an award-winning forex broker that operates in 9 regulated jurisdictions, including major financial markets like the UK, Australia, and Japan. The company has been leading the way in the field of online trading since 2006 but its operations have expanded dramatically since then.
Today, AvaTrade is home to a community of more than 300,000 registered clients and executes over 2 million trades each month, whose overall volume exceeds the impressive $70 billion. AvaTrade has plenty of merits up its sleeve, from round-the-clock multilingual customer support to a broad scope of trading instruments, including over 60 forex pairs, indices, cryptos, commodities, and stocks.
The renowned forex broker facilitates trading in majors, crosses, and exotics at highly competitive spreads that start at 0.9 pips. Forex CFDs are also readily available, with EU and Aussie clients having access to leverage of up to 1:30 for majors and 1:20 for other pairs.
Margin requirements for forex traders looking to implement leverage range from 3.33% to 5.00%, depending on what pairs they trade. AvaTrade is suitable for forex traders at all levels of experience, giving them a choice from multiple platforms like MT4, MT5, WebTrader, and ZuluTrade, among others.
- 6. AdmiralsMin DepositNo minimums for bank transfersMin Spread0.00 pipsTradable Pairs47 currency pairsRegulationsFCA (United Kingdom), CySEC (EEA), JSC (Jordan), ASIC (Australia), EFSA (Estonia), FSA (Seychelles)SoftwareMetaTrader 4, MetaTrader 5, WebTrader, MetaTrader Supreme EditionBanking MethodsVisa, Mastercard, JCB, Skrill, Klarna, Bank Transfer, Neteller, PayPal, POLi, AstroPay, iDEAL, Przelewy, Trustly, SafetyPay, China Union PayCFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Admirals (previously Admiral Markets) is a world-renowned online broker with more than twenty years of industry experience. The company upholds the highest standards of security and excellence under the harsh regulatory glare of top-tier regulators like the FCA, ASIC, and CySEC.
With a presence in more than 130 jurisdictions worldwide, Admirals is a global hub for forex trading, offering contracts for difference for over 45 currency pairs. Admirals customers have the opportunity to start investing in the forex markets with an initial amount as low as $100. Forex traders will benefit from tight spreads, some of which start at zero pips based on what account one opens.
Clients of the broker have access to live price fluctuations for major currency pairs at all times. Forex traders can polish their skills and broaden their knowledge about the foreign exchange market by participating in live webinars and seminars. Ebooks, articles, and video tutorials on forex are also readily available.
Admirals reduces the risk of slippage by boasting lightning-fast execution speed, with orders being filled within milliseconds. More advanced forex traders have access to a vast range of tools for fundamental and technical analysis, alongside market heat maps, market sentiments, and a trading news section. Forex traders have a choice from popular and widely used platforms like WebTrader, MT4, and MT5.
- 7. eToroMin DepositRanges from $10 to $10,000 based on region, payment method, and account typeMin Spread1 for major pairs CFDs on averageTradable Pairs49 currency pairsRegulationsCySEC (EEA), ASIC (Australia), FCA (United Kingdom), DNB (the Netherlands), FINRA, SIPC, and FINCEN (the USA), SFSA (Seychelles)SoftwareOpenBook (social trading platform), WebTrader (proprietary platform)Banking MethodsVisa, Maestro, Mastercard, Diners Club International, JCB, WebMoney, PayPal, Rapid Transfer, Bank Transfer, Neteller, Skrill, Klarna, Trustly, FasaPay, UnionPay, Bpay, WebMoneyCFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Born in January 2007, eToro went on to establish itself as an industry leader in the field of social trading. The broker’s proprietary platform gives you instant access to over 2,000 assets, including commodities, cryptos, stocks, indices, and ETFs. Trading with fiat currencies is also possible with eToro, with forex traders having a choice from 49 major, minor, and exotic pairs.
Forex novices can acquire more knowledge on how currency trading works by setting up free demo accounts with $100,000 in practice balance. The OpenBook social trading platform allows you to track the performance of seasoned forex traders and copy their positions in your profile.
In terms of trading costs, eToro has slightly higher spreads compared to other brokerages, starting at 1 pip for forex majors. Spreads are variable and change based on market conditions and volatility.
EU retail investors have the option to trade currency pairs on margin, with leverage ratios of up to 1:30 for majors. The eminent broker strives to meet the needs of all traders regardless of their capital and experience level. Minimum deposits range from $10 to $10,000 but the exact amount varies based on region and account type.
- 8. Plus500Min Deposit$100Min Spread0.8 pips on averageTradable Pairs67 pairsRegulationsCySEC (EEA), ASIC (Australia), FMA (New Zealand), FSCA (South Africa), SFSA (Seychelles), MAS (Singapore), FCA (United Kingdom), ISA (Israel)SoftwareWebTrader (proprietary platform)Banking MethodsVisa, Mastercard, Neteller, Skrill, PayPal, Bank TransfersCFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Plus500 is a highly rated online brokerage that has been in operation since 2008. Launched by a group of six fintech specialists from Israel, Plus500 trades publicly on the London Stock Exchange as part of the FTSE 250 Index. The company offers a full scope of products and allows clients to take positions on over two thousand financial CFD instruments.
A fully regulated brokerage, Plus500 has received authorization to legally service customers from many major markets, including the UK, Australia, Continental Europe, Singapore, and South Africa. Its highly intuitive and structured proprietary platform supports trading with more than 60 major, minor, and exotic fiat pairs.
Forex traders have access to a wide range of sophisticated tools to safeguard their gains and restrict their losses, including guaranteed stop orders. Spreads at Plus500 are relatively competitive, averaging 0.8 to 1 pips. Account registration is easy and quick as it takes a few minutes only.
New retail clients can start exploring the foreign exchange markets with an initial investment as low as $100. Those based in the EU and Australia can additionally inflate their positions through leverage of 1:30 for majors and 1:20 for other pairs.
Comprehensive Comparison of the Top 8 Forex Trading Brokers
| Forex Broker | Min Deposit | ECN Account | Market Maker | Scalping Allowed | Supported Currencies | Pro Account | Other Markets | Spread | Trust Pilot Rating |
|---|---|---|---|---|---|---|---|---|---|
| 1. Fusion Markets | $0 | Yes | No | Yes | AUD, CAD, EUR, GBP, USD, THB, JPY, SGD | Yes | Forex, Commodities, Indices, Crypto, US Stocks | 0.9 pips Classic; 0.0 pips Zero | 4.9 ⭐ |
| 2. FP Markets | $50 (AU$100) | Yes | No | Yes | USD, GBP, EUR, SGD, CHF, CAD, AUD, NZD, PLN, JPY, HKD | Yes | Forex CFDs, Shares CFDs, Metals CFDs, Commodities CFDs, Indices CFDs, Crypto CFDs, ETF CFDs | 1.0 pips Standard; 0.0 pips Raw | 4.7 ⭐ |
| 3. Pepperstone | $0 | Yes | No | Yes | GBP, USD, EUR, CHF | Yes | Forex, Indices, Commodities, Cryptocurrencies, Share CFDs, ETFs | From 0.0 pips (Razor Accounts), 1 pip (Standard Accounts) | 4.6 ⭐ |
| 4. Global Prime | $0 | Yes | No | Yes | USD, AUD, GBP, EUR, CAD, SGD, JPY | Yes | Forex, Cryptocurrencies, Indices, Commodities, Bonds | 0.9 pips Standard, 0.0 pips Raw | 4.5 ⭐ |
| 5. AvaTrade | $100 | No | Yes | Yes | EUR, GBP, USD, CHF, AUD, ZAR, JPY | Yes | Forex, Major stock indices, Cryptocurrencies, Commodities, Bonds, Individual Shares, ETFs | From 0.9 pips (retail), 0.6 pips (pro) | 4.4 ⭐ |
| 6. eToro | $50 or $100 based on country ($10 for the UK) | STP accounts available | Depends on entity | No | EUR, USD, GBP | Yes | Crypto, CFDs on Forex, Stocks, Commodities, Crypto, ETFs, and Indices | 1 pip | 4.2 ⭐ |
| 7. Plus500 | $100 | Yes | Yes | No | USD, EUR, GBP, CAD, AUD, NZD, BGN, JPY, CHF, BRL, PLN, SEK, RON, HUF, DKK, SGD, ZAR, and more | Yes | CFDs on: Forex, Crypto, Indices, Commodities, Stocks, Options, ETFs | 0.8 pips | 4.1 ⭐ |
| 8. Admirals | $100 ($1 for Invest MT5 Account) | Yes | No | Yes | USD, EUR, GBP, CHF, BGN, RON, PLN, HUF, HKR, CZK | Yes | CFDs on Forex, Indices, Stocks, Commodities, Bonds, ETFs, Cryptocurrencies | From 0.0 pips (Invest and Zero Accounts), 0.5 pips (Trade Accounts) | 3.9 ⭐ |
Our Standards and Rating Methodology
At BestBrokers.com, our main goal is to help you find online brokers that allow you to trade with confidence. All reviews you see on this website have been compiled based on our unwavering standards and a rigorous methodology we continue to perfect to this day. We ensure all sites we recommend can deliver the high-quality trading experience we have come to expect.
Transparency Is the Touchstone of Our Reviews
BestBrokers.com takes pride in being fully transparent about its broker evaluation process. We have seen plenty of reliable and subpar forex brokers over the years to be able to spot the ones that are worth our readers’ time.
We Consistently Revise and Improve Our Methodology
Furthermore, we continue to revise and fine-tune our methodology to ascertain it considers the newest trends in the world of online forex brokers. Another thing we take into account is the feedback of real traders. This gives us the confidence that we deliver broker recommendations that best represent our readers’ needs.
The Areas We Cover in the Process of Forex Broker Evaluation
Reviewing online brokerages is not a one-sided process. To receive a high rating from our team, an online forex broker cannot simply provide a decent trading platform. Our experts consider a variety of other factors as well, including financial instruments diversity, trading costs, account types, safety of funds, the availability of good educational materials, and more.
Multi-Areas System of Broker Analysis
The team behind BestBrokers.com has designed an assessment system that covers multiple areas of analysis. We create live accounts with each brokerage, which allows us to thoroughly test its platform’s usability and the overall service quality. All brokers we review receive a score for their performance in each area.
Then we reweight the individual scores so that we can assign a final rating that reflects the brokers’ overall performance. We frequently revisit the brokerages to ensure they maintain a consistent level of quality. If not, our team updates their scores accordingly. Here are the main areas our experts pay attention to:
- Regulatory compliance and licensing are easily the first things we check so that we can assign scores based on the strength of regulations. Reputable forex brokers operate under the supervision of respected financial regulators like the UK’s Financial Conduct Authority (FCA), the Australian Securities and Investment Commission (ASIC), the Cyprus Securities and Exchange Commission (CySEC), and the US Commodities Futures Trade Commission (CFTC). Brokerages licensed by these stringent authorities receive more points from us.
- The overall reputation in the forex trading community is equally important to us. We take a close look at each broker’s history and longevity, collecting information about ownership, sources of operating capital, and any potential issues reported by fellow traders. Your feedback is important to us as it helps us build up a full picture of the forex brokers’ trustworthiness.
- The trading platforms and their usability is another crucial aspect we pay close attention to. Analyzing this area helps us properly assess the overall ease of use and navigation of each trading site. A good broker tends to provide a range of customizable features like trade signals and charting tools, as well as fast order execution. It boasts cross-compatibility across all devices via intuitive software that allows for seamless navigation.
- Portfolio diversity is also an area of interest for us. We first look at the variety of currency pairs on offer. From highly liquid major pairs like GBP/USD and EUR/USD to minors and exotics – a good broker must cater to forex rookies and seasoned investors alike. The larger the inventory of financial instruments on offer, the higher a broker scores with us. We award additional points for the availability of other instrument categories and sub-categories such as stocks, indices, commodities, and bonds.
- Security is another point of interest we consider. Only forex brokers that are committed to protecting their customers’ funds and personal data score high with us. We look for watertight encryptions, security protocols, and strict privacy policies. Then we also look into the brokerages’ insurance policies and the recourse traders have in case of broker insolvency.
- Trading costs also undergo a detailed assessment by our team. We take a careful look into the spreads and other fees associated with foreign exchange trading at each broker. Then we compare them with those of the competition to paint the full picture of the related costs. Some brokers advertise zero-commission trading but in reality, compensate for this with wider spreads. Brokerages with uncompetitive spreads fall behind in terms of ranking.
- The supplemental services on offer bear consideration as well. The presence of features like copy trading, auto trading, and chart trading will inevitably earn the brokers a few extra points.
- Educational tools and materials are always a big plus in our eyes. They help customers make better-informed decisions and take their forex trading careers to the next level. The high marks in this area include platform tutorials, ebooks, forex terminology glossaries, podcasts, free webinars, and educational videos.
- The ease of payments is another essential factor we take into account. First, we look closely into the range of available deposit and withdrawal methods. Some of the most common options are credit cards, wire transfers, checks, and e-wallets like PayPal. Then we consider the initial deposit amount to see whether it is low enough to accommodate those of you who are starting out with limited capital.Next, we examine whether the broker imposes additional fees on customers’ payments. The best trading sites readily waive the extra charges, covering the payment-associated expenses for traders. Finally, we also check the processing timeframes for withdrawals – the shorter they are, the higher the score we assign for this area.
- Customer support should be available around the clock since forex trading occurs 24/5. A forex trader in need of additional hand-holding should be able to receive assistance at all times. Another thing we consider is the range of support communication channels on offer. The top-rated brokers we have shortlisted provide dedicated support via live chat, free telephone lines, and email (or contact forms). Long waiting times and inadequate customer care do not sit well with us.
We Consistently Update Our Ratings – Here Is Why
Our ratings are based on the information we have collected while researching, testing, and assessing the reviewed brokers’ performance. Online brokerages often introduce various platform and service improvements, change their terms, or adjust their pricing.
We strive to reflect these changes so that we always deliver accurate and up-to-date information and ratings to our readers. Our team keeps a close watch on the brokers to stay on top of any potential changes and update the ranking if necessary.
Forex Brokers Account Types
Worthwhile forex brokers provide a selection of different account types to accommodate all categories of traders. The most widespread options include demo, mini, micro, standard, and Islamic accounts. Each type serves a different purpose and has its advantages. Your choice of account should be primarily based on your individual trading goals, experience level, and the amount of capital you are willing to commit with.
The Demo Account = Risk-Free Trading
The Micro Account = 1,000 currency units per lot
The Mini Account = 10,000 currency units per lot
The Standard Account = 100,000 currency units per lot
The Islamic Account = Swap-Free Trading
Forex Brokers Business Models
While browsing the internet in search of a suitable broker, you are likely to encounter terms such as dealing desk, market maker, straight through processing, and electronic communication network. These terms might sound as if derived from some strange tongue, but in reality they correspond to the different types of business models used by forex brokers. Below you have brief explanations of each model at a glance.
Dealing Desk (DD) Brokers – Also known as market makers, dealing desk brokers execute orders for a variety of financial instruments, including currency pairs, hard and soft commodities, options, and equities. The most distinguishing trait of market makers is that they take the opposite side of their customers’ trading positions and use fixed spreads.
These brokers generate profit from the difference between the bid and ask prices, i.e. they buy at a lower price and then sell at a higher one. Requoting is common when you use their services. They effectively act as their customers’ counterparties.
No Dealing Desk (NDD) Brokers – No dealing desk brokers give their clients first-hand access to the interbank markets. Customers’ orders do not go through a dealing desk but are sent straight to the banks and other liquidity providers. NDD brokers act as mediators between traders and the interbank market participants. They pair up the opposite sides of trades initiated by two different clients, serving as a bridge between the two.
Direct market access prevents requoting and trading prices update in real time. Another advantage of using the services of these brokers is that they offer lower spreads which are flexible rather than fixed. This opens the opportunity for an increase in the spreads’ value when important economic announcements cause volatility levels to rise. There are two subtypes of no dealing desk brokers (STP and ECN). We explain them in further detail below.
ECN Brokers – The abbreviation ECN stands for “electronic communication network”. Such brokers give you direct access to interbank market participants like hedge funds, fellow retail traders, banks, and other brokerages. The trading process occurs via electronic communication networks, which allow for higher levels of price-feed transparency and deeper liquidity. All market participants have access to the price-feed information as well as to previous price history.
This comes with several advantages. On one hand, it enables traders to easily analyze specific market trends. On the other hand, it helps prevent price manipulation since everyone has direct access to the information about past and present prices. However, this comes at the expense of per-trade-based commissions which can have a negative impact on your bottom line.
STP Brokers – Straight Through Processing (STP) brokers also transfer their clients’ trades to their liquidity providers and are quite similar to their ECN counterparts. The most pronounced difference between the two has to do with routing. ECN brokers act as liquidity hubs consisting of many connected liquidity providers who strive to find counterparties for the trades they cannot handle themselves.
STP brokerages route their customers’ orders directly to their liquidity providers who take the opposite side of the trades, acting as brokers of the brokers so to speak. STP brokers do not charge fixed commissions on the trades they facilitate. Instead, they profit by adding a markup to the spreads quoted by the liquidity providers in their pool.
Common Forex Order Types
When trading currency pairs with the brokerages recommended by BestBrokers.com, you will encounter several types of orders. It is important to get a grip on what they are and how they work so that you can fully benefit from them. Orders serve as instructions you send to your broker, specifying how you want to buy or sell a given asset, in this case currency pairs. Keep in mind the available types of orders you can use are broker-specific and might vary from one trading site to another. Below we explain the most common ones.
Market Orders
With market orders, you instruct your forex broker to enter or exit a given trading position at the best price that is currently available. For instance, let’s suppose the bid price for the GBP/USD pair currently sits at 1.3150, while the ask price is 1.3152. Assuming you decide to buy GBP/USD via a market order, you will do it at the price of 1.3152.
The broker will immediately execute the order. One downside of market orders is that they might result in excessive slippage during turbulent periods when the markets are moving fast. When conditions are volatile, there might be discrepancies between the price you have picked and the price at the time of order execution.
Limit Orders
With limit orders, the forex trader sends an instruction to their broker to buy or sell a pair at a certain price or higher. The broker executes the order whenever the market reaches the trader’s desired entry price or better. To put it simply, these orders work to your advantage because brokers execute them only when the prices become more beneficial to you. You can use them for both short and long positions.
Stop Orders
This is another type of conditional order that has two sub-types, buy stop and sell stop. You instruct the broker to buy a currency pair above the market or sell it below the market at your specified price.
Buy stop orders are instructions to buy at a price higher than the current market price. For example, you have reasons to believe the GBP/USD pair will move above the 1.3100 mark, and send a buy stop order for 1.3102.
When the market moves to 1.3102, the buy stop order will transform into a market order and the broker will fill it at the next best price. Conversely, if you are confident the GBP/USD will continue to depreciate in value and drop below 1.3100, you can place a sell stop order at 1.3099.
Stop Loss Orders
As you can probably tell by the name, forex traders use this order type if they seek to minimize their losses when the foreign exchange markets move unfavorably. If you set a stop-loss at 15% below the price you bought a currency at, you will restrict your losses to 15%. Here is a more concrete example where we assume you have opened a long position for GBP/USD at the price of 1.3120. By setting the stop loss at 1.3100, the maximum losses you can potentially incur will not exceed 20 pips.
Good ‘Til Canceled (GTC) Order
This is a more exotic order type and you have to be more careful with it. There is no specific timeframe here as the order stays active until the trader decides to cancel it. However, the name is somewhat of a misnomer since GTC orders do not usually stay active for an indefinite period.
Brokers themselves often set them to expire within thirty to ninety days after traders have sent them. The practice helps prevent neglected orders from being suddenly executed. Let’s say the GBP/USD presently trades at 1.3200 and you set a buy good-til-canceled order at 1.3150. If the price reaches 1.3150 before you decide to cancel the order or it expires, the broker will fill it.
Forex Broker Software Platforms
The trading software serves as the investors’ gateway to the foreign exchange markets and is among the primary things to consider when deciding where to trade. Brokers that offer a diverse enough range of trading platforms usually receive top marks from us.
Some trading sites use proprietary software developed in-house but most tend to rely on platforms created by third parties like MetaQuotes. Either way, cross-compatibility is a desirable feature, especially if you insist on keeping a close watch on the markets as you go.
The platform’s features are another major point of interest. A good platform provides users with sufficient tools for technical and fundamental analysis and boasts lightning-fast speeds of order execution, allowing traders to enter and exit their positions with great ease. By contrast, a cluttered, unintuitive interface can result in costly entry and exit errors.
Platforms like eToro, for example, support copy trading, enabling inexperienced users to track the performance of seasoned investors and copy their positions. The best brokers out there provide a choice from browser-based, stand-alone, and mobile trading platforms.
Features vary across different proprietary platforms so we recommend you to test them individually by setting up demo accounts. This will give you a good idea about each platform’s features and performance. Let’s have a quick look at the most broadly implemented third-party forex trading platforms.
MetaTrader 4 (MT4) is easily the most widely used software for trading. Estimates suggest that more than 80% of the forex brokers in the industry work with it, including many of those BestBrokers.com recommends. Created by MetaQuotes Software in 2005, MT4 is compatible with several operating systems like Microsoft Windows, iOS, and Android. Some of the MT4 features include dozens of technical indicators and graphical objects, over a thousand symbols, and a single-thread strategy tester.
MetaTrader5 (MT5) is the successor of MT4, launched in 2010. Despite the extra features it boasts, its uptake was unimpressive – most brokers and traders continue to favor its predecessor. Unlike MT4, which is primarily intended for foreign exchange trading, MT5 also works with other instruments like options, bonds, stocks, and futures. Additionally, it has a depth-of-market feature and an economic calendar.
cTrader is courtesy of the Cyprus-based company Spotware Systems and ranks third in popularity among forex traders. The most distinctive trait of the platform is that it supports automated trading but this is hardly the only advantage here. The cTrader platform offers advanced order protection, an economic calendar, level II depth of market, six types of charts, and over fifty pre-installed technical indicators.
NinjaTrader is a sophisticated charting platform that launched in 2004. Developed in the United States, the platform is primarily used by traders based in North America. NinjaTrader supports numerous customizable features, including various drawing tools and hundreds of indicators. On the downside, few brokers work with NinjaTrader, which is only compatible with the Microsoft Windows OS.
Commissions, Fees, and Other Related Costs
Forex brokers are no charity organizations so you should not expect them to fill your orders free of charge. You should be aware of the various costs associated with trading currency pairs to even stand a chance of becoming a successful forex trader. We give you a glimpse of the most common costs you will incur when trading on the foreign exchange market.
The Spread
To remain competitive, most forex brokers have abandoned the practice of charging commissions and profit from the built-in spreads instead. The term spread refers to the difference between the bid and ask prices. Think of it as the juice bookmakers charge for accepting punters’ bets. For instance, if the bid and ask prices for the GBP/USD pair are 1.3115/1.3118, the spread will equal three pips.
Dealing desk brokers typically use fixed spreads that do not fluctuate, so that traders know the cost of their positions in advance. Flexible or floating spreads are common among no dealing desk brokers and vary based on market volatility.
Commissions
ECN brokers usually offer narrower spreads compared to market makers but this comes at an expense – their clients must pay fixed commissions per trade on top of the spread (if any). Round-turn commissions are another thing to beware of. The broker charges a flat commission based on the amount you trade. For example, you decide to trade the EUR/USD pair with a standard account but there is a $2.50 commission per lot (100,000 currency units). The broker will charge you $2.50 per leg, i.e. upon entry and exit, so that you pay $5 in total for a single-lot position.
Financing Costs
Also called rollover or swap rates, financing fees are in place on positions that remain open overnight. The brokerage will automatically apply them to traders’ accounts every day they have an open position, including on weekends. The financing fees generally depend on the interest rate differences of the two currencies in the pair, as well as on the spot prices. Sometimes market conditions can also influence them.
Withdrawal Fees
Some brokers might impose nominal fees when you request a withdrawal from your account’s available balance. Others offer you one or more free withdrawals per month but you will still suffer extra charges if you exceed the allowed monthly maximum. If you are unsure whether any withdrawal fees are in place at your chosen brokerage, you can always inquire with the support team. On a more positive note, many of the top-ranking sites on BestBrokers’ shortlist process withdrawals at no extra cost.
Inactivity Fees
If your account remains inactive for a given period, usually twelve consecutive months, many brokers will start deducting monthly inactivity fees from your available balance for maintenance purposes. The exact rates differ from one forex broker to another and are generally listed in the terms and conditions.
Forex Broker Regulations
One of the first things you should look at when picking a forex trading site is who regulates it. Trading with a properly regulated firm gives you the assurance your funds are protected against broker insolvency. Regulated brokerages uphold the rigorous standards of financial watchdogs, including storing clients’ funds in segregated accounts.
Additionally, they must meet certain minimum capital requirements to operate in regulated markets. The highest-ranking forex brokers at BestBrokers.com typically carry the stamp of approval of one or more of the following financial regulators.
- The Financial Conduct Authority (FCA) regulates forex brokerages within the United Kingdom. Broadly considered one of the most influential financial regulators in the industry, the body operates jointly with the Prudential Regulation Authority and the Bank of England.The UK left the EU and the EEA in late January 2020 but its regulatory framework still borrows heavily from the regulations outlined in the Markets of Financial Instruments Directive (MiFID). Consumer protection measures in the country largely overlap with those implemented in EU member states, including lower retail leverage caps, client funds segregation, and negative balance protection. The FCA’s main goals are to preserve the integrity of the UK financial markets, protect institutional and retail investors, and impede financial malpractices.
- The Australian Securities and Investments Commission (ASIC) is one of the most reputable regulatory agencies in the world. It regulates Australia’s financial industry under the provisions of the 2001 Corporations Act. Under ASIC regulations, brokers must have a minimum operating capital of $1 million or more. The body requires its licensees to store clients’ funds in segregated accounts at banks that belong to the tier-1 category.
- The Commodity Futures Trading Commission (CFTC) dates back to 1974 and has the mandate to oversee the derivatives markets in the United States. It publishes its Commitment of Traders Report each week to assist the public in better understanding the dynamics of the markets.CFTC-regulated brokers must hold operating capital of $20 million or more, one of the world’s highest thresholds. The brokers must routinely submit auditing reports and hold their customers’ money in segregated accounts at top-tier financial institutions. Contracts for difference (CFDs) are illegal in the United States but local retail traders have access to other leveraged products, with maximum leverage ratios capped at 1:50.
- The Federal Financial Supervisory Authority (BaFin) has the responsibility of supervising brokers and other financial companies in Germany. It was founded in 2002 after the passage of the Financial Services and Integration Act.Since Germany is also part of the EEA, brokers that hold licenses from the FCA and other European financial regulators can service German customers without necessarily setting up registered offices in the country. The minimum capital requirements BaFin imposes range from €750,000 to €5 million, depending on the amount of trading capital the brokerages hold on customers’ behalf.
- The Cyprus Securities and Exchange Commission (CySEC) came to be in 2001. It reformed its regulatory protocols after Cyprus became an EU member in 2004 to align them with the framework of the MiFID. This allows CySEC-licensed brokers to provide their services throughout the EEA. Brokers regulated in Cyprus must maintain operating capital of €750,000 or more. Licensees are part of an Investor Compensation Fund and must reimburse each customer with up to €20,000 in case of bankruptcy.
Safety of Funds and Money Guarantees
BestBrokers.com prioritizes the safety of its readers’ funds, which is why we only recommend fully licensed and properly regulated forex brokers. The brokers we have shortlisted for you go above and beyond to protect clients and their funds by implementing the following measures:
- Negative balance protection is available at all Europe, Australia, and UK-regulated forex brokers that allow their clients to trade contracts for difference (CFDs) with leverage. It protects you from losing more than your available balance if the market goes against you. However, this form of protection is only available to retail investors, professional traders cannot take advantage of it.
- Funds segregation is a must for all properly regulated forex brokers. In essence, this means they keep their customers’ funds in segregated accounts that are separate from those they store their operating capital in. Clients can feel confident they will get their money back if the broker files for bankruptcy. Financial regulators typically require the brokers to store clients’ funds at top-tier banks. The brokerages must also meet certain minimum operating capital requirements to receive licenses.
- Investor compensation schemes serve to protect retail customers and award them compensation if the brokerages fail to return their money or assets for one reason or another. This happens most commonly when they experience financial problems or suffer insolvency.Many regulatory bodies refuse to grant licenses to brokers that do not participate in one such scheme. The exact approach varies across different regulatory jurisdictions. CySEC-licensed brokers, for instance, can compensate their traders with up to €20,000 each in case of bankruptcy.
