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Finding the best forex broker for your needs is critical when currency trading. This forex broker guide will help you select the best broker
There are five key areas to consider when selecting a forex broker:
Its hard to overlook the cost of trading with any currency broker which in the long-term can be higher than other financial products. This isnt due to the lack of competition but features such as leverage thattop forex brokersneed to provide. There are two main areas of costs, spreads and commissions.
Every currency broker has a buy and sell price for currency pairs. Traditional currency exchange providers (such as those on the airport) display these openly. The largest the distance between these two elements, the more the broker will make. As foreign exchange traders want to minimise currency trading costs, find a broker that not only advertises a low minimum spread but also a low average spread is critical. This will usually mean a broker that has no dealing desk and is not a market maker.
To reduce spreads, some of the best forex brokers offer ECN direct market access options. These allow forex traders to directly access liquidity pools (such as the banks) and the actual live forex market prices. Brokers in these scenarios charge a commission based on volume to offset their costs associated with customer service, leveraged products and theforex platformoffered.
Forex trading brokers often have other associated costs for those holding positions over the weekend or overnight. Additional charges may also apply forforex trading servicesincluding premium platform and charting options and finally news services.
There are a plethora of forex platforms but only one or two are offered by each forex broker. For experience traders this will often help short-list the best forex brokers as they wont want to switch their forex platform. For those new to forex trading, there are two sets of forex platforms to consider.
There are two forex brokers that are the most popular world-wide and are offered by most of the best brokers. When you open an account, you can choose which platform you wish to use.
MT4 is the worlds most popular forex broker. It is designed for todays busy trading environment with analytics, in-depth news, real-live charts and quote and the option of expert advisors for automated currency trading. The forex platform offers secure trading, the option to export data in real time through a DDE protocol and advanced charting. MT4 is suitable for all investors.
This forex platform is one of the most innovative in the market for ECN currency trading. The trading platform was built with speed and depending on the forex broker can help traders get access to interbank liquidity required for algorithmic trading systems.
The two platforms above are quite similar but in general, MT4 attracts more users focused on EAs due to improved resources, availability the the online community. cTrader draws those looking to customise the interface with expert order options. Overall, traders often choose a platform they are familiar with or feel uses a similar logic to their own trading styles.
Some brokers offer only their own platform while others offer the choice of a universal platform or their own. There are no issues of using the forex brokers platform (especially if they offer lower spreads) but it will make it difficult long-term to switch forex brokers. It this isnt an issue for you, then you should consider the forex platform recommended by the forex broker. Some such brokers include:
IG is Australias largest CFD broker and have a web-based platform complemented by apps for Android, Apple and Windows tablets and mobile phones. The big advantage of the IG platform is that you can trade shares, indices,commodities CFD trading, bonds and even bitcoin. This is worth considering if your looking for an all-in-one platform.
easyMarketsoffers MT4 as well as their own platform which has a few unique features includingdealCancellationwhich allows traders to cancel any deal within an hour to recover their losses. There is also guaranteed stop losses at no extra cost. Spreads are fixed with guaranteed rates through the platform ensuring no slippage. There is also negative balance protection.
CMC only offers their own platform which has some strong graphing features including price projection tools and the ability to trade straight from these graphs. There is a client sentiment feature to see real time Position Value of other traders. There is also pattern recognition scanners to highlight possible trading opportunities.
FXCM has their own trading station platform that is ideal for automated strategies. It allows for back-testing and visually represents trades. The platform provides equity and balance charts and detailed summaries of performance. A unique FXCM feature is alsoReal Volumeindicators which provide strategy support through real market sentiment.
The top 10 forex brokers in Australia all have one elements in common, they have the technology and platforms to provide fast execution speeds when online trading. Generally, there are two ways the best brokers maximise speed:
Most Australian forex brokers user offshore server companies that are located close to exchanges. For US liquidity the most popular provider isEquinixs NY4 center. Through the Equinix Financial eXchange, the high performance data centres exchange data with strategic partners near wall street. This leads to a maximisation in liquidity from a variety of partners and fast execution speeds due to their close proximity.
The other popular provider is theLD5 IBX Equinix Datain London. While the NY4 centre is used by MetaTrader 4, this data centre is utilised by cTrader. This has close proximity to the London Internet Exchange providing fast access to not only UK liquidity but other European countries liquidity.
Only a handful of the largest retail brokers can afford to have their own servers. Examples include IG who have a worldwide network. Its hard to quantify if these are faster then the specialist technology companies so its worth noting the execution speeds our recent analysis found.
There are a number of regulatory bodies worldwide such as the fca and cysec. For Australian forex traders when comparing the different brokers, the key element to look for is if they have an Australian Financial Services Licence (AFSL). If they have anAFSL, it means they are regulated to trade in Australia with requirements to segregate client deposits, complete audits and reach a level of training. Exchanges such as cysec may have lower requirements and many forex brokers reviews highlight this face.
All theforex trading brokerslisted in ourforex broker Australia comparisonsite have an AFSL and have been established in Australia for some time.
The final element are the unique features that some of the best forex brokers provide traders. Five such features include:
Almost all online brokers offer stop-loss features but few offer guaranteed stops. This feature ensures that you cant lose more that the predefined amount placed even in turbulent market. Based on ourforex capital trading review, this can help protect against slippage which can be significant when large movements occur.
A handful of brokers have a no negative guarantee which means you cant lose more than your initial deposit. This is a critical risk management tool as in extreme events you may otherwise lose more than your deposit and have to pay back the broker large sums of money.
Spreads for most brokers will vary every minute that currency markets are open. Fixed spread brokers will ensure you know your trading costs upfront providing certainty in an uncertain market. It should be noted that in the long-term, variable spread brokers offer lower fees. The feature here is transparency and reliability (not lower costs).
Leverage is critical for any trader as currency movements are relatively slight compared to other financial products. Higher leverage means higher risk but many traders strategies rely on high levels. Its critical therefore to understand the level of leverage you require and find a broker that matches this level.
Training for those new to currency markets or looking for advanced strategies is always a good idea. Most currency brokers will offerforex courses, free online training and modules but only a few will offer a dedicated account manager, webinars and in-person training. Its worth understanding your needs and ensuring thelow fee and leverage brokerwill meet your expectations.
An internationalforex broker comparison tableshows the top brokers globally but its worth noting that brokers may differ by region. For this reason, the team have also created several other pages including theAustralian best forex broker section,UK best forex broker section,South African best forex broker sectionand theSingapore best forex broker page.