Online forex trading has grown in popularity with personal investors over the last few years. The growth has led to a big increase in the number of brokers available to traders, but choosing one doesn't always come down to simply cost.
Brokers vary enormously in what they offer, so finding the best forex broker may not be a straightforward question to answer. That said, if you want to trade forex, we've got you covered!
We've brought to you some of the key players in the market, highlighting what they do well and some of the things you should look out for when making your decision.
Looking for more Forex Brokers, check out Compare Forex Brokers.
The Best of
- Best Overall Forex Broker: IG
- Best for Research: Saxo Bank
- Best for Advanced Traders: Forex.com (Gain Capital)
- Best Trading Platform: TD Ameritrade
- Best for Non-US Traders: Ava Trade
The brokers listed below offer a lot more than just foreign exchange; perhaps in an attempt to become the trader's only broker, they have increased the number of products beyond currency trading.
In their search, traders will see brokers offer other products beyond FX, such as Contracts for Difference (CFDs) and cryptocurrencies. Like forex, trading CFDs involves using leverage (which we'll return to below) and gives the trader the ability to place trades on such things as commodities and stock indexes.
IG is one of the longest established players in the forex market, having been around since the 1970s, initially trading as IG Index. It's a globally recognized name within the forex market and is regulated in the US by the Commodities Futures Trading Commission (CFTC) and the National Futures Association (NFA).
For more advanced traders, IG offers the ability to automate trading strategies via an API, and in addition, traders can trade through 3rd-party trading platforms such as MetaTrader 4. IG is also popular with beginner traders who have access to a broad selection of educational courses, including the basics such as how to trade.
IG's website claims their spreads on the major currency pairs are equal or better to Forex.com and TD America, and while other firms might offer more attractive spreads, traders should be aware that they might come with hidden costs.
The product range of IG reaches beyond forex and includes CFDs, stocks, and cryptocurrencies. Other brokers stand out more in some areas, but IG is an excellent allrounder ticking many boxes.
Minimum deposit: $250
Like IG, Saxo is a broker that has been around since the 1970s with a trusted and recognizable brand. It offers three accounts, each one with a minimum account balance: Classic $2,000, Platinum $200,000 and VIP $1,000,000.
Saxo has a well-regarded customer service, and in addition, their primary trading platform SaxoTraderGo is impressive. While the minimum account balance is high, clients can trade a large variety of markets, including CFDs and cryptos.
Like with some of its competitors, the larger the account balance, the cheaper the service. For example, the typical spread on the EURUSD pair for the Classic, Platinum, and VIP accounts are around 0.8, 0.7, and 0.6 pips. There is a small fee if the trader doesn't meet the minimum account activity during the month.
Beyond the trading platform, Saxo stands out for its research. There's a team constantly producing trade ideas from chart setups to fundamental macro plays. There's something for every style of trading.
Minimum deposit: $2,000
Forex.com is one of the two CFD and forex brokers owned by Gain Capital (the other way being City Index). Like Saxo, Forex.com is well known for providing forex traders with a great customer experience.
Trading is via a web browser or mobile, and while the latter is more limited, the browser option offers FX traders a large variety of trading tools. There are some advanced charting options available which is why Forex.com is our choice Best for Advanced Traders. As well as this, traders can place orders directly from charts and automate much of their analysis. In addition, although relevant to slightly more advanced traders, MetaTrader4 is available.
Like Saxo, Forex.com has an extensive research capability feeding trading ideas not limited to forex but also the other products offered, including CFDs and cryptocurrencies.
Minimum deposit: $100
TD Ameritrade has a strong history with a recognizable and trusted name like the other brokers covered in this article. In 2009 it made a significant step forward in its offering when it bought the thinkorswim platform.
The strength of the thinkorswim desktop and web trading makes TD Ameritrade our choice for Best Trading Platform.
Minimum deposit: None to open an account, but cash will be to be deposited to start trading.
A good choice for non-US traders who are also interested in social trading is AvaTrade. Founded in 2006, AvaTrade offers a web trading platform and, in addition, two copy trading platforms, ZuluTrade and DupliTrade.
With spreads on par with the industry average, Ava's pricing is on par with IG and the other brokers covered here. The exact products offered to depend on the trader's country and the restrictions placed by the relevant regulator.
Minimum deposit: $100
What to look for in a Forex Broker
For the typical forex trader, choosing the best forex broker comes down to cost and how much leverage the broker offers. We'll come back to both of these in a moment, but first, some quick history.
A decade or so ago, trading forex felt like the Wild West, and traders would often complain about the dodgy practices of some brokers. Unlike stocks or futures, the forex market is decentralized. Initially, this meant that traders would buy and sell trade against the broker – the broker itself was the party that would sell to and buy from the trader. Understandably, this often led traders to suspect that prices were being manipulated prices in favor of the broker.
Over the years, as forex trading has grown in popularity with investors, transparency has improved, as has the technology. Nowadays, traders tend to look for ECN brokers (Electronic Communication Network), which has done away with the trading desk concept at the broker. Instead, traders now buy and sell from other traders, and the broker's role is simply to match the buyer and seller. This reduced interference from the broker has improved trust and transparency, but there are still costs and other factors the trader should be aware of before opening an account.
Costs of Trading
Typically, traders make comparisons between brokers based on the costs of trading through the broker. Most brokers will either charge a commission, offer spread on the forex pair, or combine the two. The spread is simply the difference between the price the trader can sell and buy the forex pair: the smaller the spread, the cheaper the broker.
The most popular forex pair is the Euro / US Dollar (EURUSD), followed by the US Dollar / Japanese Yen (USDYEN). Competition between brokers on these more popular pairs is where the spreads are the most narrow. Generally, brokers charge wider spreads or commissions on the more exotic pairs, such as the Euro / Turkish Lira.
In addition to trading costs, forex traders tend to look for brokers who offer the most leverage. When a trader deposits money in their trading account, the broker can lend ey can be lent extra trading capital. For example, with $1,000, the trader can buy $20,000 worth of the EURUSD forex pair. Of course, there is a cost involved – the trader pays the broker interest on the $20,000 for each day they are in the trade. However, if the EURUSD increases, profits are based on the $20,000 investment rather than the $1,000.
A word of warning here. While obviously, this can go both ways, and the trader can lose money, data of client activity released by brokers has given a clear picture of the traits of profitable traders versus losing traders. As a starter, the larger the opening account balance, the more likely traders would be profitable. Those traders with at least $10,000 in their account tended to trade the best. In addition, it's these traders who tend to use the least amount of leverage. The data pointed out that the more unprofitable the trader, the more likely they've used too much leverage. Just because your broker offers to lend you twenty or thirty or more times your deposit doesn't mean you should use it!
Forex Trading Explained
One of the attractions of FX trading is the liquidity it offers investors, with a daily trading volume of close to $7 trillion! It's a market open for trading on Sunday evening in the US and stays open 24 hours a day until Friday evening. If the trader believes the Euro is going up in the forex world, they also need to consider which currency it's increasing against. In the case of the EURUSD, they would be buying the Euro while simultaneously selling the US Dollar.
Forex trading is buying and selling currency based on the trader's view of how one currency will perform relative to other currencies. While this means the trader thinks the Euro will increase, it doesn't necessarily mean they believe the US Dollar will decrease, and it only means that relative to one another, the Euro will be stronger.
Traders can make trading decisions based on economic data such as central bank interest rate changes in Japan – the Bank of Japan cuts rates versus the FED in the US who is increases rates. Or, traders can buy or sell simply by looking at patterns they see on the price chart of a forex pair.
From looking at historical prices chars, they know a particular pattern often leads to price increases or decreases. There are many ways traders make buy or sell decisions, and there's no one “right” way. Done consistently, sometimes the most simple ideas can be the most profitable.
Tim Thomas was born in Guildford and now lives near Southampton, the UK with his family. Tim started his career in the financial markets and has traded and invested in stocks, options, forex, futures, crypto, and real estate for over 20 years. His website, https://timthomas.co/, is dedicated to teaching swing trading strategies for profits, helping traders reach their wealth and financial freedom goals.