Best Forex Brokers 2019
When looking for the best Forex broker, there are seemingly endless choices out there. Some of these brokerages do stand out head and shoulders above the rest and can make a significant difference as to how your trading career progresses.
There are a multitude of things to look into, and while many Forex brokerages will facilitate your trading, we found three forex brokerage accounts as some of the best available brokerages for the retail trader.
Unfortunately, one of the drawbacks to trading a retail account or any money for that matter is that where there is money to be made, you won’t always find the most scrupulous people.
At one point, the Forex world was so similar to the old Wild West that there were hardly any regulations to protect the retail trader. Luckily, times have changed and most of the bucket shops are gone. However, not all regulation is going to be the same.
For example, there was once a very interesting Forex brokerage based in Lebanon. This was while the Israelis and Hamas were in the middle of a shooting war! In such a chaotic environment, it’s very easy to see what was going to happen next. Hundreds of traders lost their deposits.
Contrast that with a brokerage that is based in a financially sophisticated and stable country. For example, the rule of law is much easier to enforce in a place like London, Frankfurt, or New York.
These are parts of the world that have stringent financial walls and protections should you need them.
I mentioned regulation. There is entirely no reason whatsoever to trade with an unregulated broker. This invites a lot of trouble and unnecessarily so.
Quite frankly, in this day and age, there is no excuse for trading with an unlicensed broker. There are far too many options out there to choose from without worrying about whether or not you will get your money back.
A regulated broker is audited, has to live by a certain standard of conduct, and in the most financially sophisticated countries will have a minimum liquid capital amount to secure deposits. If you’re not dealing with a regulated broker, your monetary security is probably at risk.
Trading platforms and tradable markets
Most Forex brokerages around the world these days will use MetaTrader 4 or 5 to process trades. Not all do, but most will.
There are other platforms that are quite robust as well, for example, the Desktop TWS platform that Interactive Brokers uses, but in general, you will find that the MetaTrader platforms make up about 90% of what’s out there.
Make sure that you like the platform you are using, and that there is a demo available to check it out before putting any money into the broker.
Markets, of course, are important. For example, if you choose to go with a broker, they should have the currency pairs that you wish to trade. Perhaps you are focused on the oil markets, and you like the correlation between crude oil and the CAD/JPY pair.
If you open up an account with a brokerage firm that doesn’t offer that currency pair, you’re going to have an issue. Beyond that, the three brokers mentioned above all offer multiple tradable markets outside of the currency world, and that is one of the reasons why we like them so much.
We trade in a globally interconnected marketplace these days, so just because you like trading currencies doesn’t mean you shouldn’t at least know what’s going on in other places, if not take advantage of it.
Education and extras
These days, the competition for your trading commissions is very intense. Because of this most brokerages offer at the very least some basic educational course.
Some are better than others granted, and perhaps you are already somewhat educated, and this won’t be an issue. However, if you feel that you need more education, it is essential to pay attention to what each broker is offering.
Another common extra is market analysis, given by professional analysts that make their living either trading the markets or at least commenting on them. By having a professional opinion help you with your trading thesis, you may find great benefit with one of these brokers.
Some even go so far as the offer signals, which is simply a way to copy somebody else’s trading ideas. There is a vast array of potential here, so make sure you look around for all of the extras that are available because quite frankly you are paying for it in commissions or spread.
As I have mentioned above, fees come into play. It’s important to understand how your broker makes their money, be it commissions or on the spread between the bid/ask prices.
Some brokerages charge a flat commission with an extraordinarily slim interbank related spread, while others build their fees into the spread.
As a general rule, the ones that charge commission are typically cheaper, although these days that’s only slightly so. You will have to do the math as to what works out better with your trading strategy.
Another thing to keep in mind is whether the spreads are variable or not. Some brokers offer a fixed spread, while others provide a variable spread to reflect interbank conditions.
If you are a news trader, then obviously you want tight spreads, something that you will not get in a variable spread platform during news events. This is due to a lack of liquidity and is to be expected.
For example, the EUR/USD pair might typically have a spread of 0.5 pips, but during a GDP announcement may see spreads widen by 5, 10, or even 15 pips. If you are a news trader, you need a fixed spread. Otherwise, it’s generally not a major issue one way or the other.
Market maker vs. pass-through
The Forex world has a lot of different brokerages out there, but typically there are two ways your broker will make money. One of the most common is to be the market maker. This means that your broker is trading against you.
However, if it is a highly regulated brokerage firm, this shouldn’t be an issue. Quite frankly, there are more than enough retail traders out there giving their money to the Forex brokerage for you to worry about them taking yours in an unscrupulous manner.
The second possible way that a broker may make money is through something called straight through processing. This is where they match orders with other customers, a dark pool liquidity, or will send the trade out into the interbank market.
These brokerage firms tend to make larger commissions, but also have no conflict of interest when it comes to the trades that you put on. At one point, these were the only brokers that you could trust, but those days are long gone.
Financial strength is something that unfortunately most retail traders will overlook. All three of the brokers mentioned at the top of the article are highly capitalized, which of course is crucial.
While it doesn’t happen as much these days, there were times in the past were Forex brokerages would lose so much money that they would just close their doors and traders would be left out in the cold. Financial strength is crucial, so trading with a very small brokerage firm can have extra risks.
The 3 Best Forex Brokers
XM is a well-known Forex and CFD brokerage based out of the United Kingdom. XM is highly regulated through the FCA and offers a multitude of trading platforms.
Beyond that, there is a significant amount of research and education available to the retail trader, while allowing small accounts to flourish.
XM is a great “one-stop shop” for retail traders overall, allowing access to a multitude of underlying instruments beyond the currency markets as well. However, investors from the United States cannot use this forex broker.
More details: XM Forex Trading Review
Forex.com is another well-known broker, based out of the United States. By being an American firm, they are extremely well regulated and capitalized, as the United States has some of the most stringent regulatory hurdles for a Forex brokerage to function. The parent company GAIN Capital Holdings Inc. is listed on the NYSE.
Beyond that, they have offices in other countries around the world that give access to CFD markets. Forex.com has been a leader in the retail Forex world for years and is one of the larger firms out there. US-residents open the account with "FOREX.com US". They are regulated and authorised by the National Futures Association.
More Details: Forex.com review
Interactive Brokers is probably the closest thing to a professional trading environment that the retail trader can be involved in. This is because the sheer breadth of financial instruments is relatively unheard of.
Not only are the Forex markets offered, but CFD markets, stocks, bonds, options, futures, and other derivatives are available. Interactive Brokers has been around for quite some time, serving both institutional and retail trader alike.
More details: Interactive Brokers review
The best forex broker - My conclusion
At the end of the day, if you stick with a highly regulated Forex broker, most issues should be minor at best. The three mentioned at the top of the article are all excellent brokerage houses that service thousands of clients on a daily basis.
It would be best if you also were looking for flexibility and freedom to trade at various markets while getting the best spreads or commissions available. Trading costs can add up over the longer-term, so please don’t forget to look into that.
Stick with the financially strong trading houses, so that the only major issues that could arise in your account will be due to trading, not a lack of execution by the host company.