Best Low Spread Forex Brokers

When a slew of forex broker options are available, making the right choice can become a major task. It takes careful comparative analysis to choose the forex broker with the tightest dealing spreads that also align with your interests and needs. Regulation, trading costs like commissions and spreads, funds security, ease of trading and customer service can all be key criteria for selecting a broker. Here's how to find the lowest spread forex broker.

6 Lowest Spread Forex Brokers

Take a look at the following forex brokers that made the list.

• Best for Overall: FOREX.com
• Best for Trading Multiple Markets: IG Markets
• Best for Professional Traders: Interactive Brokers
• Best for Outstanding Research Tools: OANDA
• Best for Copy Trading: eToro
• Best for Easy-to-Use Forex Platform: Trade Nation

1. Best for Overall FOREX.com

FOREX.com allows trading in over 80 currency pairs, indices, over 220 shares, commodities and cryptocurrencies.

The account types offered are standard and commission accounts. Cost of trading with a commission account is a low variable forex spread plus a flat $5 commission per standard lot chargeable at the time the trade is executed.

Typical spread for some of the major currency pairs are as follows:

• EUR-USD: 1.2 pips
• GBP-USD: 1.9 pips
• USD-JPY: 1.3 pips
• AUD-USD: 1.6 pips

FOREX.com has all three proprietary platform options, namely desktop, web and mobile. It also offers the widely used MetaTrader 4 platform. Currently, FOREX.com only offers spreadbetting in the UK.

2. Best for Trading Multiple Markets: IG Markets

IG Markets is also based out of Australia and allows trading in forex, bonds, stocks, commodities, cryptocurrencies, indices and futures. The firm offers 80 currency pairs and allows up to 1:50 leverage with capital requirements as low as 2% elsewhere.

The average spread for IG Markets’ ECN account is 0.8 pips for the EUR-USD or USD-JPY pairs. (Terms and conditions apply)

An ECN account facilitates using electronic communications networks for giving clients direct access to other participants in currency markets. Apart from the spread, a commission is also applicable.

For a standard account, where only spread is applicable, there’s an average 0.8 pip spread for the EUR-USD and USD-JPY pairs along with 1.0 pips for the AUD-USD pair and GBP-USD pairs.

IG Markets provides traders access to the desktop, online and mobile versions of the MetaTrader 4 as well as its own proprietary platform. IG Markets is regulated by ASIC.

3. Best for Professional Traders: Interactive Brokers

Interactive Brokers is a low-spread forex broker that offers some of the most competitive commission rates in the industry. The company has been around since 1977 and is well-known for its trading platform and its ability to execute trades quickly. With over 100 markets, Interactive Brokers provides a wide variety of currencies and commodities, as well as access to global markets such as futures, options, and stocks.

The company’s trading platform is designed to be highly user-friendly, with powerful features that make it easy for traders of all levels of experience to execute orders in a timely manner. The interface includes technical analysis tools such as charting and risk management tools, along with an array of research capabilities. Additionally, Interactive Brokers has a wide variety of mobile trading applications, such as smartphone apps, that allow traders to stay connected to the markets while on the go.

Another advantage of Interactive Brokers is their low spreads, which start at 0.2 pips for major currency pairs. This can be very beneficial for those who want to make smaller trades and benefit from lesser fees. 

4. Best for Outstanding Research Tools: OANDA

OANDA is a low spread forex broker that has been a leader in the trading industry since 1996. It offers a wide range of services, including currency trading, margin and hedging capabilities, and advanced charting and analytics tools. OANDA’s commission-free spreads are among the lowest in the industry, making them an attractive option for traders seeking to save money on transaction costs.

The broker also provides excellent customer service, offering 24-hour support via email or phone. Their trading platform is easy to use and offers a variety of features such as real-time streaming market data, charting tools, news feeds, and historical backtesting capabilities. OANDA also has an extensive educational library for traders of all levels with webinars and tutorials to help them sharpen their trading skills.

Overall, OANDA is a great choice for traders who are looking for a low-cost broker with excellent customer service and a wide range of features. With its competitive spreads and top-notch customer support, this broker is an excellent choice for any trader interested in taking advantage of the forex markets.

5. Best for Copy Trading: eToro

eToro is a reliable and popular online brokerage platform used by forex traders around the world. It offers competitive spreads, low trading fees, and a wide selection of assets to trade. With its powerful trading platform, you can easily access global markets from anywhere in the world.

One of the most appealing features of eToro is its low spreads for forex traders. Providing some of the lowest spreads in the industry, eToro offers an ideal setting for those who want to maximize their profits while minimizing their losses. The spread is the difference between the bid and ask price of a currency pair or other asset, and it's important to understand how brokers calculate this cost before choosing which one to use.

eToro provides access to more than 80 currency pairs, with spreads as low as 0.75 pips on major pairs such as EUR/USD and USD/JPY. This is significantly lower than what many other brokers charge, meaning that you pay less for each trade and can potentially make more money in the long run.

6. Best for Easy-to-Use Forex Platform: Trade Nation

With low fixed spreads, transparent fees and all the trading tools you’ll need, you can use Trade Nation to build your portfolio in the present without feeling as through you’ve lost control of your money. You can learn as you trade, buy into over 1,000 markets, practice with demo accounts, review real-time news items and read daily reports on the assets in your portfolio.

How Spreads Make a Difference when Trading Forex

Forex brokers are the intermediaries through which retail currency traders route their transactions. Although some accounts involve paying commissions, online forex brokers are typically compensated just by the dealing spread. The spread is the difference between the bid and the ask or offer exchange rates the market maker is willing to deal at.

Bids and Asks

The bid is the exchange rate at which a broker or market maker is willing to buy a currency pair. This is also the rate that their clients will be able to sell at. 

The ask or offer is the exchange rate at which a broker or market maker will sell a currency pair. A trader will be able to buy at that rate. The bid rate is generally lower than the ask rate.

The width of a dealing spread is usually expressed in pips. A pip is the smallest exchange rate movement for a currency pair. A one pip shift typically occurs in the fourth decimal place of an exchange rate quote, which involves a movement of 0.0001 in the rate. 

Currency Quotes

Currencies trade in pairs in the forex market. A currency pair’s exchange rate quote expresses the value of the base currency in terms of the counter or quote currency. The base currency appears first in the standard notation for a currency pair, while the quote currency appears second. 

An example of this notation would be EUR/USD in which the EU’s euro or EUR is the base currency quoted in terms of the U.S. dollar or USD.  Assuming the EUR/USD pair has a bid rate of 1.1363 and an ask rate of 1.1365, the dealing spread is 2 pips. If you are trading a €10,000 lot in EUR/USD, the cost of that 2 pip dealing spread is €10,000*0.0002 = $2.

Spreads

The width of the dealing spread is influenced by factors such as market volatility, trading volume and liquidity. A wider spread is indicative of high volatility or risk, while tighter spreads indicate low volatility and high liquidity.

Wider spreads are especially common around the release of market-sensitive news or in the wake of some unexpected geopolitical event that has major forex market ramifications. Wide spreads can also be due to a lack of liquidity, as can occur when a major money center closes for a holiday.

If the spread for a pair widens appreciably while you’re holding a position, then you should prepare for a risky market move. A prudent step to take might involve reducing the size of the position if you are using a high leverage ratio. This helps you avoid a margin call or an automatic closeout of your position in case the market moves unexpectedly against you.

The spread used in forex trading can be a fixed spread or a variable spread. A fixed spread is kept constant and does not vary depending on market conditions. It’s usually set by dealing desks or online brokers that also act as market makers. Most online brokers offer variable spreads that can change depending on market conditions.

What to Look for in a Low-Spread Forex Broker

Do some careful research, since a promise of low dealing spreads may not always guarantee that a forex broker offers the lowest trading costs for your particular strategy. Watch out for these situations:

• Most brokers offer different spreads for different currency pairs and account types. Some accounts might tempt traders with the promise of a low dealing spread while also charging a high commission. Make sure you are aware of all dealing costs involved. 
• Be cautious when a broker promises a fixed spread. It could mean the spread is wider than average, additional trading fees will be charged or the broker may be trading against you by acting as a market maker. 
• Some brokers that offer low spreads can require a high minimum deposit.
• When you have to make a choice among brokers offering the lowest spreads, look for brokers regulated in your country. That way, if a problem arises, it is generally much easier to litigate in your own country. Trading with brokers that offer a convenient and inexpensive mode of local payment can also help you avoid extra deposit, withdrawal and currency conversion charges. 

Choose the Best Low Spread Forex Broker for You

Tighter spreads can definitely give forex traders an edge, but look out for hidden costs. These might include commissions, rollover fees for holding overnight positions, data feed fees, charges for not maintaining a minimum account balance, etc.

Along with spreads and commissions, there are other factors that should be considered when selecting a forex broker in order to trade safely and optimally given your trading strategy.

Frequently Asked Questions