Important Factors to Consider when choosing a Forex Broker in the UK
Safety and Regulation Standards
Forex trading in the UK is legal and regulated by the Financial Conduct Authority (FCA). The FCA requires all Forex brokers operating in the country to hold a valid license and adhere to strict standards, including:
- The provision of segregated trading accounts, which protects client funds from broker mismanagement or default.
- The provision of negative balance protection to ensure that client losses can not exceed the amount in the trading account.
- Client fund protection which includes higher margin close-out percentages designed to limit client losses.
- Effective fraud investigation processes and frequently published investment scam reports.
As well as the FCA, other top-tier global regulators include ASIC and CySEC. Whether you decide to use a broker regulated by the FCA or not, it’s important to remember that choosing a regulated broker is the best way to ensure your protection as a Forex trader.
How are Forex Brokers Regulated in the UK?
In the UK, Forex brokers must be regulated by the Financial Conduct Authority (FCA), the regulatory body for non-banking financial services in the country.
Regulators supervise Forex brokers and other financial services companies to make sure they’re behaving ethically and within the law. Tier 1 regulators, like the FCA, have the best legal structure and enforcement mechanisms in the world, ensuring a clean market and the protection of participants.
The FCA has the power to take action against any Forex broker that is found to violate its regulations, including revoking their license to operate. It has a register of firms that allows you to check that you are indeed using an FCA-regulated broker. The Authority warns that if a broker is not listed on its register, “it’s probably a scam”. The FCA also maintains a warning list of firms to avoid.
Unregulated brokers are not forced to hold to the same standards. This can lead to a higher risk of fraud or unethical practices, which can result in financial losses for traders. Choosing a regulated Forex broker gives you peace of mind and security, knowing that your investments are protected and your trading experience is fair. Read more about regulation and its importance in forex trading here.
How to check if your broker is regulated by the FCA
Confirming whether your broker is regulated by the FCA is a straightforward process. By navigating to the brokers homepage, you can find their FCA registration number.
To confirm, you would need to visit the FCA’s official register page. Here, by entering the broker’s registration number, you can instantly confirm their compliance with FCA regulations.
Scam Brokers and Reporting Regulatory Violations
If you are unsure about the reliability of your Forex broker, you can check our list of brokers to avoid. If you believe you have been scammed by your broker, the first thing to do is contact the FCA. You can contact the FCA’s complaints department here, and they can advise you on the next steps to take. We also have a report a scam broker form which we use to gather information so that we get the word out. Your personal details will not be shared externally.
Knowing Your Trading costs
It is important to understand and be able to calculate your costs when trading forex, as these costs could affect your overall profitability. Forex brokers usually make money either from the spread or from a commission – fees that a forex trader pays to use a broker’s services.
The spread is the difference between the buy price (also known as the offer or ask price) and the sell price (also known as the bid price) quoted for a currency, and can be either fixed or variable. The spread is measured in pips, with the industry average being at around 1 pip for EUR/USD.
The commission is a fee, mostly measured in USD, for opening and closing a trade, which often varies depending on lot size. We have found that the industry average is around 3-3.5 USD per lot and side traded (6 – 7 USD round turn), but this often depends on the account type and platform you choose.
To calculate the total cost, you can either use a regular calculator or a spread cost calculator; many of these are available for free on the internet.
Besides the costs of trading, brokers could also charge other types of fees – often referred to as non-trading fees. These fees include swap/rollover fees (a fee your broker either credits or debits from your account balance whenever you keep a position open overnight), inactivity fees (charged to accounts when there’s been no trading activity for a certain amount of time) and fees for withdrawing funds.
We have also found that brokers often charge fees for additional paid services such as VPS (Virtual Private Server) hosting, premium trading signals, and access to exclusive versions of trading platforms, such as Tradingview Plus or Premium.
Read more about understanding your trading costs in Forex here.
Which Trading Platforms do the Best Forex Brokers Offer?
The best Forex brokers generally offer Metatrader 4 (MT4), MetaTrader 5 (MT5), and/or cTrader. Recently, we have found that more and more brokers are starting to offer the relatively new Tradingview platform. These are third-party trading platforms which you can install on your computer. They are fully customisable and have advanced charting tools, research tools, and options for automated trading or copy trading. Some brokers also have their own trading platforms, which we find are often more user-friendly, and are usually accessed via a browser or on your mobile phone. For more details on trading platforms and how they work, check out our guide on trading platforms.
Trading apps
Forex trading apps are usually offered free by Forex brokers. Some apps are proprietary, which means they are developed in-house by a broker. However, many popular apps are developed by third-party companies.
The best Forex trading apps will let you open a demo or trading account, buy and sell instruments, deposit and withdraw funds from your broker, provide real-time market data, display news and analysis, and provide price alerts and other tools to manage your risk.
Using a trading app offers the convenience and ability to react instantly to market changes directly from your smartphone, transforming how traders manage positions outside of a traditional desktop setup. However, we find that with this accessibility comes with drawbacks, including the potential for overtrading and making impulsive decisions. Additionally, while mobile technology has advanced, trading on a small screen may limit detailed chart analysis and risk precision, especially in volatile market conditions or with weak internet connectivity.
For more details on trading apps, check out our guide on the best forex trading apps.
What range of trading instruments do the best forex brokers offer?
We have found that the best brokers offer a large range of asset classes for traders to choose from, such as Forex, Shares, Indices, Cryptocurrencies (although it is illegal for non-professional traders to trade cryptocurrencies since 2021 in the UK), Commodities, Bonds and Interest rates.
The number of assets within each class, e.g., the number of forex pairs available, is also important to further diversify your portfolio. An offering of around 40 – 60 Forex pairs is considered the industry average.
Because of rules implemented by the FCA, UK brokers have a maximum leverage of 30:1, but different instruments will often have different leverage. See below for a list of instruments, their average availability and usual leverage.
Other rare instruments include futures, available at brokers such as IG and FP Markets, and Vanilla Options, available to trade at Avatrade.
Read more about the best CFD brokers here.
FAQ
Do I Need a Broker to Trade Forex?
Yes, you will need a broker to trade Forex. Connecting traders to the Forex market is an expensive and technically complex business. Most Forex brokers form a bridge between the global Forex market and Forex traders; these are called market makers. Market makers buy up large trading positions from the Forex market, which they sell to traders in smaller trade sizes.
Other brokers act as a go-between, taking orders from traders and sending them straight to the global Forex market. These are called ECN brokers or DMA brokers. Both types of Forex brokers require a lot of money to set up and need teams of highly qualified technicians to maintain their trading platforms.
How do Forex Brokers Make Money?
Forex brokers have different revenue models: Market markers only make money from the spread – the difference between the buying and selling price of the currency pair. These brokers will be the counterparty to any trade, so they make money when clients lose trades.
ECNs have tight spreads but make money from commissions, which are charged whenever a trade is opened or closed. This type of broker makes money whether a client wins or loses.
Brokers may also profit from other fees, like overnight financing charges (swap/rollover fees) and by offering additional paid services such as VPS services.
Why is Regulation Important?
Regulation is essential for protecting your money and ensuring a fair and transparent trading experience.
When trading Forex, you want to be confident that your broker is operating legally and ethically and that your funds are being handled safely. Regulated Forex brokers must adhere to strict standards set by regulatory bodies, which include requirements for capital adequacy, segregation of client funds, and ongoing reporting and compliance. This means that your funds are protected, and your trading experience is fair.
Which is the Best Broker in the UK?
According to our comprehensive tests and research, completed by our panel of forex experts, the best broker in the UK is Pepperstone. We consider it to be the top broker based on a number of objectives, using over 200 metrics to determine its overall broker score. Some of Pepperstone’s characteristics include being the lowest cost ECN broker available to UK residents, with spreads that average at 0.84 pips on the EUR/USD on its Standard commission-free account and spreads as low as 0 pips (EUR/USD) on its Razor Account in exchange for a commission of 7 USD.
Pepperstone’s execution speed is very high, which helps prevent slippage, and trades at are executed in less than 30 ms on 4 different trading platforms, including MT4, MT5, cTrader, and TradingView. This alongside a wide range of trading tools, excellent education, and world-class market research materials. Regarding safety and trust, Pepperstone is regulated by several top-tier regulators, including the FCA, negative balance protection is provided to all clients, and all funds are kept in segregated accounts.
Which Forex Broker has the Best Proprietary Platform?
xStation5, developed by XTB, is considered by many (and ourselves) to be one of the absolute best trading platforms in the industry. During our testing, we found the platform to be user-friendly, intuitive, powerful, and fast, and has many advanced features found in other popular third-party platforms, like MT4. xStation5 offers an impressive range of customisable charts, risk management tools, multiple order types, price alerts, and real-time performance statistics to evaluate your trading activity and identify areas for improvement. xStation5 also displays sentiment data on its dashboard so users can view the percentage of traders who bought or sold particular instruments. Overall, we believe that most traders will find trading on xStation5 a great experience.
Which Forex Brokers are Best for Beginner Traders?
The best brokers for beginners are well-regulated and have a 100 GBP or lower minimum deposit requirement, ensuring security and a low cost of entry. Other important factors also include low trading fees and that the broker offers negative balance protection (a requirement for all brokers regulated by the FCA), as these both help to lower risk. Responsive and knowledgeable customer support is also essential. Customer service should be available at least 24/5 via email, live chat, and telephone (preferably through a local phone number). A few brokers, like Pepperstone and IG, even offer customer service 24/7. Last but not least, beginners should look for a broker with a high-quality education section; this should feature articles, video tutorials, frequent webinars, advanced trading strategies, and chart analysis.
For more details and to see which brokers we recommend for new traders, check out our dedicated page on the best brokers for beginners.
Which Forex Brokers have the Best Demo Accounts?
The brokers with the best demo accounts cater to both beginners and more experienced traders. We have found that these brokers understand that traders need to be able to practise without being forced into trading real money too soon, and be able to test strategies without any restrictions. In our experience, the brokers with the best demo accounts have accounts that are not time-limited and replicate real market conditions as closely as possible. Beginners looking for a demo account will also want a broker with good education sources, so they can learn about Forex trading as they practise.
For more details and to see which brokers we recommend for demo trading, check out our dedicated page on the best demo accounts.
What Leverage do Forex Brokers Offer?
All brokers regulated by the Financial Conduct Authority (FCA) have a maximum leverage of 30:1 for retail traders. Offshore brokers may offer leverage as high as 2000:1, but with very little security as a result. We always recommend choosing a well-regulated broker to ensure that your funds are safe.
Is Forex Trading taxable in the UK?
Yes, Forex trading will generally be subject to either income tax or capital gains taxes (CGT), depending on personal circumstances and the instruments traded.
In the UK, the most common ways of leveraged trading are CFD trading and spread betting, which are subject to varied taxation. The primary difference lies in how capital gains tax (CGT) is applied. For the majority, spread betting is tax-free, meaning there is no tax obligation.
CFD trading, however, may be subject to CGT and the tax rate will be dependent on your income. This means that you will deduct your losses from your profit, and the remainder will be taxable. If you’re a part-time Forex trader you will have a tax-free allowance for the first £1000 of profits.
For more information, we recommend contacting HM Revenue and Customs or a tax consultant.
Forex Risk Disclaimer
Trading Forex and CFDs is not suitable for all investors as it carries a high degree of risk to your capital: 75-90% of retail investors lose money trading these products. Forex and CFD transactions involve high risk due to the following factors: Leverage, market volatility, slippage arising from a lack of liquidity, inadequate trading knowledge or experience, and a lack of regulatory protection. Traders should not deposit any money that is not considered disposable income. Regardless of how much research you have done or how confident you are in your trade, there is always a substantial risk of loss. (Learn more about these risks from the UK’s regulator, the FCA, or the Australian regulator, ASIC).
Our Rating & Review Methodology
Our overall Forex Rankings report and Directory of CFD Brokers to Avoid are the result of extensive research on over 180 Forex brokers. These resources help traders find the best Forex brokers – and steer them away from the worst ones. These resources have been compiled using over 200 data points on each broker and over 3000 hours of research. Our team conducts all research independently: Testing brokers, gathering information from broker representatives and sifting through legal documents. Learn more about how we rank brokers.
Editorial Team
Chris Cammack
Head of Content
Chris joined the company in 2019 after ten years experience in research, editorial and design for political and financial publications. His background has given him a deep knowledge of international financial markets and the geopolitics that affects them. Chris has a keen eye for editing and a voracious appetite for financial and political current affairs. He ensures that our content across all sites meets the standards of quality and transparency that our readers expect.
Alison Heyerdahl
Senior Financial Writer
Alison joined the team as a writer in 2021. She has a medical degree with a focus on physiotherapy and a bachelor’s in psychology. However, her interest in forex trading and her love for writing led her to switch careers, and she now has over eight years experience in research and content development. She has tested and reviewed 100+ brokers and has a great understanding of the Forex trading world.
Ida Hermansen
Financial Writer
Ida joined our team as a financial writer in 2023. She has a degree in Digital Marketing and a background in content writing and SEO. In addition to her marketing and writing skills, Ida also has an interest in cryptocurrencies and blockchain networks. Her interest in crypto trading led to a wider fascination with Forex technical analysis and price movement. She continues to develop her skills and knowledge in Forex trading and keeps a close eye on which Forex brokers offer the best trading environments for new traders.
Vanessa Marcos
Financial Writer
Vanessa joined the team in 2023. Born and raised in southern Portugal, she has a BA in Journalism and a Master’s in Literary Theory, both from Lisbon University. Since 2011, she has worked in social media, copywriting, content management, ghost-writing, and SEO. Vanessa loves to write, and although she is a generalist in digital marketing, she always draws on her creativity in her work. She is constantly researching new subjects and finds the analytical depth of Forex trading fascinating.