Forex is short for foreign exchange (sometimes abbreviated to just FX) and is the global, decentralized trading market of the world’s currencies. Traders, investors, banks and exchanges buy, sell and speculate on these currencies, and in turn this activity determines the foreign exchange rate.
The forex currency market offers the day trader the ability to speculate on movements in foreign exchange markets and particular economies or regions. Furthermore, with no central market, forex offers trading opportunities around the clock.
In the international forex day trading world, the vast majority of people focus on the seven most liquid currency pairs on earth, which are firstly the four ‘majors’:
In addition, there are three emerging pairs:
These currency pairs, in addition to a variety of other combinations, account for over 95% of all speculative trading in the forex market, as well as retail forex.
However, you will probably have noticed the US dollar is prevalent in the major currency pairings. This is because it’s the world’s leading reserve currency, playing a part in approximately 88% of currency trades.
If a currency pairing doesn’t include the US dollar, it’s known as a ‘minor currency pair’ or a ‘cross-currency pair’. Hence the most popularly traded minor currency pairs include the British pound, Euro, or Japanese yen, such as:
You can also delve into the trade of exotic currencies such as the Thai Baht and Norwegian or Swedish krone. However, these exotic extras bring with them a greater degree of risk and volatility.
The “best” forex broker will often be a matter of individual preference. It may come down to the pairs you need to trade, the platform, trading using spot markets or per point or simple ease of use requirements.
Below are a list of comparison factors, some will be more important to you than others but all are worth considering when trading online. Details on all these elements for each brand can be found in the individual reviews.
Spreads, commission, overnight fees – everything that reduces your profit on a single trade needs to be considered. High frequency trading means these costs can ratchet up quickly, so comparing fees will be a huge part of your broker choice. Inactivity or withdrawal fees are also noteworthy as they can be another drain on your balance.
The trading platform needs to suit you. Whether you want a simple cut down interface, or multiple built in features, widgets and tools – your best option may not be the same as someone else’s.
Demo accounts are a great way to try out multiple platforms and see which works best for you. Remember also, that many platforms are configurable, so you are not stuck with a default view.
Trading forex on the move will be crucial to some people, less so for others. Most brands offer a mobile app, normally compatible across iOS, Android and Windows.
If this is key for you, then check the app is a full version of the website and does not miss out any important features. The download of these apps is generally quick and easy – brokers want you trading.
Is customer service available in the language you prefer? Is there live chat, email and telephone support? When are they available? How high a priority this is, only you can know, but it is worth checking out.
Does the broker offer the markets or currency pairs you want to trade? A pretty fundamental check, this one. If you are trading major pairs, then all brokers will cater for you. If you want to trade Thai Bahts or Swedish Krone you will need to double check the asset lists and tradable currencies.
Do you want a broker regulated by a particular body – the FCA, SEC or ASIC perhaps? Remember European regulation might impact some of your leverage options, so this may impact more than just your peace of mind. We cover regulation in more detail below.
Partly covered in trading costs, but the spreads are often a comparison factor on their own.
This is because you are not tied down to one broker. If you trade 3 or 4 different currency pairs, and no single broker has the tightest spread for all of them, then shop around. There is nothing wrong with having multiple accounts to take advantage of the best spreads on each trade. Beware of slippage ‘hiding’ wider spreads too often.
Deposit method options at a certain forex broker might interest you. Do you want to use Paypal, Skrill or Neteller? Are you happy using credit or debit cards knowing this is where withdrawals will be paid too?
Some forex brokers now accept deposits in Bitcoin or a range of other crypto’s too.
Most brands will follow regulatory demands to separate client and company funds, and offer certain levels of user data security.
Some brands might give you more confidence than others, and this is often linked to the regulator or where the brand is licensed. Foreign exchange trading can attract unregulated operators. Security is a worthy consideration.
Try before you buy. Most credible brokers are willing to let you see their platforms risk free. Trading on a demo account or simulator is a great way to test strategy, back test or learn a platforms nuances. Try as many as you need to before making a choice – and remember having multiple accounts is fine (even recommended).
From cash, margin or PAMM accounts, to Bronze, Silver, Gold and VIP levels, account types can vary. The differences can be reflected in costs, reduced spreads, access to Level II data, settlement or different leverage. Micro accounts might provide lower trade size limits for example.
Retail forex and professional accounts will be treated very differently by both brokers and regulators for example. An ECN account will give you direct access to the forex contracts markets. So research what you need, and what you are getting.
For European forex traders this can have a big impact. Forex leverage is capped at 1:30 by the majority of brokers regulated in Europe. Assets such as Gold, Oil or stocks are capped separately.
In Australia however, traders can utilise leverage of 1:500. That makes a huge difference to deposit and margin requirements. Australian brands are open to traders from across the globe, so some users will have a choice between regulatory protection or more freedom to trade as they wish.
Just note that higher leverage increases potential losses, just as it does potential profits.
From charting to futures pricing or bespoke trading robots, brokers offer a range of tools to enhance the trading experience. Again, the availability of these as a deciding factor on opening account will be down to the individual. Level 2 data is one such tool, where preference might be given to a brand delivering it.
Forex trading beginners in particular, may be interested in the tutorials offered by a brand. These can be in the form of e-books, pdf documents, live webinars, expert advisors (ea), courses or a full academy program – whatever the source, it is worth judging the quality before opening an account. Bear in mind forex companies want you to trade, so will encourage trading frequently.
Integration with popular software packages like Metatrader 4 or 5 (MT4 or MT5) might be crucial for some traders. Many brands offer automated trading or integration into related software, but if you are going to rely on it, you need to make sure.
From cashback, to a no deposit bonus, free trades or deposit matches, brokers used to offer loads of promotions. Regulatory pressure has changed all that. Bonuses are now few and far between. Our directory will list them where offered, but they should rarely be a deciding factor in your forex trading choice. Also always check the terms and conditions and make sure they will not cause you to over-trade.
Desktop platforms will normally deliver excellent speed of execution for trades. But mobile apps may not. While this will not always be the fault of the broker or application itself, it is worth testing.
Our reviews have already filtered out the scams, but if you are considering a different brand, avoid getting caught out with these checks;
If you have any doubts, simply move on. There are plenty of legitimate, legal brokers.
With all these comparison factors covered in our reviews, you can now shortlist your top forex brokers, take each for a test drive with a demo account, and select the best one for you. We have ranked brokers based on our own opinion and offered ratings in our tables, but only you can award ‘5 stars’ to your favourite!
The Award of Excellence is the highest honor among The Communicator Awards, given to those that exceed industry standards in quality and achievement. The IQ Option trading app was recognized by the voting committee as the best one in the Financial category in 2017.
At HotForex, you'll find great forex trading platforms to suit all your basic and advanced needs. So, whether you like trading from your desktop or prefer to trade while on the go, we have the platforms that will make your life much simpler!