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You may have played around in the stock market. Maybe you’ve even dabbled in bitcoin. But what about Forex Trading? If you’ve ever crossed a border you’ve done Forex trading when you’ve exchanged one currency for foreign currency. But before the emergence of Forex brokers, only individuals and businesses with large amounts of holdings could take part in foreign exchange trading for profit.
Even though it’s been around for a long time, Forex trading is still relatively unknown. So to help prospective investors understand the market and identify the best Forex brokers, we will go over the Forex trading market, what the role of the Forex broker is and the best Forex brokers around today. Read on to learn some basics of the Forex market, and start investing today.
Product FAQ
1. What Is Forex Trading?
Forex trading is the buying and selling of foreign currencies on the foreign exchange market. It is this buying and selling and the foreign exchange market that set the floating rates of currencies. The Forex trading market is similar to the stock market in that you are buying and selling; only this market is currency. Like the stock market, you don’t need to have possession of the currency to trade it.
2. What Are The Different Types Of Forex Trading?

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There are several different types of foreign currency trades that can be done, and we’ll go over the most common ones you’ll come across. But a standard rule of all Forex trading is that it is done in pairs.
Spot Trading
Spot trading is when you sell one currency and you buy another. This is the most familiar type of Forex trading. The difference between the “buy” price and the “sell” price of the currency is called the “spread,” and that is how a market maker makes money.
Foreign Exchange Swaps
Foreign exchange swaps are used mostly by banks. This is when two parties agree to buy currency from each other at the “spot” trade. Before a trade is made, traders will deposit money into their account as collateral, but they can trade more than is in the account. A central bank will then hold the currency and keep it available for member banks for overnight and short-term lending.
Forward Trade
This is similar to a “spot” trade, but the exchange occurs at a future date. The trader pays a small fee to guarantee the agreed rate. Forward trades will protect you from the risk that the rate will rise.
Short Sales

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Short sales are forward trades where you borrow from the dealer to sell a currency first, instead of buying first. You promise to buy it in the future at a price agreed upon with the dealer. This sale is done when you think the price of the currency will fall and is similar to shorting a stock. It is a risky move because if the price rises, you must buy the currency from the dealer at the higher price.
Foreign Exchange Options
This is where you have agreed to buy a currency at a future date and price. However, since it is an option and not a contract, you aren’t obligated to buy it.
3. What Is Leverage?
Leverage uses borrowed capital to return risk on capital. An example of leverage in Forex trading is having 50:1 leverage which means for every $ in your account, you have access to around $ to trade with. Or if you have around $$ to trade with, then you have access to around $$$ to trade with. This is similar to trading on margin in stocks, but in Forex trading, there is no interest charge. Forex brokers will generally have different fixed leverage rates like 50:1, 20:1 and 10:1. Lower leverage protects your capital, but higher leverage will give you more returns. 50:1 is the legal limit for leverage.
4. What Is The Most Commonly Traded Currency?
Trillions of dollars are traded on the Forex market every day. The most commonly traded foreign currency is the U.S. dollar, and the U.S. dollar accounts for around 88% of total global Forex trade. The Euro is the second most-traded currency accounting for around 33% of total global trade. Banks are the biggest traders accounting for around 24% of daily turnover in Forex trading.
5. What Does A Forex Broker Do?

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A Forex Broker is the intermediary between you and the interbank. The “interbank” is a collection of banks that agree to trade together. The purpose of a Forex Broker is to make it as easy as possible for the trader to connect with banks trading currency. They follow a set of rules and are required to make disclosures similar to the rules and regulations of a bank.
6. How Does A Forex Broker Work?
The Forex broker makes money through the bid-ask spread of a currency pair. For example, if a broker buys euros for 1.2501 USD, they might sell them at 1.2502. That price increase, however small, is the spread profit. The Forex broker will make money through this and transaction fees. However, transaction fees are becoming less popular as being a Forex broker has become more competitive.
7. How Do You Open A Forex Trading Account?
Opening your Forex Trading Account is similar to opening a standard bank account. You must give identification and fill out paperwork. To get the hang of Forex Trading, you can open a demo account to practice trading.
8. What Should You Look For When Choosing Your Best Forex Broker?

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The best Forex brokers will have an excellent reputation and the functionality that is required of a broker. Before opening account, prospective investors should try the demo accounts of each broker to decide which broker they like best. You should also consider their platform tools and the number of currencies they trade.
9. What Is The Risk Of Volatility In Forex Trading?
The profits in Forex trading can be huge, but that also comes with a great amount of risk. For instance, if you are trading 10:1, you can control around $$$ on the market for around $ dollars. This means around $$$ in profits or around $$$ in losses. Forex trading is often seen as the Wild West of trading because much of it is unregulated and non-transparent.
That has changed in the last few years. For instance, leverage is now regulated, with 50:1 as the largest leverage option you can have. It also was seen as a very volatile space, but volatility in Forex trading has declined in recent years.
10. What Are The Benefits Associated With Forex Trading?
Forex trading has many benefits for traders of all levels. Liquidity in Forex trading is high, which means assets can be converted to cash quickly. The transaction costs associated with Forex trading are often built into the transaction, so they are either very low or almost non-existent. Leverage in Forex trading opens the door to higher profits.
How We Reviewed The Best Forex Brokers

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To review the best Forex brokers, we looked at the broker platform, tools and currencies to decide which had the most options. We also considered each broker’s overall reputation and how each broker makes money to decide who was the best Forex broker. To make sure the Forex brokers we considered were the best in terms of transparency and regulations, we chose only brokers that are regulated by the National Futures Association and the Commodity Futures Trading Association.
Top 5 Of The Best Forex Brokers
Oanda

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Oanda is one of the best Forex brokers for overall trading. They have a spread markup and commission fees, but the commission fee is low—at around $ per 1 million units. Their spread markups are some of the lowest among major Forex brokers. They have no account minimum and no minimum trade lot, and they give traders access to over 70 different currencies.
Pros
Cons
They offer 50:1 leverage. They have also introduced commission pricing to help with customer support. They also offer Sunday-Friday customer support and have a range of different easy-to-use tools for traders to learn the ropes and get analysis.
Forex.com

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Forex.com is one of the best Forex brokers for beginner currency traders. They have spread markups but no transaction fees. There are more than 80 currencies to trade and a customer-friendly cash rebate program. Forex.com does have minimums with a $ account minimum and a minimum trade lot of around 1,000.
Pros
Cons
Their leverage maximum is 50:1, and they allow trading on multiple platforms. The cash rebate program is particularly good for active traders. They also have a huge selection of educational tools for beginner traders, like videos, guides and reading.
Ally

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Ally is a good choice for beginner and more experienced Forex brokers. They offer strong customer support and lots of educational materials for beginner, and you can choose to have an auto-managed account or self-directed account depending on your comfort and expertise level. Their markups are low and confined to spreads.
Pros
Cons
Their account minimums are around $ overall, and managed accounts need an investment of around $$$ to open. Their minimum trade lot is around 1,000. They are a good platform for trading multiple products in one place. So if you want a one-stop-shop for Forex and stocks, this is the place for you.
Ameritrade

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Ameritrade is the best Forex broker if you’re looking for excellent platforms and tools. Ameritrade has both spread markups and commission fees. They have 70 different currency pairs and offer the maximum leverage of 50:1. While they have no account minimums, their trade lot minimums are around 1,000 for commissioned pairs and 10,000 for spread markup pairs.
Pros
Cons
Their thinkorswim trading platform is of a professional level and hard to top. It allows traders to trade multiple products in one place, create custom currency pairs and offers advanced technical analysis. Their mobile trader app is also top-notch and great for practice.
ATC Brokers

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ATC Brokers is one of the best Forex traders for low-cost Forex trading. They are commission-based and charge around $ for every 10,000 units round turn (so for both buying and selling). These commission rates are very low when considered that they are per order. This can be a great thing for high-volume traders because they save money.
Pros
Cons
They have 31 different currency types and have an account minimum of around $3,000 with a minimum trade lot of around 1,000. This platform is better for more experienced traders. They offer very few educational tools, and their platform is very bare-bones and to-the-point with little analysis.
Closing Thoughts
Forex trading is really the Wild West of investment, and the first thing you will need is a good Forex broker to start trading. But who is the best Forex broker? The best overall Forex broker, in our opinion, is Oanda for its low fees, easy trading and customer support. For beginner Forex traders, Forex.com is the best for its plethora of educational resources and stellar customer support.
For a trader looking for low-cost trading or high-volume trading, ATC Brokers is your best Forex broker option. If a trading platform is your biggest concern in a Forex broker, there is no better option than Ameritrade. Whichever Forex broker you choose, we hope you have high returns. Happy trading!
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