The Ultimate Forex Brokers Comparison Guide!
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There is a long list of Forex brokers in the market, all of whom have different priorities and diverse approaches to make online trading possible for both retail and institutional traders.Forex brokers have diverse business strategies, goals, and a global outlook, and are as unique as individual Forex traders. Similar to the varying requirements of traders, Forex brokers may also offer different FX products and features to suit their overall services portfolio. Therefore, if you need to compare Forex brokers to find out which one is best for you, there are several factors that you will be required to know in advance. When comparing forex brokers, a trader must first have a fair idea of his/her own requirements and be outright honest in their approach to the markets. Forex broker comparison is not just about comparing the various Forex products and services side by side, but it also involves having a deep understanding of the long-term aspect of investing with a Forex trading company. In this Forex brokers comparison guide, we will attempt to look at the several aspects that contribute to the overall reliability of an FX broker. We will also provide insights into the different broker qualities that should be considered when making your final choice.
Why is Forex Broker Comparison a Must For Any Trader?
Hundreds of online Forex brokers cater to the largest retail trading market in the world. Some companies may customize its products and account packages according to individual client requirements. Therefore, you may wonder why it is so important to check out the various types of forex brokers and classify them into groups according to their account features. A forex broker comparison is essential for both beginners and experienced traders alike, as comparing the services of two different companies will not only make choosing a broker much more simpler, but it also offers the opportunity to get the best value for your investments. While the internet aims to simplify our lives by offering us all information at our fingertips, it can also lead us into high-risk investment opportunities such as Forex trading and allied activities that have the potential to wipe out our investments in the matter of a few seconds. Trading the markets with dishonest companies can also cause all kinds of problems. Not all brokers are safe and secure, and it is very possible to be scammed by an online broker, even if you are a talented and experienced investor. However, avoiding issues like broker scams and fraudulent practices in financial trading is not the only reason why you should take the time to carry out a Forex brokers comparison. Here are some of the other reasons:
- To have a clear understanding of the type of services rendered by a Forex broker, and what they can offer you in terms of account packages to suit your needs. Sometimes, FX brokers that offer generic Forex trading services may not be suitable for you strategies, especially if you have specific trading needs.
- To discover which broker provides the best offers for trading This is not just about the bonuses on offer, but it may also include numerous educational resources, market analytics, trading signals, and other account benefits to help traders to learn about FX trading and the market dynamics at a rapid pace.
- To test all of the different types of trading accounts and protocols, so that you can compare and decide which trading protocol suits you best. Moreover, traders are mostly uncertain about their exact requirements, which makes it difficult to make a decision based on the experience of analyzing the products of a single Forex brokerage.
- Traders may be able to learn all the basics of trading by performing a detailed Forex brokers comparison. Comparing FX brokers and analyzing the different aspects of their trading accounts is the easiest and the most original way to learn about financial trading without the stress of losing money on real trading accounts. FX broker comparisons can also expose traders to a lot of account information, which will hold them in good stead when it comes to choosing a live trading account.
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Forex Brokers Comparison By Type Of Trading Protocols
The first step in comparing and evaluating the list of forex brokers is to ensure that you are aware of the various types of brokers and trading accounts that are available to you. Here are some of the major types of financial trading platforms that you will find according to the different market access protocols:
– Market Maker
Also known as a dealing desk protocol, a market maker broker is the most popular type of Forex brokerage, albeit not usually preferred by professional traders and institutional investors. A dealing desk Forex company is often referred to as a market maker because it has its own dealing desk, trading conditions, and fixed spreads. Market Maker brokers work with a limited liquidity pool, where clients’ orders are transmitted through the broker’s dealing desk, thereby resulting in high trading costs and less favorable trading conditions. The market maker or dealing desk brokers are able to fix their own price in the market, and may go above and beyond the general market price of a specific underlying asset. The price fixing nature of the Market Maker model is why some Forex brokers quote different prices in their trading platforms than the real-time interbank rates that are prevalent in the markets. Another characteristic of these brokers is that they can choose to take the other side of a trader’s order to make a profit from their clients’ losses. Sometimes, a dealing desk broker will have to become a counterparty to a trader’s order, so as to make the financial transaction possible. If there isn’t liquidity in the market and if the broker does not become a counterparty to its clients’ positions, they will be forced into rejecting their clients’ orders, which in turn increase the instances of requotes and order cancellations. Market maker Forex brokers are ideal for smaller traders, as most of these FX companies offer micro trading accounts that allow traders to start trading from as low as $1. Meanwhile, a market maker involves a significant conflict of interest with its clients, as the company may choose to act against its clients. Therefore, unless regulated by reliable authorities, market maker brokers may not be suitable for large traders.
– No Dealing Desk
Conversely, a no dealing desk Forex broker is the one who always provides the most beneficial trading conditions, where traders are connected directly to a global pool of top liquidity providers in the market. No Dealing Desk brokers are able to offer the best prices from the markets by receiving a live feed from several liquidity providers, which keeps the spreads low and competitive. No Dealing Desk trading not only involves competitive spreads, but it also involves the largest liquidity in the market, which is highly suitable for Direct Market Access (DMA) trading. A DMA Forex broker, through its partnership with leading liquidity providers, should be able to offer a highly favorable trading environment; however, the spreads and liquidity are never fixed. In the case of high volatility, the spreads can change their value suddenly, and orders are only filled according to the specific market situation. No Dealing Desk brokers may induce partial fill of orders, and such type of trading can induce large slippages. No Dealing Desk brokers, also known as NDD FX trading companies, primarily follow two main types of trading protocols.
ECN stands for Electronic Communication Network, a type of electronic trading network between market participants that offers access to one of the largest liquidity pools in the financial markets. ECN platforms typically contain large banks, hedge funds, and interbank liquidity providers, which are the main participants in the Forex market by transacting billions of dollars’ worth of currencies on a daily basis. ECN trading conditions are highly preferred by professional traders and institutional investors, primarily due to the open liquidity and direct market access that does not involve any conflict of interest with the broker. ECN networks show real-time quotes, orders, and the most competitive spreads in the market, thereby helping traders to reduce their cost of trading. While ECN trading is highly preferred for large traders, there are slight drawbacks to ECN accounts, which includes a commission per trade, partial order fills, and massive slippages.
An STP is a Straight Through Processing broker, which adopts a type of financial trading platform that uses a hybrid of Market Maker and ECN protocols. Most STP Forex brokers try to connect their traders to the interbank liquidity pool by offering direct market access trading, but in a significant majority of STP accounts, the brokers may connect their STP traders to a Market Maker or dealing desk protocol. STP accounts have larger spreads and do not contain any commissions for trading, but such accounts may involve a slight conflict of interest if traders’ orders are not routed directly to the interbank liquidity providers. STP accounts may be suitable for smaller traders, especially since there is a significant lack of slippages or commissions. On the downside, STP trading may involve requotes, price manipulation, high spreads, and brokers may choose to offer a market maker account to its clients
Multilateral Trading Facilities might also be considered as a type of a broker protocol, but this type of exchange activity is not regulated at all. MTF serves as a self-regulatory exchange for financial instruments, where buyers and sellers use unconventional investment platforms for trading financial products that are usually not available at regulated mainstream exchanges. MTF is not exactly popular in the Forex markets, but there are a handful of Forex brokers that adopt the MTF model through the LMAX Exchange, which is an UK-based MTF for Forex trading that comes under the European MiFID guidelines.
What Are The Other Relevant Factors In Forex Brokers Comparison?
Besides having a thorough knowledge of the types of brokers and the trading protocols, it is also important to know how to judge them and to tell the difference between the good ones and the bad ones. Our following Forex broker comparison guide can help you to determine the most important factors to distinguish FX brokers from each other.
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– Origin and History Of The Forex Broker
Understanding the underlying fundamentals of a company and its operating history is important for distinguishing brokers for several reasons. The origin and the history of a broker help us to see how reputable the company really is, and enables us to learn how this broker has operated in the market over the years. A Forex trading company’s overall reputation and customer feedback can help us to determine whether it is experienced enough to offers us the best services and the most reliable trading platforms. Meanwhile, the country of origin, as well as the jurisdiction where the broker is located also matters due to the regulatory and trading restrictions that are common in certain geographic locations. Citizens of certain countries are prevented from exercising complete freedom on Forex trading, most notably for traders from the US, and such traders cannot use brokers from other specific nations due to legal or regulatory policies. Therefore, it is essential for traders to particularly careful about the geographic location of a Forex broker while comparing the different options in the market.
– The Choice Of A Forex Broker’s Trading Platforms
Most experienced traders usually lead their search for a Forex broker according to the type of trading platforms on offer. Forex trading platforms are a critical component in numerous Forex broker comparisons, and a significant majority of comparison guides will have a dedicated Forex platform comparison and a review section to offer great insights into the platform options. Whether a trader is looking for a browser based platform, or if he wants to adopt a professional approach by downloading a trading software to install on his PC, brokers should always be competitive and innovative in their approach, or else risk losing their intended audience. These days, Forex trading software is also available for use on mobile devices, and it is likely that traders will all be able to trade on the go through simplified mobile trading apps that are available for most third-party trading platforms and proprietary trading software through the respective mobile app stores.
– The Intrinsic Account Features Provided By Forex Brokers
Forex broker comparison usually depends on the instruments available for trading, the asset types on offer, and account features that facilitate better financial trading (like FX trading signals, market analysis, and personal account managers). The success and overall reliability of an FX company depend on the range of features that are provided to traders, and some features really make a broker’s website stand out from the rest. Bonuses may also be considered as one of the striking features that alleviate the status of a company, making a broker different or better than its immediate competitors in the eye of a trader. Traders are known to compare and select brokers depending on the magnitude of bonuses that are offered to them according to the size of their investments. However, we would suggest that you do not use the bonuses on offer as your main factor for comparing brokers and for investing with a company. Some trading sites may offer excellent special promotions and offer but may otherwise have low-quality services that are best avoided.
Making Wise Investment Choices With The Best Forex Account Comparisons
Making a comparison of the various forex brokers is absolutely crucial for all traders. It helps traders to estimate the reliability and performance of a company and to find out whether they can be trusted for the safety and security of trading funds. Comparing Forex brokers will not only help in avoiding all the risks in the market, but it also gives a chance for a trader to browse through different options in the market to choose a highly reliable Forex trading service that offers top-quality account packages. Although the list of forex brokers is quite big, you can use our factors as mentioned above in your Forex broker comparison strategies to find which broker is best for you and your trading strategies. Good luck in your trading ventures!
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