Reviews of Forex Brokers – How Do We Rank the Top FX Brokers
FX and CFD trading is a hugely risky investment product, where there is a likelihood of losing more money than you invest. Shady brokers often tend to increase the risk factor, especially with their dubious policies that are always looking to siphon money away from their traders. Hence, our best Forex brokers reviews are crafted with the utmost precision to offer our readers the finest options for online Forex trading. We have developed a very detailed review framework that considers several factors while compiling comprehensive Forex broker comparisons. Our review methodologies and ranking formulas have helped us find the best FX brokers that the industry has to offer.
Best Forex Brokers for 2021
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How We Monitor and Rank the Best Online Forex Brokers
We have developed a unique and effective review methodology that helps us rank brokers according to the different trading parameters. Our review panel comprises professional traders who have extensive knowledge of the markets, which allows them to uncover the winning traits of the best Forex brokers in the industry.
Our reviews encompass brokers’ fundamental order processing policies such as ECN/STP/DMA/NDD and market maker protocols. We also pay close attention to the brokers’ trading account types, the minimum deposit requirements, range of financial instruments, leverages on offer, trade execution policies, slippages, requotes, platforms, mobile apps, and the quality of the overall trading environment. We also check the availability of ancillary account types for specific trading needs, such as Islamic, Demo, PAMM/MAM, automated, and social trading account options.
Another important aspect is the overall price that one pays for trading the Forex and CFD market in its entirety. Our FX broker reviews give substantial importance to analyzing the different costs of Forex and CFD products, such as spreads, commissions, SWAP, and other trading fees. Our reviews also provide information on whether there are any hidden costs for maintaining a brokerage account, including account maintenance fees, subscription costs for trading signals, cost of news/ tools/training materials, and the commissions charged for automated or social trading accounts.
Finally, we appraise several safety considerations of trading with a company, such as the regulatory protection offered to traders, the encryption protocols employed by the payment gateways, the methods available for deposits/withdrawals, and whether the funds are held securely through segregated accounts. These reviews also encapsulate the overall customer service experience, customer contact points, complaint resolution policies, and international locations. Here is a detailed breakdown of the different factors that contribute to our evaluation score:
- Regulation – 20%
- Choice of Accounts – 10%
- Website Quality, Trading Platforms and Mobile App Support – 10%
- Security Aspect of FX Brokers – 10%
- Bonuses and Offers – 5%
- Deposit and Withdrawal Methods – 10%
- Trading Conditions (Spreads, Commissions, Number of Assets, Slippage, Requotes, Scalping, Leverage, etc.) – 25%
- Ancillary Trading Services – 5%
- Customer Support – 5%
What Is Forex Trading and How Does It Work for Retail Traders?
The Forex market is a decentralized global financial marketplace that facilitates currency transactions between two entities. It embodies the very nature of free markets, where one currency is sold to buy another. There are two dimensions to Forex trading. The first type of transaction is spot currency market transactions, where currencies are exchanged for commerce and cross-border payments. On the other hand, the derivatives FX market is used to hedge against currency rate fluctuations, mitigate inflationary risks, earn profits from speculation and diversify an investment portfolio.
Currency trading is done through the formation of currency pairs. The most popular currency pairs are EUR/USD, GBP/USD, and USD/JPY, which have the highest trading volumes in the entire market. An exchange rate determines how much base currency can be bought or sold by selling or buying the quote currency. Since the markets are free, buyers and sellers can choose the rates as per the demand/supply mechanics, which dictates the price fluctuations of a particular pair. The Forex market witnesses over $6.6 trillion in notional volumes every day, supported by the around-the-clock activity backed by the different financial exchanges across the globe. Institutional Forex trading is facilitated through interbank liquidity pools and large decentralized exchanges, where billions of currencies are exchanged within a few seconds.
Retail Forex trading is mostly done through CFDs or ECN/STP bridges. CFDs are among the most popular Forex derivatives used for speculative retail trading. Still, most direct market access brokers may also offer direct access to the interbank liquidity pools through ECN accounts. Essentially, a Forex/CFD broker acts as a bridge between retail traders or between retail traders and liquidity providers and combines different protocols to match orders internally or pass them to the interbank liquidity pool. Traders can use their Forex brokerage accounts to buy and sell different currency pairs, utilize leverage to increase their market exposure, and use various tools to analyze the markets to make the correct investment choice. However, we should warn you that leveraged CFD trading is very risky, where you can lose more money than you have invested.
Is Online Forex Trading Legal?
Forex is a decentralized market where there are no regulations governing the global Forex industry. Therefore, there have been many questions surrounding the legality of online Forex trading and CFDs in general. Forex trading is a legal and genuine market since most countries, companies, banks, institutions and even individuals depend on the spot FX market to exchange currencies at the prevailing exchange rates. However, leveraged Forex trading through CFDs and other derivatives is facilitated through brokers regulated by several countries and independent financial regulators. Our broker reviews give a high degree of weightage to regulatory compliance, as we believe that safety is paramount while dealing with organizations that handle traders’ funds.
The Legality of FX and CFD Products
Forex and CFD assets are mostly legal throughout the world; however, the legality of these products varies according to a country’s specific economic and monetary policies. For instance, countries such as Iran have an outright ban on Forex trading. On the contrary, Forex trading is a legal and approved financial product in the US and the EU. Furthermore, countries such as the UK have legalized exotic markets such as spread betting alongside the regular Forex and CFD products. Elsewhere, countries such as China and India have strict laws regarding spot currencies and commodities trading. Indian laws, as an example, only enable INR-denominated currency trading, while trading other currency pairs is illegal. Therefore, the legality of Forex trading depends entirely on the rules and regulations of a trader’s home country or their country of residence.
The Top Regulators of Forex Brokers
Given below are a collection of the top-tier and low-tier Forex broker regulators in the world:
- The US – Commodities Futures Trading Commission (CFTC), National Futures Association (NFA) and Securities and Exchange Commission (SEC)
- The UK – Financial Conduct Authority (FCA)
- Switzerland – Financial Market Supervisory Authority (FINMA)
- Australia – Australian Securities and Investment Commission (ASIC)
- Japan – Financial Services Authority (FSA)
- The EU – Cyprus Securities and Exchange Commission (CySEC), German Federal Financial Supervisory Authority (BaFin) and other EU-based regulators such as the AMF (France), CNMV (Spain), FMA (Austria) under the European Securities and Markets Authority (ESMA) Markets in Financial Instruments Derivatives (MiFID).
Tier-2 and Tier-3 Regulators
- South Africa – Financial Sector Conduct Authority (FSCA), formerly the FSB
- Singapore – Monetary Authority of Singapore (MAS)
- UAE – Dubai Financial Services Authority (DFSA) and the Central Bank of the UAE
- Malta – Maltese Financial Services Authority (MFSA)
- British Virgin Islands – Financial Services Commission (BVIFSC)
- Belize – International Financial Services Commission (IFSC)
Regulatory Protection Offered to Traders
Different regulators have different policies to protect traders from bogus and scam operators. Regulatory compliance alone accounts for 20% of the final rating points assigned to a broker in our broker reviews. Therefore, let us understand how the different leading regulators in the market affect the safety and security of your capital and trading environment.
US – NFA and the CFTC
The US has the best rules that govern Forex brokers in the entire market. The NFA and the CFTC are two of the primary organizations indulging in Forex broker regulation in the US, while the SEC has a negligible role. Both the NFA and the CFTC are independent authorities that stipulate several policies that safeguard traders’ interests. These include enforcing minimum capital requirements of at least $20 million for brokers, minimizing leverage, creating a safe trading environment, and issuing penalties for non-compliance.
UK – FCA
The FCA is another leading Forex broker regulator that issues specific guidelines for protecting investors from broker scams. Some of the protectionary measures include segregation of clients’ funds, maintaining a minimum operating capital, and compensation for traders in case of insolvency under the Financial Services Compensation Scheme. FCA-regulated brokers are also audited to the most stringent guidelines.
EU – ESMA, ECB and MiFID Derivatives
The EU is home to several regional regulators such as the CySEC, AMF, BaFin, and CNMV, which fall under the ESMA, European Central Bank (ECB), and the MiFID framework. Most of the regulatory guidelines are similar to the UK’s FCA, which include minimum capital requirements for brokers, segregation of clients’ funds, routine audits, and compensation for traders in case of broker insolvency.
Australia – ASIC
The ASIC is another top watchdog that regulates FX brokers in Australia. Australia is renowned for its investor-centric regulatory policies that educate investors about the best practices to adopt in the financial markets. Segregation of traders’ funds, minimum capital requirements, and global auditing standards are some of the basic enforcement guidelines adopted by the ASIC, giving Australian brokers a positive reputation in the global financial market.
Security Aspect of Forex Brokers
Regulation is a key factor that decides the security aspect of FX companies. Brokers usually adopt several security measures such as SSL-encrypted websites, secure payment gateways, and account verification to protect their clients’ sensitive financial and personal information. Most regulated brokers are also legally required to segregate their traders’ funds from their working capital, preventing the companies from misusing their traders’ funds.
It also allows the administrators, or other competent authorities, to compensate traders if these companies apply for insolvency. Routine auditing is another security aspect that keeps brokers in line with their standard reporting guidelines, as this renders an additional safety dimension to brokers. Therefore, the safety of Forex brokers depends on the extent of regulation, security protocols, financial practices, and data privacy policies.
Our Forex broker reviews place special emphasis on the security aspect of the brokers’ websites since we only recommend brokers that follow the best safety standards. We always recommend our readers ensure the authenticity of the brokers by verifying their regulatory information, website encryption, and brand recognition. The security aspect of Forex brokers is responsible for 10% of the company’s final ratings, which is why our reviewers strive to include the different brand names of a particular broker, their history, details of the parent company, encryption protocols adopted, privacy policies, and regulatory information in our best broker reviews. We will also alert our readers about any possible fake entities or scam operators so that you can stay safe by avoiding malicious operators.
Bonuses and Offers – How Do They Affect Our Broker Reviews?
The retail Forex trading market is infamous for its attractive bonus programs and lavish promotional offers, which sometimes resemble the gambling industry. Brokers sometimes provide up to 200% of the deposit amount as a bonus, which helps traders increase their exposure in the market. However, in most cases, brokers offer anywhere from a 10% to 100% bonus on the deposit amount with a maximum threshold. Other bonuses include free trading credits, no-deposit bonuses, referral bonuses, cash rebates, gifts, and VIP bonuses. Our best Forex brokers reviews contain a section dedicated to evaluating the bonuses offered by a broker, but it has a marginal impact of 5% on the overall broker rating.
The reason for its low weightage is because these forex brokers bonuses often carry several restrictions that prevent traders from accessing their capital, which can become a hot subject of conflict between brokers and traders. Over the years, several financial watchdogs have intervened with stringent regulatory policies that prevent FX companies from offering a bonus to their clients. More specifically, brokers based in the EU, UK, US, and Australia don’t provide a bonus or any other free money promotions. However, brokers that operate through international jurisdictions do provide reasonable offers to their clients. Still, we always evaluate these offers comprehensively in our reviews before recommending these bonuses to our readers.
Does the Platform User Experience and Quality of the Website Affect Traders?
Trading platforms are the most indispensable tools in the Forex market. Brokers provide different platform options to their clients according to their dealing protocols, including proprietary apps and third-party platforms such as MetaTrader and cTrader. Some leading brokers choose to develop a proprietary web app for desktop users and proprietary mobile apps for iOS and Android users. On the other hand, mainstream brokers employ the tried and trusted third-party apps such as MT4, MT5, and cTrader for desktop and mobile trading. Platform choices are an important component of our broker reviews, as we always evaluate the utility, performance, trading speeds, order execution policies, and access points (desktop and mobile apps).
Our Forex broker reviews also give importance to the overall first impressions of the website. We believe that a professional website with easy-to-access information goes a long way to inform clients about the different products and services on offer. Therefore, the website’s design, ease of navigation, registration process, and trading information must be on point. Traders should also be able to register an account, verify their identity, and deposit funds with minimal hassle. Hence, the choice of platforms, quality of the website, and user experience contribute significantly to determining the overall scores in our broker reviews, with 10% of the final broker rating determined by these factors.
Trading Conditions and Their Impact on Forex Broker Performance
Our expert reviewers consider the implications of trading conditions quite seriously, such that they warrant a significant weightage on the final rating of a broker. Trading conditions can include many different attributes, such as the number of tradeable assets, real-time spreads, slippage, requotes, leverage, scalping capabilities, hedging options, and the general order execution quality of the broker. A broker is only as good as the trading environment it provides to its clients, and our reviews ensure that every aspect of FX trading is covered in our best Forex broker reviews.
To create a comprehensive review, we find out the different asset classes supported by a broker and the number of assets offered under each category. Normally, most mainstream brokerages provide a collection of Forex, commodities, indices, metals, and share CFDs, but nowadays, we also expect them to offer new instruments such as cryptocurrencies and other exotic assets. The actual number of instruments can vary, but the cost of trading these instruments should also align with the market standards. Therefore, we compare the spreads, commissions, and SWAPs of different instruments to determine the overall costs of trading.
Our reviews also aim to discover whether brokers restrict traders from implementing specific trade strategies. For instance, retail traders may scalp the markets for quick gains, which is frowned upon by some market-maker brokers. Additionally, regulatory restrictions, such as those in the US, prevent brokers from offering certain perks such as high leverage and hedging functionalities to their traders. Furthermore, brokers may also tamper with their clients’ orders and create an adverse trade environment using controversial order execution policies. We believe that brokers should work in the best interests of their clients, and aside from regulatory restrictions, companies must offer full freedom to traders to adopt any trading strategy or style that they prefer. Therefore, the overall trading environment, costs of trading, and order execution policies of a broker are responsible for a hefty 25% of the final rating of the company.
A Detailed Look at the Different Types of Forex Brokers
Brokers are categorized into two major groups: dealing desk and no-dealing desk brokers. Each has its distinct pros and cons, and our reviews rate brokers according to their dealing desk policies. The following sections offer a brief insight into how these two types of brokers operate in the market.
Dealing Desk Brokers
Dealing desk brokers are those that handle orders internally. These brokers are also known as market makers, where they make a market for their clients. Clients’ buy and sell orders are matched internally through the broker’s dealing desk, but the broker may take the opposite end of its traders’ positions if it faces a liquidity crunch. The broker can either choose to hold on to its clients’ opposing positions or offload them to the market through a liquidity partner. Such a concept involves a significant conflict of interest since brokers essentially bet against their traders’ positions. Here are some of the pros and cons of dealing desk brokers:
- Offers a stable trading environment.
- An excellent option for small-volume traders.
- Full order fulfilment or the order is cancelled.
- A high degree of requotes and slippages.
- Spreads are high, and prices may be subject to manipulation.
- Order execution speeds are just average.
No-Dealing Desk (NDD) Brokers
No-dealing desk brokers adopt a direct market access policy where all orders are transmitted to a liquidity pool through an ECN/STP/DMA protocol. Trading is facilitated by connecting traders directly to the liquidity pool through bridges or electronic networks. All pricing and quotes are derived by consolidating the interbank market information from liquidity partners, investment banks, and other market participants, which helps no-dealing desk brokerages to offer accurate pricing, low spreads, and direct market access trading conditions. There are primarily two types of NDD brokers: STP and ECN brokers.
Here are a few pros and cons of No-Dealing Desk brokers:
- Direct market access trading with no conflict of interest.
- Competitive pricing with ultra-low spreads.
- Quotes derived directly from the liquidity providers and ECN network.
- Partial order fills are common with ECN accounts.
- Trading is riskier due to the volatile nature of NDD trading.
An Analysis of the Forex Trading Account Types – Which Should You Choose?
Companies often have multiple types of online Forex trading accounts to cater to different segments of traders. The choice of accounts and their inherent features have a fairly big impact on our final broker rating since these options can ultimately affect the traders’ decision to choose the broker. 10% of the overall review scores are contributed by the choice of accounts alone, and our best Forex brokers reviews have detailed sections dedicated to analyzing the different Forex account types on offer. Hence, if you are looking for the best account option to start trading or an intermediate/advanced trader looking to improve your trading results, read the following sections to choose the best type of Forex account that suits your individual trading goals and preferences.
Extra Tools and Services Offered by Brokers
The Forex industry has become quite a competitive marketplace where brokers have started offering several value-added services to attract new clients and retain existing traders. These allied add-on tools can include trading calculators, economic calendars, VPS servers, tutorials, webinars, trading signals, trading bots, and automated chart pattern recognition software. These add-on services can be invaluable for both beginner and professional traders alike since they offer better insights into the dynamics of the markets and help traders increase the accuracy of their trading. Some brokers offer these tools and services free of cost to their clients, while others may charge a subscription fee or reserve them for premium traders. However, in our opinion, the non-availability of these ancillary trading services is not entirely a deal-breaker.
Most of these tools are freely available to traders through third-party service providers, and brokers rarely add any value to these tools on their own. Nevertheless, some premium offerings can change the trading prospects. These include trading signals, automated charting pattern recognition software, VPS servers, sentiment indicators, and market analysis tools. We do make it a point to showcase the availability of such tools in our broker reviews, but they only have a collective contribution of 5% towards the broker’s overall rating.
Funding Methods – The Ease of Deposits, Withdrawals, and Security of Transactions
The choice of payment methods and the security of transactions are discussed in detail in all of our best Forex broker reviews. The types of funding options, ease of deposits, security of payment gateways, and withdrawal policies have a sizeable influence of 10% on the final broker rating. We are very particular about the online and offline funding methods, including popular e-wallets such as Skrill, Neteller, WebMoney, PayPal, credit/debit card payments, and traditional options such as bank wire transfers. It is preferable if the broker absorbs transfer fees, at least for deposits, but we understand that this is not feasible in all cases.
Our security experts evaluate a company’s payment gateway to ensure that it incorporates the latest encryption protocols for maximum security of payments and that all funds are segregated from the broker’s operating capital. Segregation of funds can help in recovering the trading capital if the company is rendered insolvent. We also check the payment policies, the time required for deposits/withdrawals, and withdrawal processing rates of brokers by performing real-time deposits and withdrawals through verified anonymous trading accounts managed by our in-house traders. Our reviewers only recommend brokers with a positive track record of successful withdrawals processed. We will personally ensure that our withdrawals are cleared before assigning an overall review score.
As outlined above, our broker evaluation techniques cover all the major attributes of a broker concerning their real-world performance, regulatory compliance, and customer satisfaction. Our team works exhaustively behind the scenes to compile the best Forex brokers reviews according to our detailed framework. Our review methodologies and rating criteria were developed through many years of trading experience, and we have been evaluating Forex brokers for a very long time. Of course, we are highly proactive in routinely modifying our review framework and rating guidelines according to the changes in the market, which helps us keep our reviews fresh and relevant for our readers.