Login

New to Benzinga?

Register

Already have an account?

Best Forex Broker

If you fret about the volatility and risk associated with stocks, then forex trading is likely not your cup of tea. There are a plethora of risks involved, including leverage, transaction, country and interest rate risks, to name a few.

Quicklook – Our Favorite Forex Brokers

  • TD Ameritrade – Best overall
  • optionsXpress – Best for beginners
  • Forex.com – Best for low cost

The choice becomes further complicated for two reasons:

  1. There are hundreds of brokers who offer a multitude of platforms for trading currencies.
  2. There are no hard-and-fast rules for forex trading.

With so much at stake, it’s imperative that you zero in on the right broker. Benzinga has done your forex homework for you, so breathe easy and check out a few of our suggestions:

What Is Forex Trading?

Forex trading is a global, decentralized, over-the-counter market for trading global currencies. The market participants in a forex market include traders, investors, governments, banks, businesses, etc.  

The market is open 24 hours, five days a week. Although there is no physical marketplace for the forex markets, important world trading centers for currencies are located in Sydney, Tokyo, Hong Kong, Singapore, Frankfurt, Zurich, Paris, London and New York.

Forex quotes are offered by central banks and what our broker quotes is the average of all the quotes received from the banks. Essentially, the broker acts as a market maker and sells the currency pair to you and not another trader.

Characteristics of the Forex Market

  • The forex market is characterized by high liquidity, with roughly $3 trillion worth of transactions handled each day, allowing easy entry and exit. That said, the forex market is not regulated and therefore, lacks transparency.
  • The number of currency pairs traded are limited, making research and asset picking easy. This is unlike the equity market, where a plethora of stocks are trading.
  • The currency market allows anywhere, anytime trading.
  • High volatility associated with the currency market offers sizeable profitable trading opportunities. On the contrary, high volatility also exposes one to high risk. Given that most of the factors driving forex trading such as geopolitical and macroeconomic factors, a trader/investors stand to lose a lot, especially because of the lack of regulation.
  • The tight spread in terms of pips facilitates trading even with low capital.

Understanding The Risks Involved In Forex Trading

Conventional wisdom states that high returns are always associated with high risks. There is no dearth of risks in the forex market. Here is brief on a few major risks one should be wary of while trading currency pairs.

Exchange Rate Risk

Exchange rate risk or currency risk arises when an investor needs to close out a long or short position at a loss due to adverse movement in the exchange rate of the currency pair he is trading.

Risk Associated With Leverage Trading

Once an investor decides to take a plunge in the forex market, he does by opening a margin account in a brokerage, which provides him with leverage or loan for trading. The leverage provided could be in the ratio of 50:1, 100:1 or 200:1 depending on several factors. A 50:1 leverage means the trader has to maintain at least $1 for every $50 worth of trade he makes.

This is substantially higher than the 2:1 leverage allowed in stock trading and 15:1 for futures trading. This exposes a forex trader to enormous leverage risk if his bet goes wrong. When his position loses value to the extent of him not meeting the margin requirement, the broker will begin to liquidate his assets just so that the account complies with the margin requirement.

Volatility Risk

Volatility refers to the change in the value of the currency pair held as an investment, annualized and expressed as a percentage. The volatility associated with a currency pair also poses a risk to currency traders.

Interest Rate Risk

With the direct relation interest rates share with the value of a nation’s currency, the prevalent benchmark interest rates or a change thereof can introduce risk in currency trading.

Sovereign Risk

Sovereign risk refers to a nation failing to meet its interest payments or principal repayments, which in turn can impact the value of the nation’s currency. Devaluation of a nation’s currency also engenders sovereign risk.

Counterparty Risk

Since the currency market is not regulated in both the trading and clearing, a forex trader may be exposed to counterparty risk, which arises if the forex broker defaults or does not keep up his end of the bargain. If this happens, a currency trader will be straddled with huge losses.

The best way to go about trading safely in the forex market is to choose well-regulated brokers. It is best to do a background check on the agency under whose regulatory jurisdiction the broker falls.

Forex trading is regulated by bodies such as the Commodity Futures Trading Commission, or CFTC, which regulates leveraged trading offered to retail traders. The CFTC requires that all online forex dealers be registered and meet strict financial standards enforced by the National Futures Association, or NFA.

Best Overall

TD Ameritrade and Oanda are among the best among the U.S. forex brokers; each individually offers unique advantages. TD Ameritrade wins because of is technological prowess through platform, tools, and research, although it is slightly disadvantaged because of higher commissions and fees.

The firm’s mobile platform is the best and one-of-a-kind, making TD Ameritrade a preferred choice for the on-the-go traders.

Meanwhile, Oanda reigns when it comes to cost, the currency pair option it allows and its overall platform simplicity.

For a comprehensive overview of TD Ameritrade, check out Benzinga’s TD Ameritrade review.

Best For
  • Beginner investors
  • Advanced traders
  • Investors who want portfolio-building advice.

Best for Research

TD Ameritrade ranks as the top broker in terms of research, with the thinkorswim platform offering powerful research tools, including screeners, news feeds and a  detailed economic calendar.

Best Forex Trading Platform and Tools

TD Ameritrade owns the forex trading space when technology is concerned. TD Ameritrade’s thinkorswim is a powerful trading platform which allows traders to monitor the forex market, devise trading strategy and implement it in one easy-to-use, convenient location. It also garners the added advantage of a good mobile trading platform.

 

Best Forex Broker for Beginners

Best For
  • options traders
  • Frequent traders
  • Penny stock traders
  • No account minimum
  • futures traders.

To appeal to a beginner, a broker should offer:

  • Services at an affordable pricing and margin requirement,
  • Simplicity of trading and
  • A treasure trove of information and resources pertaining to trading.

optionsXpress, which provides a practice account and requires no minimum deposit, wins hands down on this count. It also provides webinars, live trading, blogs and newsletters, which serve as rich educational tools for a greenhorn.

Oanda also butts in as a top contender, with its practice account that spans for an unlimited time frame and zero minimum balance. It also provides a rich haul of educational resources in the form of webinars, scheduled learning events, video on demand, etc.

Best Forex Broker: Currency Pairs Offered

The selection a forex broker offers is also important, as it offers traders an opportunity to trade currency pairs.

TD Ameritrade offers 77 currency pairs compared to 71 by Oanda, 52 by Forex.com, 44 by TradeStation, over 50 pairs by Ally Invest Forex, 22 pairs by Interactive Brokers and 21 by optionsXpress.

Without question, TD Ameritrade is the leader on this metric, with Oanda closely breathing down its neck.

Best Forex Broker: Low Cost

Forex.com

Forex.com keeps costs down with competitive spreads and quality trade executions.

Forex traders charge commissions as a fixed spread, or variable spread, or a commission based on a percentage of spread. Spread is the difference between the price at which a forex trader is willing to buy you the currency pair and the price at which he is willing to sell you the currency pair. In other words, it is the difference between the bid price and ask price.

Oanda and Forex.com charge merely the spread markup and therefore, ranks as top forex brokers for low-cost trading. TD Ameritrade charges a $1 minimum, $0.10/1,000 units per side and also the spread mark up as  commission.

Broker Best For Commissions Account Minimum Choose your platform
TD Ameritrade
  • Beginner investors
  • Advanced traders
  • Investors who want portfolio-building advice.
$6.95 $0
Get started securely through TD Ameritrade's website
1 Minute Review

This publicly listed discount broker, which is in existence for over four decades, is service-intensive, offering intuitive and powerful investment tools. Especially, with equity investing, a flat fee is charged, with the firm claiming that it charges no trade minimum, no data fees, and no platform fees. Though it is pricier than many other discount brokers, what tilts the scales in its favor is its well-rounded service offerings and the quality and value it offers its clients.

Pros
  • Superior technology
  • No account minimum balance
  • Excellent customer support
  • Premier data and news partnerships
Cons
  • Slightly higher commissions
  • Can be for more advanced users
Current Promotion

Trade Free for 60 days + Get up to $600 with Trade Architect from TD Ameritrade.

OptionsXpress
  • options traders
  • Frequent traders
  • Penny stock traders
  • No account minimum
  • futures traders.
$4.95 $200 minimum equity balance required to maintain an IRA.
Get started securely through OptionsXpress's website
1 Minute Review

optionsXpress is a great tool yourself on stock options trading. The Virtual Practive Trader gives the customer 25,000 virtual trading account to test trading strategies and gain experience without putting any money on the line. With customer support from Charles Schwab optionsXpress offers broker assisted trades and a pleathora or educational tools when a trader is ready to enter the stock market.

Pros
Cons
Current Promotion

Customers who open a new account and transfer at least $5,000 from another brokerage earn 50 commission-free trades.

Interactive Brokers
  • Day traders
  • Penny stock traders
  • Forex traders
$0.005 per share minimum $1 and maximum 0.5% of trade value; volume discount available $10,000 $5,000 for IRAs, $3,000 for clients 25 or younger
Get started securely through Interactive Brokers's website
1 Minute Review

If you’ve got $10,000 and you consider yourself a sure-footed professional trader, Interactive Brokers might a major possibility for you, particularly if you’re adept at navigating tricky trading platforms (can you say 124 option indicators?) or have done more than just dipped your toe a “coupla times” into the complex world of international markets.

Pros
  • Interactive Brokers offers the lowest margin rates in the industry
  • Low pay-per-share commissions on stock trades (up to 1,000 shares) and on options trades (up to 20 contracts)
  • Vast order types options for professional traders
Cons
  • It’s a hefty $10,000 minimum to open an account
  • Account fee charges (including annual, transfer, closing and inactivity fees) and complex trading platform, which can be difficult for beginners
Current Promotion

Lower minimum activity requirements ($3/month) and opening account minimum requirement ($3,000) for clients 25 and younger.