As the number of FOREX traders continues to rise, the best FOREX brokers are increasingly focusing on keeping the customers they do have happy, thereby securing improved revenues and higher profitability. Traders, some wary of the relatively high risks involved in FOREX activities, will need all the help they can get to avoid fraudulent brokers altogether. In what follows, we list the best FOREX brokers today, the result of in-depth research by Arincen.
The FOREX market is the largest and most actively traded financial market in the world, by a long margin. However, when shopping around for the “best” FOREX broker, traders – beginners and experienced alike – typically look for a number of features and benefits. Chief among these are the breadth and depth of product offerings, be they currencies, contract for differences (CFD), indices, commodities, spread betting, cryptocurrencies, etc.
What is FOREX and Why Do We Need a Broker?
The FOREX market is a global decentralized marketplace for trading currencies. This market, which determines foreign exchange rates for every currency, includes all aspects of buying, selling and exchanging currencies at current prices. In terms of trading volume and liquidity, the FOREX market is by far the largest in the world, at some six trillion dollars daily, only followed by the credit market. The FOREX market operates 24 hours a day and five days a week (Monday through Friday), except international holidays.
By trading FOREX online, users are able to make extra income, a phenomenon that appears to be on the rise in recent years. Such activity is facilitated by a brokerage firm, which, in turn, enables clients to buy and sell through a trading platform, either on your personal computer (PC) or more recently by using one’s own smartphone.
In what follows, we list the most important terminology in FOREX trading. This includes:
Spread, defined as the difference between the bid (sell) price and the ask (buy) price of a currency pair.
Leverage, the use of your broker’s money to open larger positions than you would have been able to with your own capital.
Lots, denoting the number of currency units you will buy or sell.
Pips, short for percentage in points, used to quote changes in FOREX currency pairs.
How Do I Choose the Best FOREX Broker?
No matter where you live, you need to choose a broker based on how well they are regulated. In developed nations in Europe, North America, as well as in parts of Asia, the quality of regulation is in line with the quality of the overall financial infrastructure. That is to say, the most stringent, tier-1 regulators can be found in the most advanced countries. Prime examples of these include, but are not limited to, the Financial Conduct Authority (FCA) in the UK, the Cyprus Securities Exchange Commission (CySEC) in Cyprus, the Australian Securities and Investments Commission (ASIC), the Financial Services Agency (FSA) in Japan, and the National Futures Association (NFA) in the US. Tier-2 and tier-3 regulators in lesser economies do not provide you with the right level of oversight that will ensure your interests as a trader are protected in times of trouble. However, based on where you live, if you have no choice but to work with a broker that is not based in a developed economy, it is still better to choose a regulated broker over an unregulated broker. This will give you the means by which to raise the alarm through appropriate channels if you have been scammed or if the broker becomes insolvent. Make sure that when you choose a broker, they not only have a license to trade in the country in which they operate, but also that they are regulated by the appropriate (often the highest) regulatory authority in the country. Some brokers, even though they are tier-1 brokers, for example, the CySEC, will also go to further lengths by signing up to regional regulation, such as taking out a Markets in Financial Instruments Directive (MiFID) license, which applies across Europe.
First, you must ensure that FOREX is a legitimate activity that is permitted by law within the country in which you live. If you are just starting out, do not assume FOREX trading is legal in your country. You are advised to research the rules first. Pay special attention to issues like taxation and limits on how much FOREX you can trade. From there, make sure you are dealing with a broker that is overseen by the most appropriate regulator. Some countries have multiple financial regulators for different asset classes, so you should make sure your broker is correctly licensed. Regulators play a key role in the financial landscape, often ticking important boxes such as:
Ensuring that FOREX brokers act in a consistent and responsible manner.
Managing disputes arising from the act of FOREX trading, be this hearing complaints from individual traders or from brokers concerned about customer behavior.
Issuing licenses to new FOREX brokers setting up shop in the country.
Enforcing its rules by issuing penalties to individuals or firms who contravene financial regulations.
Notwithstanding your country’s local regulations, you are advised, if you are looking to engage with brokers outside the country, to check if your broker is also regulated by a tier-1 authority, such as the UK’s FCA or the CySEC from Cyprus.
Tradable Assets and Instruments
Ideally, you should be looking for a broker in a country that operates a permissive trading environment. Given the amount of choice on the market, your broker should offer all the major asset classes, ranging from cryptocurrencies, stocks, mutual funds, bonds, commodities and exchange traded funds (ETF), and, of course, FOREX trading.
Payments, Deposits and Withdrawals
Depositing funds into and withdrawing funds out of your FOREX account should be very easy. After all, you have done your bit by following Know Your Customer (KYC) processes and depositing funds in good time and in good faith, not before sharing all your personal information with the broker. You should, therefore, be able to transact just as speedily when you need to withdraw your earnings or deposit more funds. If your broker operates in a country with a mature banking industry that is highly mature and safe, then you should have no worries. Most major payment providers should be accommodated in the financial ecosystem in which your broker operates and they should be in a position to offer comprehensive services. These include credit and debit cards, wire transfers and all major eWallets.
FOREX Trading Customer Service
You must pick a brokerage firm that is able to provide good customer support around the clock. This most notably includes the company representatives being easy to reach through a variety of means. They should be knowledgeable and polite, which will make dealing with them that much more rewarding and pain free. After all, when you need customer service assistance, you normally do not have time to go around in circles looking for the right people with whom to deal.
Technical Aspects of the Broker’s Website
When it comes to sharing sensitive personal information online, such as a credit card, cyber security is paramount. You should, therefore, always be on the alert for SSL certification and two-factor authentication (especially when registering with a new site). To provide our users with peace of mind, we at Arincen have introduced the “Company Checker,” which is an online tool directly linked to an international Website called Scamadviser. This is an independent site that checks the countries in which these FOREX Websites are managed, where the server is located, in addition to other security and informational aspects. It ranks FOREX firms by granting them a score ranging from 0% to 100%, with the best FOREX firms usually receiving a score of 90% and above. Any company that has achieved a score lower than 85% should thus be avoided. Simultaneously, whenever looking for a new FOREX broker, users must ensure its Website is fast, modern and user-friendly.
Ask Other Traders on Our Network
Arincen has tried its best to create a supportive environment where traders of all backgrounds come to meet. After all, Arincen’s goal is to simplify the world of trading! Our Website provides an excellent set of tools, like our market-leading signals, rolling news coverage, and a bustling community where traders from all sides of the experience spectrum can learn from each other.
Most Trusted FOREX Brokers and How to Verify Regulations
At the get-go, it is important to learn more about regulatory bodies and their role in the FOREX market. These are government entities charged with regulating the sector. Their role is two-fold:
1. Observing andregulating the work environment in the FOREX market; and 2. Protecting investors and their funds.
FOREX firms must at least obtain one license from a relevant regulatory authority. Otherwise, they should be avoided at all times. In this context, we present five of the most important FOREX market regulatory bodies from around the world.
1. The FCA, UK; 2. The FINMA, Switzerland; 3. The ASIC; 4. The Financial Markets Authority, New Zealand; and 5. The NFA, US.
While FOREX market regulatory bodies exist in almost every country, these are the most important five and also the most strict. To learn more about other regulatory bodies, please visit en.arincen.com, where you will find a comprehensive global database.
How to Verify that Your Broker Has Authorization
To check if a FOREX broker is regulated by the appropriate regulator, you simply need to find the regulator registration number on the broker's homepage. From there, you can look up the licensing number on the financial register available on the regulator’s Website to confirm if the broker is currently licensed correctly. It may require that you verify that several competing brokers in the same country are regulated by the same broker. This way you can establish who the most common regulator is. You can also visit the “About Us” section of the regulator’s Website. They will normally discuss their mandate in detail.
The Dos and Don'ts of FOREX Brokers
One of the first things a new FOREX trader should do is check the extent to which the FOREX company abides by the rules and regulations governing its operation. Emphasis must be placed on what it can and cannot do.
There are seven things brokerage firms cannot do:
The FOREX brokerage firm cannot recommend a buy or sell;
The FOREX brokerage firm must not provide price or market expectations (rise/fall);
The FOREX firm cannot control your financial dealings (deposit/withdrawal);
The FOREX brokerage firm should not “manage” your portfolio under any circumstance;
The FOREX brokerage firm cannot grant a client a bonus unless there are clear terms guiding it from beforehand;
The brokerage firm must not use bank accounts not under its name; and
FOREX brokerage firms cannot have or offer the service of account managers.
In short, the role of brokerage firms is strictly confined to facilitating buyers and sellers to come together toward an agreed-upon commission. FOREX brokerage firms that violate any of the seven rules aforementioned should be avoided. However, should the trader wish to receive any of the above-mentioned services, our advice is to seek an expert Website like Arincen, something we will delve into toward the end of this article.
FOREX Trading Scams and How to Avoid Them
The best regulators take an active role in monitoring scam activity and publicizing information about brokers that are operating in their jurisdiction illegally. Be sure to subscribe to the consumer information service provided by your broker’s main regulator. You will receive regular information on the latest scam activity.
By subscribing to this information service, you should also receive details on how to access channels through which you can initiate complaints and tip-offs relating to suspicion of fraudulent activity or scams. This is the best way for you to be well protected against common FOREX scams.
Will Your Money Be Protected if Your Broker Becomes Insolvent?
Some tier-1 brokers, like the FCA and the CySEC, operate compensation schemes that offer investment repayments up to a predefined level to traders affected by broker insolvency or malfeasance. Note that not all regulators, let alone all tier-1 regulators, offer access to compensation schemes. Be sure to directly ask your broker what they offer in terms of investor protection. Some brokers take out private, third-party insurance, and compensation facilities that can prove just as useful if the in-country regulator does not mandate compensation.
Spread Differential, Extra Commissions, Commission-Free Accounts and Leverage
Before you start dealing with a specific FOREX company, it is worth looking into the spread differential in more detail. This is defined as the difference between the bid (sell) price and the ask (buy) price of a currency pair. While, for some FOREX companies, the spread is the one “cost” that applies to any trade that you place, others add extra commission fees (this isn’t necessarily bad, as the combined fee of the spread plus the commission might still be competitive) to each trade. Then there is Swap, which is a commission fee charged for holding a position overnight. Equally important is to pick a FOREX company that offers leverage suitable to your needs.
The spread is how “no commission” brokers make their money. Instead of charging a separate fee for making a trade, the cost is built into the buy-and-sell price of the currency pair you want to trade. Good companies typically offer a EUR-USD spread of 1.4 basis points. It is noteworthy that some companies offer a variable spread, which is typically dependent on the market situation, thus making it vulnerable to fluctuations and volatility. Trade volume and market news play an important role in this regard. When there is extreme volatility, it is hard to realize the offered price, which means the broker may have to increase its variable spread. The variable spread is lower than a fixed spread, which is more appropriate for traders who prefer to plan prudently and not be surprised. Of course, some FOREX brokers offer both.
The commission is a fixed amount and depends on the trading volume of a currency pair. Traders do not pay an additional spread, only the commission itself. Commission-based account models are the cheapest accounts. However, one must mention that some FOREX companies offer a very low spread, but with a fixed commission.
A swap in FOREX refers to the interest that you either earn or pay for a trade that you keep open overnight and/or move from one market to another. A foreign currency swap is essentially an agreement to exchange currency between two foreign parties. The agreement consists of swapping principal and interest payments on a loan made in one currency for principal and interest payments of a loan of equal value in another currency. Though most companies offer swaps, a few do not and that is certainly an added advantage.
Finally, a few words on leverage in FOREX, defined as the ratio of the trader's funds to the size of the broker's credit. In layman's terms, leverage is money traders borrow to increase their potential returns. Of course, the size of leverage is not fixed at all companies, depending, as it does, on the trading conditions provided by the FOREX broker. Most investors take advantage of the optional leverage feature, which allows them to obtain a large exposure of 1:100 for a relatively small initial deposit. Naturally, the high degree of leverage that is obtainable in the trading of CFDs and FOREX can work both against you as well as for you.
What Tools and Platforms Should FOREX Brokers Offer?
The best brokers offer platforms that can be used by traders with different requirements. Be they Web-based or downloadable, platforms must be customizable with good technical indicators and strong risk-management tools.
Professional traders will be looking for sophisticated platforms with exceptional performance and a seamless trading experience featuring a range of charts, market indicators, and drawing tools. Beginner traders will be looking for an intuitive design, clear action labels, and helpful tips and prompts.
Best FOREX Brokers and Platforms for Beginners
Take a look at our expert’s top 7 FOREX brokers for 2023
FXDD 92.15 - Best Overall Broker
2. ICM Capital 91.10 - Best Deposit and Withdrawal Broker
3. XTB 85.55 - Best Customer Service Broker
4. IG 85.45 - Best Regulations Broker plus Convenient Platform
6. CMC Markets 80.07 - More than 9,000 Assets 7. Think Markets 80.05 - Aimed at the Audience of Traders
FXDD received the highest score in our survey (92.15). One of the first FOREX companies to offer a credit card in order to allow traders to withdraw their profits, this New York-based company has the UK's FCA license under its belt. It also has a rich portfolio of assets, offers a relatively low spread, in addition to the MetaTrader4 (MT4) platform. Further, it has excellent and fast customer service, and also offers traders a variety of ways to deposit money.
CM Capital is considered the industry leader in deposits and withdrawals, whereby each withdrawal does not take more than five business days. Moreover, the company offers its customers a handy credit card to withdraw their profits, in addition to enabling customers to use various deposit methods. The company, which is licensed by the UK's FCA, has several branches around the world. Among other things, it has a rich portfolio of assets, especially stocks, offers a low spread, as well as the ability to use MT4.
What distinguishes XTB is the fact that it offers the best customer experience among all the companies we have surveyed. Indeed, it boasts the fastest response rate from all the companies under investigation. This is especially relevant, since the market is always on-the-go, and so you need to act fast. XTB offers lots of asset classes, as well as the ability to use the MT4 trading platform. Finally, it maintains a relatively low spread, which is suitable for quick deals.
IG is arguably the best broker when it comes to security and trust, boasting, as it does, licenses from 10 regulatory bodies, including the all-important FCA from the UK. The company is also a bank and is a publicly traded company in London. It is known for offering more than 10,000 asset classes of currencies, commodities, future contracts, ETFs, indices, cryptocurrencies etc. Further, it has its own state-of-the-art trading platform and offers a relatively low spread.
Saxobank is considered one of the best investment banks in the area of financial markets and currencies, as it offers the very best trading platform and tools from all the companies we have reviewed. Meanwhile, its spread is very low and, as such, suitable for short-term deals; and it offers a large number of asset classes, including currencies, commodities, indices etc. Finally, its customer service is excellent and very responsive to traders' needs.
CMC Markets is thought of as one the best companies, offering some 9,000 asset classes that encompass currencies, commodities, indices, cryptocurrencies, bonds and stocks. The company offers a relatively low spread, the MT4 platform, and fast customer service. It is most suited for traders looking for diversity in asset classes.
Originally founded in New Zealand in 2010, and moving to Australia within the space of their first two years, Think Markets is a global online brokerage focusing on FOREX and CFD trading. In addition to a range of major and minor currency pairs. Think Markets has an array of CFDs on offer. This includes indices, as well as hard and soft commodities.
Many traders find they cannot go wrong with MetaTrader’s powerful and robust MT4 platform. It is well-loved for good reason. Common features include excellent charting tools and insightful analytical packages. However, if you want to try something new, you can go for a proprietary platform. If you choose to do this, Saxo Bank offers advanced trading features and high-performing tools with unrivaled market analysis.
Which FOREX broker charges the lowest fees?
You will find that FXDD’s ECN account comes with the lowest fees. No matter your trading experience level, there is a pricing tier that caters to your needs.
Which FOREX broker offers the most CFDs?
For brokers that deal in the most CFDs, look no further than CMC Markets and IG, both of which offer a multitude of CFD selections.
Which FOREX broker offers the most assets?
CMC Markets and IG are the two FOREX brokers we would not hesitate to praise for the widest and most comprehensive range of financial assets.
Which FOREX broker is best for professionals?
Professional traders have worked hard to be successful in their field. As such, they are always on the lookout for online brokerages that have worked just as hard to offer the best features they can. These features normally include fast execution speeds, deep liquidity and responsive customer support. Research and educational resources are two key areas that experienced traders try to make the most of as they can make better and faster decisions with reliable and expertly-drafted information. In this case, you should look to brokers that use MT4, an industry stalwart of a platform that offers all of the above.
The Difference Between a Dealing-Desk and an Agency Broker?
Upon choosing the FOREX broker right for you, it is vital to understand the trade structure under which you will be operating. In short, you need to understand whether you are using a “Dealing Desk” FOREX broker or an “Agency Broker.” Understanding the differences and identifying them beforehand can significantly impact whether or not you feel comfortable using the broker you choose in the long run. After all, the last thing you need is for your broker to be trading “against” you. In what follows, we will define both in short, while pointing to their differences.
A Dealing Desk FOREX broker, also referred to as a Market Maker, is a broker that takes the other side of a client’s trades. He does so by pre-setting the bid-and-ask price and waiting for a trader who would be willing to take advantage of these terms. There are two ways Dealing Desk brokers make their profit:
First, they buy at lower prices and sell at higher prices; and
Second, they cash in on the spreads between the bid and ask price.
For the vast majority of times, Dealing Desk brokers keep trades safely within their own liquidity pools, thus not requiring external liquidity providers. Though critics claim that these types of brokerage firms “exploit” the trader, others actually appreciate the fixed spreads that come with them.
By sharp contrast, the exact opposite of a Dealing Desk broker is an Agency Broker. While these brokers differ slightly in their offerings from those of a Dealing Desk FOREX trader, they do share some similarities, including not taking the other side of their clients’ trades. As a substitute, they work with liquidity providers to give their clients variable spreads, and to match traders with other traders who would like to take the other side of a trade. Further, Agency Brokers tend to have lower spreads than Dealing Desk FOREX brokers, which, depending on the trader, can be an advantage or a disadvantage, as the spreads, in this case, aren’t fixed.
Who is Arincen and What Are Our Services?
Put simply, Arincen is a social networking platform that brings together traders and experts to exchange expertise and ideas. Collectively, we evaluate the best FOREX brokers in the world while offering a comprehensive suite of services and tools, all in one place, either via a PC or a mobile app. Services provided by Arincen are wide. The range:
The latest in FOREX signals.
An online trading academy.
How to learn about FOREX.
An up-to-date economic calendar.
The platform is so rich, one can create his own private portfolio of traders and experts they like and, at the same time, follow their recommendations and investment sentiments. Further, thanks to Arincen, users can keep an eye on market-price developments, as well as the latest news. Users can also benefit from the network’s educational courses on offer, to say nothing of exciting Webinars – all done in a modern and fast-paced work environment. Get all that you need in one place – not less, not more. In short. Arincen: We Meet to Simplify the Trading World.
The best FOREX brokers in 2022 are those that are licensed by international and reputableregulatory bodies, such as the UK’s FCA; allow traders to withdraw their profits during a timeline that doesn’t exceed two to five business days, in addition to allowing for various deposit options; offers a competitive USD-EUR spread; provides round-the-clock customer care 24/5; and, finally, works through the MT4 trading platform.
If anything, the key message to take away from this article is that the FOREX brokerage firm one picks must be legally licensed and well-regulated.
The expert team at Arincen collected more than 120 pieces of data covering in excess of 100 licensed FOREX companies. Data collection was done in three ways:
Other Websites that have ranked FOREX companies.
A survey questionnaire (referred to here as Survey “1”) we had sent to the companies invited to participate in the exercise. We have identified 13 criteria for our assessment, each containing several aspects and carrying its own relative weight. These include licensing, deposits and withdrawals, number of assets, etc.
Afterward we validated the data by:
Registering with FOREX companies as a secret shopper and/or as Arincen.
Survey number “2,” in which we asked these companies’ customers for important feedback and past experience.
The next step saw us evaluate and rank each company, relying on the hard work of 15 Arincen employees. We were very careful in ensuring the most accurate assessment possible, including taking into account different languages, as well as the various mobile-app operating systems; e.g., Apple, Samsung etc.
To add credibility to our research project, we sent a final and third survey (referred to here as Survey “3”) to enable participating FOREX companies to evaluate our research and whether it accurately reflects the realities on the ground. We were fortunate enough to receive a mark of 9.9 out of 10! We have kept to a minimum the margin of error, which stood at a measly 1%. To learn more on how we came up with the evaluation, please click here.
The FOREX market is the largest financial market in the world at some six trillion dollars daily, only followed by the credit market. The market operates 24 hours a day and five days a week (Monday through Friday), except international holidays.
How do you ensure the trustworthiness of a broker?
FOREX firms must at least obtain one license from a relevant regulatory authority. Otherwise, they should be avoided at all times. In this context, we present the five most important FOREX market regulatory bodies from around the world.
1. The Financial Conduct Authority (FCA), UK;
2. The Swiss Financial Market Supervisory Authority (FINMA);
3. The Australian Securities and Investments Commission (ASIC);
4. The Financial Markets Authority, New Zealand; and
5. The National Futures Association (NFA), US.
What do the dos and don’ts of brokerage companies include?
One of the first things a new FOREX trader ought to do is to check the extent to which the FOREX company abides by the rules and regulations governing its operation. Emphasis must be placed on what it can and cannot do, details on which were outlined at length above.
What are the associated costs and commissions associated with FOREX trading?
A first step in FOREX trading is identifying the spread differential, defined as the difference between the bid (sell) price and the ask (buy) price of a currency pair. While most FOREX currency pairs are traded without commission, the spread is one “cost” that applies to any trade that you place. This is, indeed, the biggest source of profit for the FOREX company. Good companies typically offer a EUR-USD spread of three basis points.
As for commissions, FOREX trading companies can be placed in three categories. The first offer fixed spreads, while the second tender variable spreads, with a third category of companies offering low-cost spreads but that come with a (relatively high) fixed commission.
How important is good customer service in FOREX trading?
As timing is key to FOREX trading, you must pick a brokerage firm that is able to provide good customer support around the clock. This most notable include the company representatives being easy to reach, fast and polite, which will, in turn, spare you of having to worry about problems down the road.
Do FOREX traders pay tax?
FOREX trading is taxable in many countries. Traders are compelled to keep a close eye on their earnings as profits above a certain level are likely to attract taxes. Speak to a tax expert for more information.
Adrian Ashley is a seasoned business and finance writer. With a corporate career spanning over 20 years, he has developed deep experience in such diverse areas as investing, business, finance, technology and macroeconomics.