Choose From The Best Forex Brokers

Foreign exchange trading, or Forex trading, is a long-established form of trading - if you know the market well and if you choose the right broker. Here, in this article, we name our top 5 Forex brokers, but also investigate exactly what is Forex trading so that we can all learn how to choose a the best forex broker in the UK that is suitable to our needs. 

What is Forex trading?

Forex trading is the term often used to describe trading currencies. It is short for Foreign Exchange trading but can also be referred to as FX trading as well. 

In practice, trading currencies is commonly undergone in the following two ways: 

1. When currencies are either overvalued or undervalued 

If a currency is overvalued, a trader can short it, trying to benefit when it falls to a certain amount when he or she rebuys it to settle the trade. Or, if it is undervalued, it can simply be invested in through a buy and hold strategy waiting for a time to sell the currency if it rises in value. 

2. Through arbitrage. 

Arbitrage is when a currency is worth two different amounts in relation to two different currencies.

Types of Forex Market

Trading on the foreign exchange market happens in the following markets

Spot

The spot market is when the currency itself is actually traded and trading is therefore done at the current price of the underlying asset. 

Futures

The futures market is buying and selling contracts on exchanges where set sizes and settlement dates are predetermined. 

Forwards

The forwards market is a more customised version of the futures market. Contracts are drawn up between two consenting parties on the terms that they arrange. 

While foreign exchange trading can be carried out to make money, it also has other purposes for different types of entities. Many international companies partake in foreign exchange trading to help protect against losses in movements of currencies in which they do business while individuals trade currencies on a personal basis when going abroad. 

How to choose a Forex Broker?

Choosing the right Forex broker for your needs is almost as key as making the right Forex investments. However, choosing the right Forex broker depends on your needs and requirements as well as why you are trading Forex in the first place. For those that are simply trading currencies to go abroad on holiday, a simple travel exchange will be sufficient. For those looking to trade currencies or hedging against currency movements, there are particular characteristics that will have a bearing on what Forex broker is right for you

1. Check fees

Before deciding on a broker, evaluate how many times you anticipate trading in any one week, month or year. Different brokers will offer different fees for each trade they put through, which will then vary again according to the volume that you place with them. In general, the more you place, the less the fees become but the amount by which they vary can be very different from broker to broker. 

2. Check range

Not all forex traders will trade in every single currency pair available - in fact very few do. Investigate your potential forex broker’s range of currency pairs therefore. If they only have a few, check that the few they do have meet your needs. If they have many, this may be better for you if you anticipate trading in unusual pairings. 

3. Check trade sizes

Some brokers will only be able to place trades up to a certain limit. It is imperative to check this before you sign up to a brokerage. Additionally, it can be helpful to check the lower limits of a forex traders range too. If you anticipate placing small trades, not all traders will offer this as a service. 

4. Added extras

Many brokers will have some added extras to their offering and services. Check before you buy what your Forex broker provides. Some will be a no frills outfit, which may be reflected in lower fees - but sometimes the added extras can be worth the added cost. Research is a prime example of information that can be helpful to customers when making trades, as well as easy to use web portals and platforms. 

Top 10 Forex Brokers

Whilst we have reviewed several brokers, in our opinion there are only three Forex brokers that we recommend:

Saxo

Saxo has one of the best trading platforms out there, making it easy to place well informed and accurate trades. While it can have some quite high fees on its futures, the research it provides as standard is market leading. 

IG

IG allows customers to trade Forex based CFDs. For that reason, it is best suited to the experienced trader. However, it offers a wide range of currency pairs making it suitable for those who want to place less usual trades. 

Interactive Brokers

Interactive Brokers is perhaps one of the best forex brokers for experienced retail traders out there. In particular, its futures trading tools and services are excellent while its platform is a slick and professional portal. 

What Is The Commodity Futures Trading Commission?

The Commodity Futures Trading Commission (CFTC) is an independent agency of the US government that regulates futures and option markets. It ensures market integrity, protects market participants from fraud, manipulation and abusive practices related to the sale of commodity and financial futures and options, and monitors trading to promote market transparency. The CFTC also provides customers with regulatory information about commodity futures contracts traded on domestic exchanges.

The Best Forex Brokers - Key Takeaways

Forex trading is one of the most complicated types of trading that anyone can partake in. This is down to the fact that not only is the market open 24/7, meaning it is almost impossible to keep fully up to date with the news cycle and market fluctuations, the geopolitical influences on currencies movements, above many other factors, make it a hard market to consistently make gains on. Plus, using the leverage available in Forex trading can quickly wipe out any gains made at pace. Choosing the right broker for you is therefore of paramount importance, given that if you don’t, you can make a complicated exercise even trickier. So before you start trading currencies, it is best to do your due diligence on with whom you are going to place those trades first.