What are the best forex brokers?
Foreign trading is the act of trading foreign currencies based on how you expect the currency exchange rates to change. If your pick goes up considerably in comparison to another currency, that results in profit for you. If it goes down, that means that you were wrong in your thought process and you incur a loss. Forex trading is the largest in the world, mostly liquid, and trillions of dollars change hands daily. It is a digital market online of various banking institutions, brokers, finance companies, and individual customers.
The foreign exchange trading industry is a twenty-four hour per day, seven-days per week market. Ironically, United States forex trading is among the most active around the world. That is ironic because it is also the most expensive arena to trade in and the most heavily regulated. In order to operate in the United States brokers need to be registered with the Commodity Futures Trading Commission (CFTC) and the National Futures Association (NFA) as Futures Commodity Merchants. The NFA is a not-for-profit, self-regulating entity whose main focus is to maintain the integrity of the markets within the United States as well as protect the traders/investors from being involved in scams or fraud. This registration requires a $20,000,000 locked capital deposit. This deposit covers any losses in case of a rocky market.
Regulations are put in place to protect the small investor or customer (individuals or small businesses who assume assets of less than $10,000,000). In the United states, the regulations the CFTC and the NFA uphold are strict.
- Leverage for minor currencies no more than 50:1.
- The maximum leverage available on minor currencies is 20:1.
- There is no hedging with trading.
- Any money paid to customers by a broker has to be kept in a
- Qualified United States institution or in a money center country.
The regulations put forth by these two regulatory agencies makes the United States among the safest foreign exchange markets for individual traders and small businesses.
Foreign exchange brokers give access to customers to the platforms where they can do the buying and selling of their currencies. Due to the regulations, client services have been vastly improved by forex brokers. Opening accounts with most all brokerages is a very user-friendly, simplistic, and fast process.
SEARCHING FOR A BROKER
Forex trading is very competitive and the brokers are limiting their fees down to very little or no fees in order to bring more customers to their firms. They also are charging little to no commission and opt to make their money by way of the bid-ask spread of a currency pair. This makes your job of finding the right brokerage difficult. You really have to take the time to do your research and know what to look for when entering the market.
Ensure that the broker that you choose has regulations in place and is capitalized in case of large losses, your account will be both secure and segregated, and they maintain fair trading practices according to the regulating agencies.
High level of security with your personal and financial information, two-step authorizations, encryptions.
- Transaction costs
You don’t want to get the least expensive and risk a quality broker. You want to get competitive prices and the most quality.
Good brokers will have no reason to make the withdrawal process difficult for the customers. They will make it a smooth process. The only reason for holding funds at all is to facilitate the trading process, to begin with.
- Trading platforms
Most trading actually happens on the brokerage’s own trading platform which needs to be user-friendly and stable. There needs to be a strong, free news feed, good simplistic technical and charting tool offering,
It is vital that the broker fills you at the best possible price in the fastest possible time for your orders under the normal marketing conditions. A few pips difference in price will determine your ability to win that particular trade.
- Customer service
Pick a broker that is easily able to be contacted when problems come on. The competence of a brokerage’s customer support in handling the account or tech service issues is as important as executing the trades. Support may be great in account opening but then be terrible after they have you as a client.
TOP FOREX BROKERS IN THE UNITED STATES
The foreign exchange market makes up upwards of $4 trillion average traded values each day in turn making it the largest financial market globally. There is not a central marketplace for the foreign exchange market so traders have to have a broker that can assist them with their trading processes. There are a few that stand out as among the top within the United States.
Commission: $1 minimum; $0.10/1,000 units- depending on currency
Maximum leverage: 50:1
Account minimum: $0
Currency pairs: Nearly 80
Minimum trade lot: 1,000 to 10,000, depending on pair.
This site offers highly powerful charting tools, can compare multiple currency pairs with each other, provides any needed technical indicators. Customers are able to analyze social input from twitter. The brokers also provide reliable third-party research tools with Morningstar and Market Edge. thinkorswim platform revolutionary for the advanced trader, a little complex for the beginner. They promise no hidden fees, access to mobile trading app, and twenty-four/seven support. Regulated in the United States.
Commission: $5 per 100,000 traded
Account Minimum. $50
Currency pairs: 80+
Minimum trade lot: 1,000
This is owned by GAIN Capital Holdings, Inc., a New York Stock Exchange-listed parent company. They offer tight forex spreads, free education, trade executions that are timely, mobile trade/MetaTrader 4 or FOREXTrader PRO platforms, three ways to trade – advanced, web, or mobile applications, a multitude of technical research indicators in nearly thirty languages. High volume traders will receive cash rebates, earned interest, and bank fees will be waived. They are licensed in jurisdictions which are highly regulated. They are available for traders of any skill level.
Commissions: Commissions are $5 per $100,000
Maximum Leverage: 50:1
Account minimum: $0
Currency pairs: 70+
Minimum trade lot: None
Dr. Richard Olsen and Dr. Michael Stum founded Oanda making it one of the first forex brokers online. Oanda is a well-liked broker dealing with upwards of 20% of world’s forex trading that offers competitive spreads with no commissions along with deep-market liquidity as well as Oanda Marketplace. It offers forex tools and products as well as advanced analytical tools with breaking forex news along with training videos, and MetaTrader 4 plugins that come from Oanda and associated partners. This broker offers that you can start with a free demo and they give benefits to the high-volume traders including discounted spreads as well as subscriptions with a partner-type platform, and free-wire transfers plus other rewards.
It is vital to make sure that a broker that you are dealing with is registered by CFTC and regulated by the NFA. In order to do that you will find their NFA ID number at the bottom of the broker’s U.S. homepage within the disclosure text. You can take that number to the NFA website and look up the firm to validate the current status of the ID number there.
After you do your research, the best way to determine which company will serve your needs is to take advantage of their demo accounts. This way you can actually do a simulation of what it would be like to do a trade with their brokerage. There is no better way to test out a system than to use it in real time. You should do that with the three companies that we have listed here for you which are three of the best within the United States.
If you are brand new to the trading game, one of the first things that you want to do is to learn the language. That is the most important thing right off the bat. If you don’t understand the terminology you won’t be able to participate. The educational tools available with most of the brokerages offer glossaries with the terms that they use. It’s a good idea to study those so that you can communicate and understand what is happening with your trading.
Then read any educational information they provide on their site, go to the webinars, attend any courses that they offer, participate in the demo accounts. This is the way to become one of the advanced traders. When you become an advanced trader or a professional, there are rebates and perks that you will have access to with your account.
It’s also very important to remember that any money that you will receive as profit is going to be considered taxable income by the government. You will need to report that either as capital or regular income. If you report it as ‘capital gains’ you will pay much less in taxes than if you report it as a ‘regular’.
Another great feature within some of the brokerages are the forums where you can discuss and share trading stories with other clients. This is a great way to get recommendations or extra insight on how to do maneuver the system.
David is a financial expert who graduated from the University of Fordham (Master in Finance) in 2001. He has 10+ years of experience in private equity and wealth management. With strong expertise in senior-level financial planning, personal financial analysis, and mortgages, David knows his way around personal finance. Before working at CCR he used to be a financial analyst at McKinsey.
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