The best forex brokers provide a platform through which traders can buy and sell currencies on the foreign exchange market with the aim of making a profit. Every day, around $5 trillion is traded on the currency markets worldwide, making foreign exchange or FX trading, as it is also known, one of the most actively traded markets there is.
The best forex brokers allow investors to trade currencies from across the globe, from the well-established Dollar, British Pound and Euro, right through to the lesser known currencies of smaller and emerging nations. How much money you might make will depend on the currency price at the moment you choose to buy or sell. However, currency trading via forex brokers can be a risky business too - the huge volumes traded can make price movements extremely volatile, therefore opening up the possibility of traders making a significant loss if the direction of travel is the wrong way. Equally, it is this volatility that can make trading using the best forex brokers so enticing, bringing with it a greater chance of high profits, albeit at an increased risk.
For those keen to explore currency trading, it is vital to select a forex broker offering the platform, technical indicators, analytical tools, and educational resources that are best for you. You'll also need to find forex brokers that offer the particular currency pairs you're looking to trade, and consider the costs that are charged for trading. Most forex brokers will have charting technology built into their platforms too, and provide access to the latest market news to help you in your trading decisions.
Our shortlist of the best forex brokers takes all of these things into account and more. And knowing that some people will be entirely new to currency trading, while others will know their way around the forex markets, we have made selections to suit different types of trader too. However, whether you are a relative novice or a trading expert, it's vital to always pay heed to the monetary risks that are involved. And if you're in the process of evaluating the different types of investment that could make you money, our guide to the best online stock trading brokers is definitely worth taking a look at too.
1. TD Ameritrade: Best forex broker overall
TD Ameritrade comes on top among the best forex brokers thanks primarily to its well-regarded thinkorswim trading platform, and for the vast amount of trading tools it can offer. The platform allows Forex to be traded just as you would trade options, equities and futures. It also supports more than 70 currency pairs, allowing experienced currency traders the option to try something new, and beginners to trade on the most common pairs.
Some 350 technical indicators are available to help you establish when the best possible time to make a trade is, while for the more experienced trader, the Prophet tool can help estimate the future performance of a currency pair. When it comes to pricing, TD Ameritrade is relatively straightforward. Forex currency pairs are traded in increments of 10,000 units and there is no commission - however, the cost of the trade is reflected in the bid/ask spread. The thinkorswim mobile app allows for trading on the go, while trade desk associates are on hand to assist day and night.
- Read our TD Ameritrade review
2. Interactive Brokers: Best forex broker for pricing
If you’re an active currency trader wanting to trade a high volume, then Interactive Brokers is likely to be for you. It has some of the best pricing around, although it's worth noting that an initial deposit requirement of $10,000 might be a bit too rich for newer investors. The platform offers 23 trading currencies and includes a wide variety of tools to help monitor and analyze the 86 currency pairs. There are over 90 technical indicators too, all available to help you track currency performance either against another currency or an index.
In terms of price, Interactive Brokers charges a commission as a percentage of each trade you make. It uses a tiered structure, and if you trade less than 1,000,000,000 units a month, you pay 0.2 basis points for commission on the amount you trade – so on an order of 100,000, you’d pay $2.00. When you trade higher volumes, that commission decreases. At the lowest level, you pay 0.08 basis points. Interactive Brokers also has some of the lowest spreads around, and sometimes with no markups at all.
- Read our Interactive Brokers review
3. Ally Invest: Best forex trading platform
Ally Invest brings with it forex trading platforms that are customizable and easy to use, making it a good option for beginners and experienced traders alike. With 50 currency pairs and over 80 indicators, Ally should have plenty to offer everyone, particularly as the minimum deposit is just $250.
Advanced investors are likely to benefit the most from the more sophisticated options available through the MetaTrader 4 platform, including systematic strategy programming and trading direct from the charts. Meanwhile, novice traders can make use of the practice trading account to get themselves up to speed before taking the plunge for real. Everyone is likely to find value in the research, economic calendar and real-time news that is on offer, while Ally also offers excellent pricing, with no commissions on any trades - it makes its money from markups on the spread instead.
- Read our Ally Invest review
4. FOREX.com: Best mobile app for trading
FOREX.com has one of the best mobile trading apps we’ve seen, making it great for people who want to trade on the go. Trades can be placed and funds added through the app, with any changes made automatically synced with the desktop platform. There's all the news from the other platforms too, and real-time trade alerts.
FOREX.com lets you trade over 80 currency pairs, and doesn’t charge any commissions - to make its money, the site marks up the spread on the currency pairs. And as you only need to make an initial deposit of $50 to start trading, FOREX.com is a forex broking option that should be accessible to everyone, including beginners. That said, there's much for more experienced forex traders to like too, particularly if the need to trade strikes when you're away from your desktop.
- Read our FOREX.com review
5. OANDA: Best for forex beginners
If you’re just starting to dip your toes into Forex trading, we recommend looking at OANDA as a broker. It doesn’t have a minimum deposit or minimum lot size, which means your initial investment doesn’t need to be as large as with other brokers. It also means you're not risking several thousand dollars in the early stages of your forex trading career with a broker which requires you to trade in increments of 1,000 units.
OANDA’s platform is easy to use too, especially to set up a stop-loss on an order, which keeps you from being in a losing position for too long, while you can trade on more than 70 currency pairs, including some exotic options like the South African Rand. There are over 65 technical indicators on which to base your trading decisions - this may be fewer than on many other platforms, but all the standard options that are useful for beginners are present. The one drawback for beginners is there aren't many tutorials or other educational resources, but if you have a basic forex trading knowledge and just want to get started, OANDA offers a great option.
- Read our Oanda review
6. Nadex: Best for experienced traders
Nadex is an exchange that allows forex trading to be conducted via binary options, call spreads and knock-outs, making it an excellent option for currency traders looking for something a little different. There's only one trading platform through which to place your trades, but it's simple to master, and accompanied by a demo account should you wish to try before you sign up. Knowing that what it offers is slightly out of the norm, Nadex goes to great lengths to explain all the various trading options in great depth. And if you're still concerned about picking up the machinations of the platform, there's step-by-step guidance on site, and video tutorials, to help you through.
The opening deposit of $250 should make Nadex accessible to most, while the fee structure is straightforward and clearly explained too - there's no broker fees to pay either. Where it lacks somewhat is in the number of currency pairs on offer and the range of technical indicators on show. However, if you know your way around forex, and want a different avenue through which to trade, Nadex is certainly worth a look.
- Read our Nadex review
What is forex trading?
Forex trading involves the buying and selling of currencies, and is the largest and the most liquid market in the world. Forex operates 24 hours a day, five days a week, and it has no single, centralized market.
When you make a forex trade, you are buying and selling currency and, in essence, betting on the fluctuations in their exchange rates. For example, if you were to buy Euros when the conversion rate is 1.25 U.S. dollars for 1 Euro then sell when the conversion rate is 1.28 U.S. dollars to 1 Euro, that difference of .03 represents your profit. Currency is usually traded in lots of varying sizes. A standard lot is 100,000 units of a currency, a mini lot is 10,000 units, and a micro lot is 1,000 units. A few forex brokers may offer nano lots, which are only 100 units, but typically traders buy in larger amounts.
Most trading occurs on major pairs, such as EUR/USD, USD/JPY, GPD/USD and USD/CAD, but having the option to trade different, more exotic currencies from smaller or merging countries can provide an opportunity to spread your investments around, diversify your portfolio, and potentially reap larger rewards from more volatile currencies.
The change in a currency pair’s value is measured in pips - this is the smallest amount that the value can change. Usually currency pairs are quoted out to the fourth decimal, and a pip is the change in the last number. For example, if EUR/USD is trading at 1.3300 and it moves to 1.3302, that is a movement of two pips. When pips are magnified by the size of lot, that is where the opportunity to profit emerges.
As the changes in currencies are usually very small, it might seem that forex trading will only be profitable for institutions or investors that can afford to buy large lots. However, this is where leverage comes in. Typically, a forex broker will offer you a margin account which can magnify the amount you have available. The ratio of the amount you borrow on margin and the amount you deposit is the leverage. Regulations mean that U.S. brokers cannot offer more than 50:1 leverage.
Forex trading strategies
As with all types of investments, there are many different forex trading strategies. The breakout strategy, for instance, involves trying to identify when a trend might be forming, and looking for "price breakouts" that go beyond the boundaries where it normally moves. If the breakout is the start of a new trend and you're onboard, then you stand to make some money. More advanced strategies include carry trades, where investors look to profit from the difference in yield between two currencies, and not just the conversion rates.
Given the complexities of most forex trading strategies, and the volatility of the currency exchanges that provides the opportunity for both profit and loss, it’s always a good idea to test the forex trading strategies you intend to adopt before putting your money at risk. Most brokers offer demo accounts on which traders can practice, which will include tools that allow you to backtest your strategies.
Forex trading tools
The trading platform and the tools on offer are vital considerations when choosing a forex broker. When making our choice of the best forex brokers, reviewers tested the platform demos on offer and the mobile apps that can be downloaded, looking for platforms that are easy to use and provide analytic tools to help maximize trading performance.
The best forex trading platforms will let you create multiple watchlists to track different groups of currencies, while some only allow for one or provide a single pre-made watchlist. Some platforms provide the option to create alerts that will notify you when a currency pair reaches a certain price or meets some other criteria. Ideally, these will be email or text alerts, although some brokers only offer notifications inside the platform. There also others that have no alert options at all.
The best forex brokers will also provide charting tools to help you track the performance of a currency pair. These tools include technical indicators, a crucial part of planning and executing any trading strategy.
Forex trading costs
The main cost of forex trading lies in the bid/ask spread. This is the markup a broker applies and is derived from the difference between the bid (or selling) price and the ask (or buying) price. The spread is usually the difference in the last two decimal places of the exchange rates. Forex brokers refer to this difference as pips. Since exchange rates are constantly fluctuating, spreads often do as well, especially when a particular country’s economic fortunes take dramatic turns for the worse or the better.
Some brokerages charge commissions on each trade. These brokerages often have tighter spreads but may be better for higher volume traders. Commission-based brokers also tend to require the highest initial deposits.
Forex education & support
Investment education and platform training is essential to be a successful forex trader. In addition to standard platform training manuals, the best forex brokers offer video tutorials and step-by-step guidance as to how to use all of a platform’s features.
Keeping on top of events in the markets and the countries where you're trading is essential too. The best forex brokers will have weekly webinars on their sites and regularly updated blogs that provide insight and context on the forex markets, and the factors that influence them. There might also be explanations of trading strategies and latest thinking as to how to exploit the currency markets for profit.
A forex signal is a notification or suggestion to enter a trade, usually when a currency pair reaches a certain price at a certain time. Forex signals are either generated by an analyst or an algorithm and, besides price and time, there are a variety of technical indicators to pay attention to as well. Forex signal services can be free or subscription-based, but most are geared toward short-term trades and not long-term trading strategies.
Many forex signal services promise results, but the market is constantly shifting, and forex is especially susceptible to global events - it is vital to consider that promised results won't always come to fruition. Be very wary of any service that makes guarantees about profits.
Traders can choose between manual and automated signals. A manual signal requires the trader to place the trade himself or herself, whereas automated signals can integrate with your broker's platform and fill the trade automatically. While most forex signal services with automated trading require a subscription, many will also offer a free or reduced price trial period, so you can try the service and see if it works for you.