Best Forex Brokers in USA 2018
With one of the most active trading communities, the US is one of the most highly regulated regions in the world. FX Empire is here to help chart the waters of the local industry and to help you decide who you should be trading with. Through the course of our research we have considered a variety of key areas such as safety, technology, support and trading conditions, in order to help you find the perfect trading partner.
How to Choose a Forex Broker (as a US trader)
Considered the world’s largest market, the forex market never closes. It runs 24 hours a day and 7 days a week. Affected by numerous external factors, the forex market offers traders huge profitable opportunities for those who dare to dabble in it. The U.S forex industry is considered the most active forex industry around the world. Under U.S financial regulations, only brokers which are registered with the NFA or CFTC are permitted to accept traders from the U.S. Hence, this severally limits the choice of forex brokers which U.S based traders can choose.
How to Choose a Forex Broker (as a US trader)
If you are a U.S trader who wishes to participate in retail forex trading, there are a few things that you should be aware off first before you decide which broker you wish to sign up with. This article will look at those areas which include:
- Regulated by competent regulatory agency
- Suitable and reliable trading platforms
- Competitive trading cost
- Having suitable trading accounts
- Reliable customer service
General Regulation & US Regulation
The forex market being an OTC (Over the Counter) market is one of the most difficult markets to regulate since there is no central exchange where forex trading activities are being carried out. Because of the unregulated nature of the OTC market, to protect U.S based investors from being scammed, the US government has introduced a regulatory framework to require all financial services providers to be a registered member of an authorized exchange. In short, the broker must be a member of the Natural Futures Association (NFA) or the Commodity Futures Trading Commission (CFTC). However for the U.S, the main regulatory agency which is responsible for regulating forex trading is the NFA.
The NFA was established in 1982 and is a self-regulatory, non-profit organization. Its main responsibility includes the following:
- Approving and licensing of forex brokers
- Ensuring all approved brokers are in compliance with regards to their capital requirement
- Monitoring for fraudulent activities and stop such activities
- Reviewing the compulsory audited reports submitted by the brokers
In other words, the NFA ensures that all brokers operating in the U.S financial trading industry are operating with integrity, transparency and in compliance of their regulatory requirements. To help forex traders verify the regulatory status of brokers, the NFA has also provided a verification system known as called Background Affiliation Status Information Center (BASIC) where traders can log in and check if a broker is an approved broker that is in compliance with all the regulatory requirements.
Trading Platform & Software
There are two main types of platforms adopted by brokers, proprietary which are built and designed in house by the broker or generic/white labeled platforms which are built by a third party and feature the brokers branding, such as their logo. The most popular example of this is the MetaTrader4 by MetaQuotes. This is adopted by most if not all forex brokers on the market today. Other popular examples are the Sirix Platform and the cTrader. It’s worth test-driving the proprietary platforms first in order to decide if their structure and interface suits you as a trader.
As the trading platform is the most important part of the broker’s operation, most brokers offer their clients a choice of a few different kinds of trading platforms.
Depending on the trader’s preference, there is usually a choice of a desktop trading platform which traders can download and install onto their desktop computers such as the MetaTrader 4 platform.
Alternatively if they do not wish to download and install any software, they can opt for a web based trading platform which can be accessed using a web browser.
For traders who find themselves on the move and wish to keep in touch with all the developments in the financial markets, they can use mobile trading apps which can be downloaded and installed onto their smartphones or mobile devices.
What is most important when evaluating a trading platform is to ensure that it is user friendly and comes with all the necessary tools that will help a trader trade more effectively. Important tools that feature on trading platforms include advanced charting systems with the ability to incorporate indicators and studies. This is particularly useful for those traders that rely on trading strategies. Other features a live market news stream to keep the trader update, although sometimes this features on the brokers website rather than on the platform, economic calendar of upcoming events, live support directly from the platform and the ability to trade from charts.
Commissions, Spreads & Leverage
Trading costs represent a huge determinate factor of a trader’s ability to make profit when trading forex. The higher the cost of trading, the more prices have to move in the trader’s favor before he can make profit from his trade. Hence, it is crucial that you pay close attention to the commissions and spreads that a broker will levy on your trade.
In the forex industry, most brokers do not charge their traders any commission on the trades that they make. However in cases where the broker is a Non Dealing Desk (NDD) where the trader’s order is transmitted directly to the liquidity pool, the broker will typically charge traders a small commission for their service. The key benefit of trading with a NDD broker is the raw interbank spreads which traders will have access to.
The normal trading cost which a trader will incur is the spread which they pay on the asset traded. The spread is just the difference between the BID and ASK price. Spreads can be in the form of fixed spreads or in the form of variable spreads.
Fixed spreads as their name implies are fixed and higher than variable spreads. They are suitable for traders who want to know beforehand the spread that they will pay before executing a trade.
Variable spreads on the other hand although lower than fixed spreads can fluctuate depending on the volatility in the market.
One major limitation which forex traders in the U.S will face is the leverage which they can get from their brokers. Because of the regulatory requirements imposed by the NFA, forex brokers in U.S can only offer their clients a maximum of 1:50 leverage ratio. Leverage is the ability to multiply your capital in order to gain more exposure to the market. So 1:50 leverage means your invested capital will be worth 50 times more than its face value. Leverage comes with extra reward but also increases the risk level, so should be used carefully by novice traders.
The type of trading accounts that are provided by a forex broker in the U.S depend on the primary focus of the broker. If the main focus of the broker is the small retail trader, the broker will most likely provide their clients with the ability to trade in lots smaller than the standard lot size of 100,000 units of currency. These types of trading account are called Micro and Mini account.
The difference between a micro and a mini account is the lot size, 1,000 units for the mini account and 10,000 units for the mini account. Both these types of trading accounts are termed as “beginner friendly” as they have a low minimum deposit requirement.
For some forex brokers, they do not differentiate between the different types of clients that they have. This type of broker usually offer only one standard type of trading account to cater to all their clients regardless of how much they invested.
The third type of trading account that is offered by some brokers is the VIP trading account. VIP trading accounts are geared towards high net worth clients that demand more from their brokers. Usually this type of trading account comes with benefits such as dedicated account manager and fund management facility.
The last thing that most traders have in their mind when evaluating a forex broker is customer support. The fact is, for any online based service industry, it represents the cord that links the trader to the broker. By entrusting their hard earned cash to the broker, it is only fair that the broker is responsive to any queries or problems that the trader may have while trading.
Hence, it is important to look for a broker that has provided traders with multiple methods of communicating with the support team. In addition, the support hours must be long enough to cover the trading hours and not be limited to office hours since the forex market is actually a 24 hours market. Another factor to consider when evaluating a broker’s customer support service is whether the support service is available in multiple languages or just one language.
Apart from all the above mentioned factors, check out if the broker that you are evaluating is offering additional value added services. Additional services such VPS, social trading, educational resources and free trading signals are all value added services which can help tip the scale in a broker’s favor over other brokers in the industry.
We understand that for U.S traders, selecting the best forex brokers in the USA to work with can often be a frustrating and tedious process, given the fact that there are so many factors to consider. To help our readers, we have reviewed a selection of the key U.S forex brokers based on the criteria that we mentioned in this guide. So if you are looking for a U.S based forex broker that is dependable and reliable, we urge you to read our reviews of the best forex brokers in USA.
- New Zealand
- South Africa
- South Korea
- Hong Kong
- United Arab Emirates
- Russian Federation
List of Brokers
|BROKER||USER RATING||REGULATED BY||HEADQUARTERS||MIN. DEPOSIT||OFFICIAL SITE|
|ASIC, CySEC, FCA||Israel||$100||Open Account|
|ASIC, BVI, FSA(JP), FSB, MiFID||Ireland||$100||Open Account|
|ASIC, CySEC, FCA||Cyprus||$200||Open Account|
|CySEC, FSB||Cyprus||$100||Open Account|
|BaFin, FCA||United Kingdom||$300||Open Account|