How to Choose the Best Forex & CFD Broker in 2019
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Wondering who is the best Forex & CFD broker in 2019? In this article, we will analyse the elements for assessment, such as the significant account details to look out for, the significance of customer service, and the most important criteria for a broker, in order to choose the best Forex & CFD broker for 2019. We will also review all of the important aspects of the best Forex broker.
What is a Forex Broker?
When you feel you are ready to start trading currency pairs, you need to find a reliable Forex broker. First we should address exactly what a Forex broker is. A Forex (FX) broker is a firm or company that provides FX traders with access to a trading platform that enables them to buy and sell foreign currencies. Currency traders utilise these brokers in order to access the 24-hour Forex market.
A currency trading broker (often referred to as a retail Forex broker) handles a very small portion of the overall volume of the foreign exchange market. FX brokers are mainly compensated through the 'bid-ask spread' of a currency pair. Your first priority is to carry out research, with the aim of discovering whether a broker possesses an exceptional reputation, and whether they are able to meet your requirements.
The vast majority of the main Forex brokers will permit prospective clients to test their services with a practice or demo trading account, so that they can obtain a good understanding of what the system is actually like. It would be wise of you to test out as many trading platforms as you can prior to deciding which broker to use.
The List of Significant Account Details
Every eminent Forex online broker has various account offerings (or account types) that include the following. First of all - leverage and margin. FX participants have access to a range of leverage amounts depending on the classification of the client, up to 1:30 for retail clients and up to 1:500 for professional clients. Leverage is a loan extended to margin account holders by their brokers.
For instance, by applying a 50:1 leverage, a Forex trader with an account size of $1,000 can hold a position that is valued at $50,000. Leverage works in the trader's favour with winning positions, as the potential for profits is considerably amplified. However, leverage is capable of hastily destroying a trader's account, because the potential for losses is augmented as well. This leads us to the point that leverage should only be used with caution.
The second offering of Forex trading brokers is spreads and commissions. A Forex broker makes money through established commissions and spreads. An FX broker that utilises commissions may charge a stated percentage, or the difference between the ask and the bid price of the currency pair. Nonetheless, a lot of brokers advertise that they don't charge commissions, and instead make their money with wider spreads. For instance, the spread could be a fixed spread of three pips, or the the spread could be variable depending on market volatility.
Imagine that a EUR/USD quote of 1.3943 - 1.3946 has a three pip spread. This implies that once a market participant purchases at 1.3946, the position has already lost three pips of value, as it could solely be sold instantly for 1.3943. Therefore, the wider the spread, the more complicated it can be to make a profit. In fact, common trading pairs like the GBP/USD and EUR/USD will generally have tighter spreads than the more thinly-traded pairs.
The third one is the initial deposit that an online Forex broker may offer. The majority of Forex accounts can be funded with a very limited initial deposit (even being as low as $50). Of course, with leverage purchasing power it can be considerably greater than the minimum deposit. That is one of many reasons why Forex trading is so appealing to new traders and investors. Many brokers offer standard, mini, and also micro accounts with changeable initial deposit requirements.
And the last one is the ease of deposits and withdrawals. Every FX broker has their own account withdrawal, as well as funding policies. Brokers may permit account holders to fund trading accounts online via PayPal, simply with a credit card, or via ACH payment, not to mention wire transfer, bank cheques, or either business or personal cheques. Usually withdrawals can be made by cheque or by wire transfer. Those that are considered to be reputable, and good Forex brokers might charge a fee for each service.
What Should Be Outlined About Currency Pairs?
Whilst there are an outstanding number of currencies accessible for trading, only a few receive a lot of attention, and thereby trade with the greatest liquidity. The majors include USD/JPY, EUR/USD, USD/CHF, and also GBP/USD. Those who position themselves as top Forex brokers might offer a wide choice of Forex pairs. However, what is of paramount importance is that they offer the pair (or pairs) which the FX trader or investor is most interested in.
The Significance of Customer Service
FX trading takes place 24 hours a day, so a broker's customer support must be available at any time. It should also be easy to actually speak to an actual person, rather than just a time consuming and frequently frustrating auto-attendant.
When considering which is the best Forex broker, a quick call can give you an idea of the kind of customer service that they provide, the wait times, and also the representative's capability of answering questions about spreads, regulations, leverage, and company details in a concise manner. Those details include how long they have been an FX broker, and the actual size of their trade volume. As you well know, larger brokers mainly have access to better execution and prices.
The Integral Part of Brokerage - The Trading Platform
The trading platform is the investor's portal to the market. As such, Forex traders should make sure that the trading platform, and any kind of trading software is simple to use, and visually attractive. It also should have a range of technical analysis and fundamental analysis tools, and it should be easy to enter and exit trades without additional effort.
This point is crucial when considering how to choose a Forex broker worthy of your attention: a well-designed Forex trading platform will have simple 'buy' and 'sell' buttons - and some even have an emergency button that closes all of the open positions. A poorly designed user interface could lead to costly order entry mistakes, such as accidentally adding to a position rather than closing it, or going short when you meant to go long.
These discrepancies and mistakes can make your trading process unprofitable and emotionally draining. Be sure to choose a reliable one such as MetaTrader 4, as it is the most popular choice amongst the best Forex brokers. In addition, other considerations to include are: the ability to customise, order entry types, automated trading options, backtesting, strategy builders, and also trading alerts. Most brokers offer free demo trading accounts so that Forex traders can try out the trading platform without any risk, before they move to live market trading..
The Most Important Criteria for the Forex & CFD Broker
Here is a list of 13 important points that traders should considering when choosing a broker:
- Forex Broker Regulation – It is important to open an account with a regulated broker.
- Trading Platform – Choose a broker that offers a Forex & CFD trading platform that you are most comfortable with, and that fits your individual needs. For example, Admiral Markets offers several options including: MetaTrader 4 (MT4), MetaTrader 5 (MT5), MetaTrader WebTrader, and the MetaTrader Supreme Edition plugin for MT4 and MT5.
- Spreads – There's nothing wrong about searching for a broker with the lowest spreads, but watch out for marketing techniques. A lower spread advertised on the website does not necessarily mean that you will continuously have the spread.
Besides, there are ECN (Electronic Communication Network) and STP (Straight-Through-Processing) accounts on which you pay commissions to the broker. Finding the cheapest Forex broker involves searching for various qualities such as the combination of spread, execution quality, commission, and swap.
Looking for a competitive Forex broker that only offers low spreads is not necessarily the best idea, as a displayed average spread does not guarantee this spread when you place the order.
- Order Execution Quality and Slippage – Having low spreads is a good start, having orders executed at the asking price is even better.
- Allows for Scalping – If you are looking for the best Forex broker in the EU, be aware that a good broker does not place limits on trading styles. A scalping broker has no minimum distance to respect between the market price, the stop-loss, and the take-profit.
- Forex Broker with No Dealing Desk or Dealing Desk – Depending on your strategy, you may opt to choose an ECN, STP, or an NDD (No Dealing Desk) broker.
- Fund Security – Choose a Forex broker with bank accounts in Europe, in particular, with segregated bank accounts.
- Different Types of Trading Accounts – A good broker should offer you several types of accounts: ECN, STP, or accounts with spread reductions for more substantial deposits.
- Optional Leverage – Forex is a market that is often traded with leverage. To manage a trading position well, and to be able to choose leverage is very important.
- Diversification of Trading Instruments – It is always exciting to be able to invest in several financial markets at the same time. A good choice is to work with a Forex broker that offers a wide variety of markets to trade on, such as CFDs on indices, CFDs on commodities, stocks, CFDs on cryptocurrencies, or ETFs.
- Customer Service – Having a broker who cares for its customers is much more practical and reassuring for traders.
- Education – Forex brokers offer training sessions and education. For Forex beginners, it is essential to understand the trading terminology, so a broker with proper training tools is always a better choice. Admiral Markets offers several courses, including Forex 101, Zero to Hero, and a whole library of articles on Forex, trading CFDs, and trading in general.
- Custom Tools and add-ons - Good Forex brokers should offer valuable support for their traders. For instance, Admiral Markets created both the MT4 and MT5 Supreme Edition add-ons, and made them available for its live Forex and CFD trading account, and its demo trading account. These tools aim to help Forex and CFD traders make more money, with less effort.
The MT4/MT5 Supreme Edition Overview (MT4/MT5 SE)
Admiral Markets' Supreme Edition plugin is arguably a first class package add-on that offers dozens of unique tools to empower trading decisions. No matter if you are an experienced trader or a beginner trader, SE is an invaluable tool for helping you make good trading decisions. Here is the list of tools available in the MT4/MT5 SE package:
Source: MetaTrader 4 Special Edition Add-on
Bear in mind that MT4/MT5 SE is client driven, as Admiral Markets' clients have also indirectly helped to develop the tool. For example, the 'Correlation Matrix' is a tool that is unique to Admiral Markets traders. The Correlation Matrix provides invaluable and in-depth market information across all currency pairs in different time-frames.
This will enable you to make informed decisions that significantly mitigate the risk involved when planning your trading. Additionally, it is recommended that all traders implement risk management strategies within their trading, to ensure that they are managing the risks effectively. The Supreme Edition is not just a simple trading solution. It offers more complex tools such as the Admiral Renko indicator, that also offers extensive customization of the standard Renko indicator.
For instance, with the Admiral Markets Renko indicator you can modify:
- Renko block size in pips – sets the size of the Renko blocks
- Symbol pip size – sets the pip size of the instrument
- Colour for up and down blocks – customises the colour of the Renko blocks
- Draw blocks as continuous – adjusts whether the blocks are continuous or not
- Target lines for next blocks – changes the style of the indicator lines
- Draw on top of the chart – decides whether Renko blocks appear in the foreground or the background
- Alerts on new blocks – sets up alerts for when new blocks are being drawn
- Round the starting price – decides whether the starting price should be rounded
- Maximum historic blocks – sets the number of blocks displayed at one time
- Build Renko data from history period – decides the time-frame over which the Renko indicator is calculated
- CSV/TSV log – decides whether to keep a log file by inputting a file name and choosing a format.
For a brief overview of what the Supreme Edition plugin has to offer, why not read more with our guide: MT4 Supreme Edition Indicator Package
Beware of False Information and Privacy Violation
Unfortunately, many people incorrectly associate Forex trading with scams. The problem is that there is an increasing number of unscrupulous companies marketing false information. The number of Forex-related scams has significantly increased over the last few years, so it's important for you to be able to identify a hoax. After all, Forex trading should be a potentially profitable experience.
When traders register with a particular broker, they expect their personal data to be protected, (i.e. not passed to third parties). When someone you don't know contacts you via your personal phone number, for example, the entity that gave your information to them has violated your privacy. Why? Because you haven't allowed your data to be publicly available. Some brokers even buy stolen trader database's, so they can contact the listed people worldwide.
Regulated Brokers: How to Find an FCA Regulated Broker
The first thing you need to check is if your broker is authorised and regulated by the Financial Conduct Authority (FCA). Today, there are many scams on CFD trading websites, and very often these sites have regulations that are not very rigorous, or they are not regulated at all. For instance, with the European passport, any financial company registered in one of the countries within the European Union has the right to offer brokerage services in other countries without the need for additional agreements.
One of the strongest European authorities is the FCA.
If you are looking for the best Forex brokers online, a professional website does not guarantee that the broker is a trusted one. A major advantage of a UK broker is the Financial Services Compensation Scheme (FSCS), a system that guarantees its customers' funds up to the amount of 50,000 GBP, should the broker go bankrupt. The FSCS is the last resort compensation fund. They also protect banks, building societies, credit unions, etc. That's why having the best UK Forex broker should be your first choice when you decide to trade.
Types of Forex Brokers
We can distinguish between several types of Forex brokers according to a range of criteria. Usually Forex brokers can be divided into groups for:
- Brokers with licences (reputable)
- Brokers without licences (or non-reputable brokers)
Depending on the execution of orders, there are:
- Dealing Desk Forex brokers
- No Dealing Desk Forex brokers (STP or ECN)
Depending on the trading platforms on the exchange rate, we can have:
- MT4 Forex brokers
- MT5 Forex brokers
- Brokers with a proprietary platform
- MT4 & MT5 brokers
Generally speaking, there are DD (Dealing Desk) and NDD (No Dealing Desk) brokers. NDD brokers include:
- STP ( Straight Through Processing)
- ECN (Electronic Communication Network)
- Hybrid (ECN+STP).
We usually refer to DD brokers as market makers. The infamous term "market makers" is used because these brokers usually take the opposite side of traders' trades. They make money through spreads and by providing liquidity. They also try to find a matching long or short order from their other clients, before taking a countertrade or passing it on to a liquidity provider. They are known to offer artificial quotes, and orders are filled on a discretionary basis.
No Dealing Desk
Contrary to DD brokers, NDD brokers don't pass their orders to a market maker or a liquidity provider. They use both the STP and ECN technologies without a DD, and route trade orders directly to liquidity providers. This allows clients to access real markets with better and faster fills. It is a bridge between clients and liquidity providers, and there are no requotes when an order needs to be filled. We differentiate between two types of NDD brokers: the STP and the ECN.
The STP (or Straight Through Processing) technology requires no dealing desk. All orders are routed to the broker's liquidity providers, and prices are executed at the bid/ask rate provided by liquidity providers. Liquidity providers in this case are hedge funds, big banks, and investors that effectively act as counterparties to each trade. Usually, the STP broker has an internal liquidity pool that is represented by different liquidity providers, that compete for the best bid/ask spreads for STP broker orders.
In a broader sense, STP means that the broker company plays the role of a silent connection provider between the market and the trader, rather than a dealing desk re-processing trades. Please note that Admiral Markets uses the STP model exclusively. The other benefit of an STP broker includes the 'DMA'. DMA stands for Direct Market Access. DMA refers to when a broker is passing their client orders directly to their liquidity pool, so orders are filled at the best possible price, with only a small mark-up spread by the broker.
You should always aim for the broker with the most variable spreads. The reason for this is that the broker with the most variable spreads is able to select the best bid from one of the liquidity providers from their own pool, and the best ask spread from another liquidity provider. That effectively offers the best possible spread for their clients. The STP execution simply goes without any requotes, and due to its lightning speed, it is very suitable for traders who like to scalp and trade the news.
A few years ago, the MT4 ECN seemed excessive. In fact, the initial reaction to this concept was that it seemed like something impossible. If a Forex trader wanted to use the standard platform, they were supposed to trade solely with one broker. Nevertheless, the demands of the retail Forex trader ultimately became heard, and MT4 ECN was developed as a response.
There are a lot of similarities between the STP and the DMA, but the primary difference is routing. As mentioned above, the STP can choose to deal with different liquidity providers out of their liquidity pool, while the ECN acts as a form of hub. The hub acts effectively as the major liquidity source, as it is represented by banks, hedge funds, and all the major market players.
They all become interconnected in order to find counterparties for the orders they are unable to handle internally. Another difference between the STP and the ECN is that ECN trading is mostly capped at a 0.1 minimum lot size. This is because there are very few liquidity providers allowing for less than 0.1 lots, which proves to be difficult for inexperienced traders who need to trade with smaller amounts of money (for instance, between 1000-2000 EUR), so a hybrid model has been developed as a solution.
The Hybrid model is a combination of both the ECN and the STP. Usually, with this type of service, brokers are able to focus on providing great customer service, education, and different market analyses. Blending the ECN or the DMA and STP models allows for a fully electronic Forex dealing service. This popular mix allows a Forex broker to fully automate the order entry, dealing with spread pricing and the trade execution aspects of their deal execution business.
Possibly the best model is the STP, although the hybrid model through NDD is also an excellent choice. Applying the STP and the ECN models, brokers avoid market making. It is a win-win situation for traders and brokers alike. Brokers don't want traders to lose, because they might earn more from spread or a commission, the longer that traders are using them.
How Important is Regulatory Compliance?
The first one thing you need to check when looking for trusted Forex brokers is regulatory compliance. Note that there are different regulatory bodies in different regions, so a good rule of thumb is to ensure that the FX broker you are considering is authorised and regulated by the regulator in their regions of operation.
For instance, in the UK a reputable FX broker will be officially authorised and regulated by the Financial Conduct Authority (FCA). Additionally, brokers in the EU should act according to the guidelines of ESMA - the European Securities and Markets Authority.
In the US, a reputable broker will be a member of the National Futures Association (or NFA) and will be officially registered with the US Commodity Futures Trading Commission (CFTC) as a futures commission merchant, as well as a retail foreign exchange dealer.
And in Australia, the key regulator is the Australian Securities and Investments Commission.
If you search for Forex brokers online, a professional looking website does not necessarily guarantee that the broker is regulated and abides by local guidelines. If a broker is regulated, however, they will state this on their website, along with the license number they hold with that regulator. This information will most commonly be found in the 'about us' section, as well as in the website footer.
Owing to potential concerns regarding the safety of particular deposits and the integrity of the broker, all accounts should only be opened with companies that are properly regulated.
Forex Broker Comparison – Forex Broker Ranking
As discussed earlier in this article, you will find a lot of reviews on Forex brokers and all kinds of online Forex broker rankings. When it comes to online Forex trading and CFD trading, as well as dealing with Forex brokers and CFD brokers, you should always trust yourself, deciding who is the best Forex broker and who is the best CFD broker will ultimately come down to you.
Admiral Markets has won awards in several categories:
- Best Sell-Side Analysis 2018 by FXstreet.com
- Best Video Podcast 2017 by FXstreet.com
- Best Forex Broker 2018 and CFD Broker 2018 in Germany
- "Best Service" CFD Broker 2017 by the German Institute of Customers (DKI)
- Best Forex Educator 2016 by UK Forex Awards
- FxCuffs competition 2015 and 2016
Admiral Markets UK Ltd. is a regulated broker, and you can read reviews of the services provided on the FPA website. Bear in mind that the reviews posted here are highly subjective, so it's recommended to test the services offered by Admiral Markets on a Demo account first.
There is no best 'Forex & CFD' broker in the world, but if you are confident with your Forex broker, you will be capable of devoting considerably more time and precious attention to analysis and developing various FX strategies. Research prior to committing to a specific broker can go a long way, and can improve a trader's odds of being successful in the competitive foreign exchange market.
This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.