CFD Forex Trading & Best Forex Brokers

Interested in Forex Trading? Short for foreign exchange the asset to invest is currencies. In businesses transactions like tourism or commerce foreign exchange acts as changing one country’s currency into another for such global business. It all started after the accord at Bretton Woods in 1971 when currencies were allowed to float freely against one another, and the values of individual currencies varied, which has given rise to the need for foreign exchange services.

Forex has been taken up by the commercial and investment banks on behalf of their clients, and has simultaneously provided a speculative environment for trading one currency against another using the internet.

When you opt for trading in Forex there are many questions in a trader’s mind which creates doubt and confusion. Below you will find the answers to such questions to ease your trading process.

How to choose the best Forex Broker?

As a new trader you need to look for a Forex broker. But how can you choose the best one with so many choices in the market. You should look whether the broker is registered with any regulating authorities or not.

Check to see if your broker of choice is registered with the National Futures Association (NFA) or Commodity Futures Trading Commission (CFTC) if they're based in the US. If the broker is based in the United Kingdom, check with the Financial Service Authority (FSA). If the broker isn't registered with any of these or any other recognized regulating firm, then you may want to think twice before signing up with them.

Also search whether the broker is Dealing Desk or Non-Dealing Desk broker and does the broker offer fixed or non-fixed spreads and how wide are the spreads.

These questions are more significant to those traders who like to take quick profits on a few pips. Large and/or variable spreads can cut into the profits of this type of trading strategy.

Also while comparing you need to know how much or how little leverage will a broker give you and does the broker credit or debit daily rollover interest and offer premium services such as charting, news feeds, and market commentary and how important are premium services to your trading.

The best practice is to open demo accounts with at least two brokers and see which fits most on your criteria when trading and also come to know of customer service support of the broker’s.

Forex Brokers Comparison

CFD Forex Broker Rating Markets Available Fees Open an Account
1 Kawase
1 Star2 Stars3 Stars4 Stars5 Stars
Rating 3.60 /5
(15 votes cast)
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Shares, Indices, Forex and Oil Spread From 0.1 and 0.2% Commission Visit Website
2 MaxFx
1 Star2 Stars3 Stars4 Stars5 Stars
Rating 4.69 /5
(88 votes cast)
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Indices, Forex, Metals, Shares From 0.1 Raw Interbank Spread Visit Website
3 London Capital Group (LCG)
1 Star2 Stars3 Stars4 Stars5 Stars
Rating 0.38 /5
(124 votes cast)
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CFDs - Foex, Indices, Stocks, Commodities, Bonds, Interest Rates Variable spreads from 1.2 and small 0.1 commission on Shares Visit Website
4 Markets.com
1 Star2 Stars3 Stars4 Stars5 Stars
Rating 0.19 /5
(175 votes cast)
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CFD Trading and Forex Commission-free CFD Trading. 2% - 5% margins. Spread 4. Leverage 200:1 Visit Website
5 Keystock.com
1 Star2 Stars3 Stars4 Stars5 Stars
Rating 2.40 /5
(5 votes cast)
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Over 200 different assets No fees Visit Website
6 Trade.com
1 Star2 Stars3 Stars4 Stars5 Stars
Rating 2.33 /5
(6 votes cast)
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Wide range of assets across global markets No fees Visit Website
7 XM.com
1 Star2 Stars3 Stars4 Stars5 Stars
Rating 0.34 /5
(333 votes cast)
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Precious metals, forex, energies, stock and indices 1 pip spread Visit Website
8 IronFx
1 Star2 Stars3 Stars4 Stars5 Stars
Rating 0.43 /5
(221 votes cast)
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CFDs, Forex, Spot Metals, Futures and Shares Fixed and floating spreads from 1.4 to 2.4 Visit Website
9 Pax Forex
1 Star2 Stars3 Stars4 Stars5 Stars
Rating 3.07 /5
(5 votes cast)
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CFD- Forex-indices- stocks- commodities - no commission no fees at all – low spread 0.3- Accepting USA clients. Visit Website

How does Spreads work? How do I compare apples with apples?

The vast majority of Forex brokers offer not to charge commission only a few brokers do so. So, that means it costs you nothing to trade. But then where do these brokers get paid. They charge you what's referred to as “Forex spreads”.

A Forex spread is the difference in price between what a Forex broker will buy the currency from you for and the price at which they will sell it. It is all based on supply and demand, just like any other market. If there is a higher demand for dollars, the value of the dollar will go up vs other currencies. This is precisely how Forex spreads are defined and calculated.

In forex or conventional security markets, weighted alpha is designed to help discriminate between different instruments before applying a trading strategy. Weighted alpha allows forex traders to see which currency pairs are exhibiting meaningful trends and activity, acting much like a momentum indicator. It's a technique for measuring price changes in one asset and comparing it to price changes in similar assets. Weighted alpha is a popular tool for preliminary trend and momentum analysis.

Tools such as forex momentum apply weighted alpha to spot the strongest current forex contracts. Contracts that have risen over the past year have positive weighted alpha scores. Traders can use this information to select which currency pairs have the most potential before applying a more thorough strategy. For example, if the NZD/USD pair has been a stronger contract than the USD/CNY, weighted alpha quantifies this strength so that traders can make an apples-to-apples comparison before exiting or entering any positions.

Are Forex Brokers Regulated?

Yes the best Forex brokers are regulated. The most important thing your broker must have is proof of regulation. If you choose to do business with an unregulated broker, you are opening yourself up to a whole slew of potential problems. For example, if you have to dispute a trade or action facilitated by the broker, who do you turn to? If they are unregulated, you are going to have very little if any legal protection from fraud. Or if the broker goes bankrupt, will you lose your deposit?

Thus you need to have a broker that is regulated in a country where the law is followed and legal protection is strong. The essence of the regulatory authorities is to assure the economic strength of the broker and the integrity towards the traders. The leading regulatory bodies are: US - National Futures Association (NFA) and Commodity Futures Trading Commission (CFTC), Europe - Financial Services Authority (FSA UK) and Cyprus Securities and Exchange Commission (CySEC).

What are the most popular forex platforms?

Most brokers have several platforms, including those that are highly specific for automated and algorithmic trading. Some of the largest factors that come into play when selecting a forex trading platform are your individual trading style and experience level. Well-rounded forex platforms will have the most flexible solutions that enable you to trade and manage risk from any computer or mobile device.

The most popular ones are MetaTrader 4, MetaTrader 5, ACT Forex, DealBook 360, Thinkorswim, Forex.com and MB Trading.

How leverage works in Forex trading?

Leverage is a loan that is provided to an investor by the broker that is handling his or her forex account. When an investor decides to invest in the forex market, he or she must first open up a margin account with a broker.

In Forex, investors use leverage to profit from the fluctuations in exchange rates between two different countries. The leverage that is achievable in the forex market is one of the highest that investors can obtain. Standard trading is done on 100,000 units of currency, so for a trade of this size, the leverage provided is usually 50:1 or 100:1.

Leverage of 200:1 is usually used for positions of $50,000 or less. Sometimes the leverage can work against the trader also and for this forex traders usually implement a strict trading style that includes the use of stop and limit orders.

What is a Price Improvement Technology (PIT)?

In recent years Forex trading has seen much advancement with regards to technology like the DMA or direct Market access trading. The latest advancement in Forex technology is what is known as Forex price improvement. Forex price improvement technology will help Forex traders deal with gaps in the market and also the problem of fast moving market conditions.

Non-Dealing Desk Forex Brokers now have the ability to offer what could be considered positive slippage. If a Forex trader places a limit order they can actually have the ability to have an improved execution price, something that has not been seen in the marketplace before.

If under certain trading scenarios the liquidity and the price are available then the Forex trader will receive an execution at that improved price. It was always to the benefit of the Forex trader to implement an employee limit orders and not market orders, which may result in gap execution. Price improvement technology will help Forex traders minimize risks and improve their overall trading results.

Is there a minimum account size or deposit?

Obviously you need a Forex Account when trading and make a minimum deposit. With trading platforms like FXOpen you can even have as low as $1 and start your trade. But to be more realistic the money you deposit plays a crucial role in how much you will likely make if you follow proper risk management.

If you’re willing to grow your account slowly, then you can likely begin with as little as $250, but starting with at least a $1000 is recommended no matter what style of trading you do.

Why execution speed is important?

Trader by all means wants his orders to be fulfilled as soon and as accurately as possible which means he/she wants to enter the market immediately at posted price with no slippings, requotes, or delays. Unfortunately, not all companies can provide such level of service.

Today there exist technologies allowing to process orders in the average of 0.03 seconds which, certainly, enables traders to enter the market at posted price. When choosing a Forex broker, one of most significant parameters is the speed of order execution. The quicker the company processes investor’s orders, the higher the chances are that the trader will enter the market with the posted price.

If trade is effected during news issues or at high volatility, at such speed of execution the risk of slipping is less. Also trader can work at interbank market with leading providers of liquidity at best current prices at the market, reducing spreads and commission fees.

Why is Deposit processing time important?

Deposit processing time is important if you want to trade the same day. Therefore it is important to use the mode of deposit that will take few business hours. Or make your deposit prior in advance. For deposits made via bank wire transfer three to five working days are usually required for the deposit to be made. If you use Credit/Debit card and e-wallet deposits then usually it is processed within 2 business hours and your money to your trading account is received the same day or on the following business day, at the latest.

Can I leave an open forex trading position for the next trading day?

No. It is not advisable. For securities trading, overnight positions expose the investor to risk because a number of events can negatively impact a position while the trading floor is closed. In forex trades, 5pm EST is considered the end of the trading day. Positions opened at 4:59pm EST and closed at 5:01pm EST are considered overnight positions because a new "day" begins after 5pm. Rollover interest is paid out or received on overnight positions based on the closing interest rate.

What is negative balance protection?

When trading with a brokerage who operates using a Non-Dealing Desk model (STP/ECN Brokers), in certain circumstances traders may face heavy losses should the market move against them. When there is a lack of liquidity, it may not simply possible for the broker to close a position at traders stop loss or at the level where they have no remaining equity. This can lead to traders facing negative balances, essentially meaning that the trader owes the brokerage money.

Some brokerages will pursue clients to recover these negative balances. This means that traders can potentially be pursued via the courts and by debt collection agencies, so that the brokerage can recover the money which it likely owes to it’s liquidity providers.

Not all brokerages, pursue traders who end up with negative balances due to dramatic market volatility. These brokerages are said to offer their clients negative balance protection, which means that the broker will cover any losses faced by clients.

But all brokerages do not offer negative balance protection, as this can pose a risk to them should their be extreme market movements which leave large numbers of their clients with significant negative balances.

So there are number of regulated brokerages which offer their clients negative balance protection. For many traders negative balance protection will be an important selling point and this traders should check the Terms and Conditions of the brokerage they are looking to trade with. It is also important to remain up to date with any changes to the terms and conditions, as developing events may lead brokers to renege on their commitment to offer negative balance protection.

What is minimum distance on Limit & Stop Level?

There are Forex brokers who require certain minimum distance for trading stops & limit orders to be met when trading. It makes the trader requirement to place stops on each trading position no closer than the X amount of pips from the entry point, or from the current price if they modify an already open position.

It is trader's job to know about these limits and rules and decide whether to accept the conditions. When speaking about brokers, this measure helps them to prevent any system abuse, quote delays abuse etc, as well as stop unwanted scalping activities.

For traders this brings several additional conditions to deal with: When a trader opens a position the initial spread is paid when a trader is required to place a stop at a certain minimum distance he is basically asked to bid another X amount of pips which cannot be claimed back. Should a trade go wrong a trader will not be able to close a position sooner than after a minimum required distance meaning that a loss on each unprofitable trade cannot be smaller than the X amount of pips. The requirement for a minimum distance for stops and limit orders eliminates any possibility to use scalping tactics effectively

With having much of information and research on your side you can start forex trading for a valuable experience.

Risk warning: Your capital may be at risk. CFD trading is suitable for experienced traders and not beginners.