Foreign exchange (commonly known as forex or fx) markets are the most busy in the world, with trillions of dollars circulating around the globe 24 hours a day, five days a week. As brokers commonly permit traders to borrow large sums of money to fuel their speculations, fortunes can be quickly made and squandered.
To join in on this action, you’ll need a broker who deals in currencies, and many of the largest names in stock trading do not offer this service. Because the markets are so dissimilar, you must also analyze a forex broker using different criteria than you would a stock broker.
Listed below are some of the best forex brokers, including a few that permit clients to trade cryptocurrencies.
Here are the best online brokers for forex trading in 2022:
- TD Ameritrade
- Ally Invest
- Interactive Brokers
Leading forex brokers online in September 2022
The TD Ameritrade Company
TD Ameritrade offers a variety of tradable items, but its portfolio is truly rounded out by its currency options. In addition to the broker’s highly respected “thinkorswim” trading platform, currency traders can also trade via a few mobile applications.
The broker employs spread pricing and provides 50:1 leverage, which is the U.S. legal maximum. It offers more over seventy currency pairs, providing an extensive selection. TD Ameritrade also permits clients to trade Bitcoin futures, albeit clearance is required to trade futures and pricing is determined by the broker’s trading system.
Forex.com, as its name suggests, specializes on currency trading (but it also deals in metals and futures) and offers a multitude of appealing features. Clients can select the pricing structure that best meets their needs: spread, commission, or the broker’s STP Pro pricing, in which prices are sourced directly from global banks and other liquidity providers with no further markup.
In addition to providing access to more than 80 currency pairings, Forex.com boasts that it is the leading forex broker in the United States in terms of assets held with the broker.
Ally Invest is better known as a low-cost stock broker (particularly for its notably competitive prices on options trades), but the addition of currency trading significantly expands the scope of its products. Ally is a wonderful option for novice traders because it offers more than 80 currency pairings and user-friendly charting software, including mobile access.
Even if you have no intention of trading, Ally allows you to open a $50,000 practice account so that you can learn how currency trading works. Given the complexity of forex trading, this is an excellent resource for novices who wish to test the waters.
Interactive Securities Brokers
Active and professional traders like Interactive Brokers for its affordable fees and robust trading platforms. The powerful trading tools and real-time quotations from many of the world’s top forex dealing institutions will not disappoint Forex traders. You can even trade stocks on overseas exchanges while simultaneously attaching a forex order to hedge the currency.
In 2021, Interactive Brokers began offering cryptocurrency trading. Attractive commissions will be available for trading major cryptocurrencies such as Bitcoin and Ethereum.
IG is a highly specialist forex broker that is accessible to American investors. It is a powerful broker that includes various options, such as a demo account, that can assist new traders. The broker provides a web interface, a smartphone app, and MetaTrader4 and ProRealTime access.
IG offers spreads as low as 0.8 pips (a pip is one ten-thousandth of a point) and claims its pricing on the euro-dollar pair is up to 20 percent lower than the top two U.S. brokers. The broker’s platforms also offer a broad array of charting tools.
Robinhood does not offer traditional currency trading, but it does bring its clean, user-friendly interface to the cryptocurrency market. Seven types of cryptocurrencies, including some of the most prominent such as Bitcoin, Ethereum, Litecoin, and Dogecoin, are available for trading on this website. You can also obtain prices for nine additional digital currencies.
Robinhood, which allows free trades on stocks and options, also offers free cryptocurrency trading.
Considerations when selecting a forex broker
Although you may be aware with a number of well-known online stock brokers, just a few of them engage in FX trading. Instead, a multitude of specialized specialty brokers fill the market, and they may cater to high-volume currency traders seeking every advantage.
However, regardless of the type of forex broker you’re seeking, you’ll want to focus on at least a few characteristics that are shared by all forex brokers:
Forex brokers can price their services in one of two ways: by incorporating the price into the buy-sell spread, or on a commission basis. Frequently, spreads are quoted in pips, or one ten-thousandth of a point.
• Leverage: How much leverage is permitted by the broker? In general, traders seek a greater degree of leverage to magnify currency market movements. The level may vary based on the currency’s availability.
How many different currency pairings (minor, exotic) does the broker offer? The U.S. dollar, the euro, the Japanese yen, the British pound, and the Swiss franc are the most widely used currencies.
• Spreads: How wide are the trading spreads offered by the broker? The deal becomes less appealing as the spread increases. Obviously, brokers who charge a spread markup will have greater spreads, as this is how they get compensated.
Investors interested in purchasing cryptocurrencies may be able to do so through typical stock brokers such as TD Ameritrade or Robinhood, despite the fact that the trading process differs from that of regular FX trading, as stated above.
A disadvantage for American traders is that many of the best forex brokers are situated in the United Kingdom and will not accept them as clients due to their nationality. However, the aforementioned brokers are all suitable for Americans.
How can I determine whether my forex broker is regulated?
Forex brokers must be regulated in order to maintain business standards and protect clients. According to the Commodity Futures Trading Commission (CFTC), the majority of frauds involve unregistered individuals, goods, or businesses. Therefore, if you engage in forex trading, you should deal with a registered broker, and it’s easy to determine whether you are.
Forex brokers are registered and regulated by the CFTC. A broker must meet certain financial requirements, its employees must be subjected to background checks, and the firm must adhere to particular conduct and disclosure standards.
You may determine whether a forex broker has been properly registered by using the search function on the National Futures Association website (which is overseen by the CFTC). Checking a broker’s registration, disciplinary or regulatory history, and financial information is possible. Be wary of any organization that is not duly registered.
What is the difference between an agency broker and a dealing desk?
When trading foreign exchange, you need a broker to execute your trades, but the broker may not always work in your best interest. There are two types of models, a dealing desk and an agency broker, each of which has different motivations for completing deals.
An agency broker is one who acts in the client’s best interest and whose goal it is to locate the best possible bargain price. Therefore, the agency broker does not maintain any inventory of the assets being transferred, as this could put the agent’s and client’s interests at odds, and just acts as a middleman. The client pays the agent just for this service, which could save the client a significant amount of money. Therefore, agents are typically designated for wealthy clients who transfer enormous sums of money.
In contrast, a dealing desk simultaneously trades and holds securities. Due to this arrangement, the dealing desk may not always act in the client’s best interest, but rather in its own.
Consequently, a trading desk may function as both principal and agent in a transaction, resulting in several peculiar conflicts:
• As a principal, the dealing desk trades for its own account, which means it may accept a client trade in which it has a vested interest in the outcome. In other words, the dealing desk may benefit at the expense of the customer by, for example, offloading inventory to the client just before the market declines or purchasing it just before the market rises.
• As an agent, the dealing desk can execute trades on behalf of a client and transmit the trade price.