14 Best Forex Brokers
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Introduction
This article discusses the best forex brokers, what is a forex broker, its pros and cons, and the forex market.
By far, the biggest and busiest financial market in the world is the foreign exchange (forex) market. Both novice and seasoned traders typically search for a number of essential features and advantages when looking for the best forex brokers.
The following are some of the most crucial factors to consider when trading: overall trading experience, breadth and depth of product offerings (including currencies, CFDs, indexes, commodities, spread betting, and cryptocurrencies), fees (including spreads and commissions), trading platform(s) (web-based, downloadable software, mobile, charting, and third-party platforms), customer support, trading education and research, and trustworthiness.
What is a Forex Broker
Financial organizations known as retail forex brokers serve as a bridge between individual trader clients and the forex market.
These forex brokers target smaller traders who want to participate in the forex market on a margin basis. They have an online presence in the form of a corporate website.
Forex trading transactions can typically be carried out by traders using the supported electronic trading platforms of online forex brokers.
Many online forex brokers support well-known 3rd party forex trading platforms like MetaTrader 4 and 5 (MT4/5) from MetaQuotes in addition to providing their own proprietary trading software.
Some forex brokers also provide beginners with incredibly helpful educational materials you can use to advance your trading knowledge. In order to aid you in making wiser trading choices, they might also give you access to professional forex market analysis and financial news feeds.
Trading bots are an option if you pick a forex broker who employs automation. These programs, known as bots, are AI-enabled and use market data to execute trades on your behalf.
Each bot follows a unique trading strategy that is intended to boost your profits. Bots for trading are not flawless, though. For the best outcomes, you need to conduct your research, establish a budget, and keep an eye on your account.
Pros and Cons of Forex
For traders, the forex market offers a distinct set of benefits and drawbacks, some of which are listed below.
Pros of Forex
- High leverage: Since a currency exchange at par has no net value, using leverage in forex trading enables you to manage sizable positions with a modest margin investment. This raises your risk but also gives you the opportunity to profit from relatively minor changes in the exchange rate.
- High liquidity: Since the forex market is the biggest financial market in the world, the major currency pairs have a very high level of liquidity. This makes it possible to execute sizable transactions in those pairs almost at any time during regular trading hours.
- Trading available 24/7: Starting at 5 p.m., the forex market is always available for transactions. Sunday until 5:00 EST Even on U.S. holiday weekends, Friday EST. Throughout market hours, this offers continuous trading opportunities.
Cons of Forex
- Fewer asset options: While many stocks can be traded, forex traders only have access to a small number of relatively liquid currency pairs, as opposed to the majors.
- Volatility: As participants process new information, the forex market may experience significant movements. For traders, this volatility may lead to unforeseen profits or losses.
- OTC market that is unregulated: Because the interbank foreign exchange market transacts over the counter (OTC), it is still largely unregulated. Nevertheless, a number of jurisdictions have put regulations in place to safeguard retail traders who conduct business with online brokers.
The Forex Markets
Trades in a currency pair are made in the forex market when traders agree to exchange one currency for another at a specific level known as the exchange rate.
This exchange rate fluctuates based on supply and demand variables, as well as the general expectations of future events in the forex market, just like stock prices do.
There are two ways for forex traders to profit from a currency transaction. They first make money if they buy or go long a currency and it appreciates in value relative to the currency they sold. Second, they make money if they short a currency and it depreciates in value in comparison to the currency they bought.
Numerous currency pairs traded on the forex market exhibit high levels of volatility or fluctuation, which can bring about profits or losses for traders. Review the EUR/USD pairing over the previous seven, twelve, or more months.
You can learn a lot by looking at the history of the pairing, and you can compare the stock’s movements to recent developments in either the United States or the European Union.
You might observe that the pairing moves counterclockwise to the news you’re reading during the comparison process. As you continue reading, you will discover how to predict currency movements based on current affairs.
Trading Forex Risk and Reward
In forex trading, profits are made when you take a long or short position in a currency pair that later increases in value. When you make a forex trade and the market doesn’t behave as you had anticipated, you run the risk of losing money.
Many brokers enable traders to leverage their positions in order to increase their gains or losses. Leverage is typically defined as the ratio of the size of a position you can control by making a margin deposit of one unit of the base currency. Therefore, a leverage ratio of 500:1 would imply that you could manage a $500 position with a $1 margin deposit.
Additionally, the majority of successful traders have a minimum risk-to-reward ratio for a trade that they will consider before they execute it, such as 1:2 or 1:3.
For instance, if you estimate that a trade has a 1:2 risk/reward ratio and that the odds of it making 20 pip profit are roughly equal to the odds of it losing 10 pip profit. You might decide that trade is worth executing if it satisfies your risk/reward ratio requirements.
14 Best Forex Brokers
1. CMC Markets
A reputable, publicly traded, and long-standing UK forex broker, CMC Markets (CMC) was established in 1989 and has successfully adapted to the ever-evolving online brokerage market. It is one of the best forex brokers.
The company is a publicly-traded company on the London Stock Exchange (LSE), trading with the ticker CMCX. Like many other forex brokers, CMC does not allow American traders.
From the inexperienced retail trader looking to dabble in the online trading markets for forex, CFDs, and spread betting to the seasoned pro seeking exposure to a wide range of products, CMC Markets is for all types of traders.
The firm has reasonable fees for the sector and is ranked highly on a number of our lists. The organization has been named the Best Forex Broker for Range of Offerings and Best Forex Broker for Overall Performance in 2020.
2. London Capital Group (LCG)
Since its founding in 1996, London Capital Group (LCG) has maintained its position in the fiercely competitive online brokerage market. The company’s most recent rebranding initiative, LCG Trader, was introduced in 2016.
This is LCG’s entire online product offering to the consumer, along with the popular MT4 (downloadable) platform and a useful mobile application.
A wide range of CFDs and spread betting instruments from various asset classes are accessible through LCG. LCG prohibits American traders, like the majority of the other companies on this list.
LCG, one of the top forex brokers with headquarters in the UK, provides a broad selection of asset classes and a smooth trading environment. The company’s rates are reasonable compared to others in the field, and we give it high marks for customer support.
With these favorable qualities and an apparent focus on functional simplicity, LCG is a good option for new traders. In addition to receiving high marks overall, the business was named the Best Forex Broker for Novices in 2020.
Although you don’t have to be a beginner to take advantage of LCG’s offerings, it is difficult to beat if you are just getting started.
3. Saxo Capital Markets
The 1992-founded Saxo Bank Group in Denmark (Saxo Bank) describes itself as a “leading Fintech specialist focused on multi-asset trading and investment and delivering ‘Banking-as-a-Service’ to wholesale clients.”
The company embraced the late-’90s technological advancements by launching one of the first online trading platforms in 1998. Saxo Capital Markets U.K. Ltd (SCML), a subsidiary of Saxo Bank that has been active in the UK since 2006, is one of the many forex brokers that does not accept traders from the United States.
Saxo Capital Markets is for experienced traders. It provides a wide range of brokerage services targeted at knowledgeable active traders, investors, professionals, and institutions.
Smaller account holders will face a number of unusual challenges, such as higher account minimums, a variety of fees, and fewer customer support options.
Tiered accounts reduce trading costs and increase benefits as equity increases, but the majority of retail traders will struggle to reach the higher customer tiers. The organization is recognized as Best Forex Broker for Advanced Traders for 2020.
4. XTB Online Trading
X-Trade, which was established in 2002 as Poland’s first leveraged foreign exchange brokerage house, changed its name to X-Trade Brokers in 2004 to conform to new Polish laws. It is one of the best forex brokers.
Following a rebranding in 2009 to become XTB Online Trading (XTB), it went public in 2016 and debuted on the Warsaw Stock Exchange under the ticker symbol XTB. The company does not accept American traders.
XTB is a good option for traders who want to cut their expenses, whether it’s the cost of placing a trade itself (the bid/ask spread) or not having to pay extra expenses like wire fees.
For non-U.K. customers, XTB offers maximum leverage of up to 500:1. whilst in the UK. Accounts receive leverage of up to 30:1. The company prioritizes customer service and provides accessible research resources and pertinent educational tools that would be beneficial to a new trader. This business has been named the Best Forex Broker for Low Costs in 2020.
5. IG
The world’s first spread betting company, IG Group (IG), was established in 1974 by Stuart Wheeler and is a subsidiary of IG Group Holdings Plc, a publicly traded corporation (LSE: IGG) that enables informed, proactive, and daring individuals to access opportunities in the financial markets.
IG does accept US forex traders, unlike the majority of brokers on this list, and has done so ever since the firm re-entered the US market in early 2019.
Anyone who wants to trade CFDs can do so globally on IG. It is for customers who want to trade the foreign exchange markets in the United States. That is all there is to it.
IG has chosen to adopt the time-honored adage, go big or go home because, well, it can, in order to successfully carry out this. This broker is well-suited to compete in the online forex broker market thanks to low spread costs, accents on customer service and education, actionable research, and useful user interfaces.
The Best Forex Broker for US Traders in 2020 award has been given to this organization.
6. Pepperstone
The Australia-based Pepperstone Group has established itself as a leading force in the online brokerage market since it first opened its doors in 2010. It is one of the best forex brokers.
It has created a highly competitive and feature-rich trading portal that focuses on forex, shares, indices, metals, commodities, and even cryptocurrencies.
Pepperstone provides straightforward market access, allowing customers to concentrate on the challenging task of trying to trade the markets profitably.
For traders who want a manageable selection of affordable offerings, numerous options for user interfaces and account types, and effective customer support, Pepperstone is the best option.
These characteristics were taken into consideration as part of Investopedia’s ranking methodology, which named Pepperstone the Best Forex Broker for Trading Experience in 2020.
Other Best Forex Brokers to Consider
7. Forex.com
The top-rated forex broker is FOREX.com, a division of StoneX (NASDAQ: SNEX). It is one of the best forex brokers.
This broker accepts US clients and is overseen by the National Futures Association (NFA) and Commodities Futures Trading Commission (CFTC) in the US (NFA). Through its subsidiaries, FOREX.com is additionally under the supervision of regulators in six important international jurisdictions.
8. CedarFX
For customers to grow their accounts, CedarFX believes in combining the best market conditions with superior pricing and technology. A low spread typically denotes low volatility and high liquidity, and CedarFX takes pride in this
CedarFX offers two account types: eco accounts and accounts with 0% commission.
9. SimpleFX
Other than a few countries, SimpleFX is accessible everywhere. WebTrader, MetaTrader 4, and native Android, iPhone, and HarmonyOS mobile apps are all available for the platform (Huawei).
10. Interactive Brokers
The market leader in trading forex, stocks, ETFs, cryptocurrencies, bonds, options, futures, and more is Interactive Brokers. Customers have access to more than 100 trading currency pairs, thin spreads as small as 1/10 PIP, real-time quotes from 17 of the biggest FX dealers in the world, and low commissions with no hidden spreads or markups.
11. eToro
Since you can follow the trades of experienced traders who have a track record of success, social trading, which is eToro’s area of expertise, is perfect for beginners. It is one of the best forex brokers.
In addition to its top-notch social trading network, eToro offers fantastic learning materials for those new to forex trading.
Anyone can use the user-friendly eToro social trading and multi-asset trading platforms and apps right away. Unfortunately, the MetaTrader 4 and 5 (MT4 and MT5) trading platforms are not supported by eToro.
12. AvaTrade
One of the safest brokers in the business, AvaTrade, adheres to 7 regulations on 6 different continents (Europe, Australia, Japan, British Virgin Islands, UAE and South Africa).
Its wide selection of assets, industry-leading platforms, and favorable trading conditions will pleasantly surprise you (you can leverage your positions up to 400:1).
13. FXCC
For non-Americans, FXCC is the top brokerage. users, allowing you to select from the top 8 cryptocurrencies, several CFD options, spot metals, and 70 currency pairs. It is one of the best forex brokers.
The well-known cryptocurrencies that are available include Bitcoin, Ethereum, and Litecoin. Aside from spot WTI and Brent crude oil, you could also invest in 12 well-known stock indices.
14. Robinhood
Although it doesn’t provide traditional currency trading, Robinhood does enter the cryptocurrency market with its well-known slick, user-friendly interface.
Customers can trade seven different types of cryptocurrencies here, including some of the most well-known ones like Bitcoin, Ethereum, Litecoin, and Dogecoin. Additionally, you can request quotes for nine additional digital currencies.
Trading cryptocurrencies on Robinhood is also free, just like it is on its main brokerage, which grants free trades on stocks and options.
How to Choose the Best Forex Brokers
Only a few of the reputable online stock brokers—even though you may be familiar with many of them—offer forex trading. Instead, the market is populated by a large number of more specialized niche brokers, who may serve high-volume currency traders seeking every advantage they can get.
However, regardless of the type of broker you’re aiming for, you should concentrate on at least a few characteristics that are shared by all forex brokers:
- Pricing: There are two ways that forex brokers can charge for their services: either by including the cost in the buy-sell spread or by charging a commission. One thousandth of a point, or one pip, is the unit of measurement for spreads.
- Leverage: What level of leverage will the broker permit you to use? In order to magnify movements in the currency market, traders typically seek out higher levels of leverage. Depending on the currency’s liquidity, the level may vary.
- Currency Pairs: The trading market is dominated by a small number of major pairs; how many additional pairs (minors, exotics) does the broker offer? The US dollar, the euro, the Japanese yen, and the British pound are the most widely used currencies. British pound and Swiss franc.
- Spreads: What are the broker’s trade spreads? The trade is less appealing the wider the spread. Naturally, spreads will typically be wider for brokers who charge a spread markup because that is how they are compensated.
Although the trading differs from standard forex trading as previously described, investors looking to purchase cryptocurrencies may be able to do so through some of the traditional stock brokers like TD Ameritrade or Robinhood.
The fact that many of the best forex brokers are based in the United Kingdom is a drawback for American traders. and merely refuses to accept them as clients due to their nationality. The aforementioned brokers are all suitable for Americans, though.
How to Know if a Forex Broker is Regulated
For the sake of upholding professional standards and safeguarding customers, forex brokers must be regulated.
The majority of scams, according to the Commodity Futures Trading Commission (CFTC), involve unregistered individuals, goods, or businesses. Therefore, if you’re trading forex, you should use a registered broker. It’s simple to check if your broker is registered.
The CFTC licenses and controls forex brokers. A broker must adhere to certain financial standards, have background checks run on all of its employees, and follow certain disclosure and conduct guidelines.
By visiting the National Futures Association website (which is under the CFTC’s supervision) and using its search tool, you can determine whether a forex broker has been duly registered.
You can look up a broker’s registration, regulatory and disciplinary history, and financial details. Any organization that is not properly registered should raise suspicions.
What distinguishes a dealing desk from an agency broker?
When trading forex, you need a broker to carry out your trades, but the broker may not always be looking out for your best interests.
A dealing desk and an agency broker are two different types of models, and as they execute trades, they have various incentives.
The goal of an agency broker is to find the best deal price while acting in the best interests of their clients. In order to avoid potential conflicts of interest between the interests of the agent and client, the agency broker simply serves as a middleman and does not hold any inventory of the assets being traded.
Because of the potential financial savings, the client specifically pays the agent for this service. Agents are therefore typically used by high-net-worth clients who move significant amounts of money.
In contrast, a dealing desk simultaneously owns and trades securities. Because of this structure, the dealing desk might not always be serving the interests of the client but rather its own.
A dealing desk can therefore act in a transaction as both a principal and an agent, resulting in some odd conflicts:
- The dealing desk can accept a trade from a client in which it has a stake in the outcome because it trades as a principal for its own account. In other words, the dealing desk might benefit at the expense of the client by, for example, selling the client inventory just before the market declines or purchasing it just before the market rises.
- The dealing desk can execute trades on behalf of a client and will pass along the trade price in its capacity as an agent.
This setup is problematic for clients because it makes it impossible for them to know the dealing desk’s interests in any given trade.
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