- Regulation is the most important factor when choosing a broker. Make sure your broker is regulated by either the FCA, CySEC or ASIC.
- Be careful of brokers that are only regulated by small island states (St Vincent, Bermuda, Caymans etc) as their regulatory agencies are not very well regarded.
- If you are a beginner trader make sure you choose a broker with an unlimited demo account, this will give you ample opportunity to practice before you start risking your money.
- Make sure the broker you have chosen supports a platform you are comfortable using, MetaTrader 4 is safe choice as it’s the industry standard and there are a multitude of online tutorials.
- Think about whether you are willing to pay commission or not. Brokers that charge commission tend to have tighter spreads on major currency pairs but this may not be worth it to you.
- Always check for other fees you may be charged. We always highlight these in our reviews but common ones are deposit and withdrawal fees and currency conversion fees.
- Think about how much leverage you want to use, keeping it low (100:1 or less) is a good idea if you are still learning how to trade
How We Compare Forex Brokers
Since starting FX Scouts, we have signed up and traded with more than 100+ brokers and have turned away twice that many.
To identify the best, we have used the following criteria.
- Regulation is trust in the investment business. There are major regulators and minor regulators, and we took all of these into account.
- Trading conditions are the details of the product they offer the trader. In each instance, we looked at the detailed product on offer.
- Platforms are the software offered to traders. We tested each of them.
Our rankings are calculated based on regulation, platform choice, and trading conditions for the clients. Our comprehensive research in each of these areas is laid out here on our Google Spreadsheet.
Regulation
Regulators ensure that brokers have a fair trading environment and anti-money laundering processes, all the while operating strict auditing oversight and ensuring client fund protection. Brokers that are regulated by more than one major regulator are more trustworthy.
Who are the major regulators?
These international regulators are respected for their commitment to consumer protection, strong oversight and swift enforcement of sanctions on fraudulent brokers.
The major regulators are:
United Kingdom – Financial Conduct Authority (FCA)
Continental Europe – Cyprus Securities and Exchange Commission (CySEC).
Australia – Australian Securities and Investments Commission (ASIC)
Types of Forex Brokers
Forex brokers fall into two main categories – Dealing desks (DD) and Non-dealing desks (NDDs). These categories are differentiated by how they execute trades, however, while there is only one type of DD broker, NDD brokers are split up subcategories called STP and ECN or a combination of the two.
Pure STP Brokers
In the NDD category, a Pure STP (or Straight Through Processing) broker, will never interfere with your trade, and the only source of liquidity comes directly from the market. STP execution will mean that if there is no liquidity in the market, a trade will have slippage, and the trader will get a requote. Pure STPs are entirely free of conflict of interest, but traders should expect continuous requotes, and slower trade execution speeds. The top Pure STPs are:
ECN Brokers
True ECN (Electronic Communications Network) send your orders directly through to the liquidity providers with who they are partnered. These providers can be other intermediaries or dealing desks, or the major banks. In a true ECN environment, traders have direct access to the Interbank market prices and have an accurate picture of the entire trading environment.
STP/ECN Brokers
An STP/ECN broker is both an Electronic Communications Network and a Straight Through Processor. Depending on the trader profile, or the trade itself, they will decide which of the execution methods is in the best interest of the customer.
If there is liquidity in the market for a particular trade, then STP execution could be used. But if it is better for liquidity to be taken immediately from within the network, then ECN will be used. This combination of execution types is intended to be able to help traders get liquidity and to execute trades faster without the brokerage becoming the market. The top ECN/STPs are:
Market Makers
Market Makers, also called Dealing Desks, operate in a completely different way. Instead of executing the trade on the currency market, a Market Maker will provide their client’s trades liquidity by immediately taking the counter-party of the trade and becoming the market. The top Market Makers are:
While this means that there will always be liquidity for any trade, taking the counter-party implies that the broker is continually trading against its client base and that it profits directly from the client’s losing trades. This opens up a direct conflict of interest.
Reputation
Can you trust a Forex broker?
Four things should be considered when determining if a broker may be trusted – regulation, trade execution method, client fund management, and industry recognition of their achievements.
The more major regulators their group is regulated by, the more oversight the group has. The number of regulators overseeing their processes gives a strong indication of the level of trust the government regulatory agencies have in them.
It is more of a concern if a market maker is regulated by fewer major regulators. Therefore, a heavily regulated market maker is considered more reputable than one with lesser regulation. It is noteworthy that some market makers have strong reputations and lots of client resources.
The execution method of clients trades is another component because if there is a financial incentive to have you lose your trades, this could be seen as making the broker less trustworthy.
Most regulators require strict processes to keep client funds safe. This process includes placing client funds in segregated accounts at major banks in the local jurisdiction. Segregated bank accounts that are audited every evening means that client funds are protected against any bankruptcy.
Industry awards are given to brokers from journalists, financial watchdog organisations and their peers. While it can be argued that these award ceremonies are biased, they remain the best gauge industry recognition.
Do brokers trade against you?
If the broker is a Market Maker, then they are the market and will be trading against you by taking the other side of your trade in order to create the liquidity you need. Since a vast majority of trades by retail traders are lost, a market maker is making money in most client trades.
STPs do not have any conflict of interest and do not trade against you, but an ECN may play counterparty to the trade.
How do brokers make money?
Depending on how a broker is executing trades, there are different ways they are making money. They will either make money charging a commission on the volume of the trade or the spread.
STPs and ECNs will make money from a tight spread and a commission, which is calculated on a per lot amount.
Market Makers will make money from the spread – the difference between the buying and selling price of the currency pair. Since a Market Maker will become the counterparty to any trade, they will also make money when clients lose trades.
Platform Choice
A minority of brokers have proprietary platforms while others use mainstream trading platforms like MetaTrader4 and cTrader. If you do choose MetaTrader 4, we have a guide to setting it up as it can be complicated to get going. Select brokers will offer their documentation and services to set up the trading software.
When it comes to choosing a partner to trade with, finding the right platform can make a substantial difference to a trading career. While MetaTrader 4 & 5 are the most common of CFD trading platforms, its older interface and the software’s need to adjust advanced settings before starting, make it less accessible to beginners. cTrader, on the other hand, has a more modern interface and is more comfortable for the beginner trader to set up.
If you are an experienced trader with a particular software choice in mind, or if you are a beginner seeking to learn more about platform options, we have put together a list of the best forex trading platforms for traders and the organizations that support them.
All brokers have mobile phone apps, and some will have developed their own priority apps, but a vast majority rely on the MetaTrader software for IOS and Android.
Educational Material
Beginner traders should get some educational support with starting out, and each broker varies significantly in what material they provide. The minimum that each will offer is some general videos and articles, but others have invested in creating small trading universities that include video material as well as live webinars hosted by experts.
Each of our reviews has a section on the educational content to help beginner traders decide the best path forward.
Trading Conditions
Spreads
Spreads, measured in pips, tell traders how profitable their trades can be and the fees associated with trading that currency pair.
The spread tells the trader if the buy and sell prices for any currency pair are far from each other, or close to each other. If the spread is 15 pips, that is considered a wide spread, where a 0.4 pip spread is deemed to be tight.
Spreads differ on their FX pairs between brokerages, but to maximise profits, a trader should always find a broker who has the tightest average spreads on the pairs they trade. If you are trading using STP or ECN execution, also consider that a per lot commission will be charged in addition or in conjunction with the spreads.
Leverage
Leverage amplifies the volume of a Forex trade. Leverage is essential in Forex trading because the movements in the market are so small that if there were no way to increase the size of the trade, it would be near impossible for individual retail traders to make money from their trades.
Leverage is presented in a format like 300:1 – in this case, a trader can increase the size of the trade by a maximum amount of 300 times but will remain liable for losses on the full amount of the trade.
Using high volumes of leverage dramatically increases the exposure of the trader to risk, which has led some regulatory bodies like CySEC to restrict leverage to 30:1 for retail traders. The maximum leverage offered varies among brokers, and some may also reserve the right to limit a client’s leverage based on the client’s trading experience.
Trading Assets
A large broker will have a lot of different assets available to trade including Forex, CFDs, cryptocurrency, equities, softs, energy, metals, bonds. A good Forex broker should have 50+ FX pairs.
Scalping
Forex scalping strategy is where a trader seeks to profit from sizeable rapid price changes in a short period. Scalping opportunities are usually created when significant unexpected new events happen, or when the equity markets open. A scalper, a trader who employs a scalping strategy, enters and exit trades several times a day, and closes all trades on the day they were opened.
Hedging
Hedging is a way of protecting yourself against an adverse event happening, that risks open trades, and can be seen as a form of insurance. Direct hedging is a common hedging strategy, where a trader buys a currency pair and then sells the same pair at the same time. Not all brokers allow hedging on their platforms, so here are those that do.
Account Types
Each brokerage will have various account types, and there is a trend in the industry to have fewer account types available than in years past. The primary distinction between account types is between the Live or Real accounts, Demo accounts, and Swap-free accounts. Managed accounts are available, but rare.
Live or Real Accounts
These accounts use real money, and everything that you do in this type of account will affect your profit or loss.
Demo Accounts
These are accounts loaded with fake money and does not expose a trader to any risk. Demo accounts give traders an opportunity to try the trading platform, customer service, research area, and trading conditions before committing real money. Most demo accounts are time limited but are easy to reactivate. These are the best demo accounts.
Managed Accounts
Select brokers will operate a managed account for you, but it is rare. There are independent money managers who can manage your account while they are trading for themselves. It is vital that you read our article on managed accounts and understand the minimum deposit requirements and additional risks involved when trading CFDs.
brokers will accept Bitcoin deposits in additional to traditional currency.
Which broker should I choose?
Traders have different requirements of Forex brokers, and thus there is no single best choice. This is how we compare them, and we offer insight into your choices. At the top of this article, there is a list of those that we believe are the best broker for traders based on their reputation, platform, trading conditions and resources available to beginners.
Arabic 
Chinese (Simplified) 
Finnish 
Hindi 
Hungarian 
Indonesian 
Japanese 
Polish 
Swedish 
Thai 
Vietnamese 
