Currency traders have a few advantages over traders of other types of securities. The market stays open 24 hours a day during the work week and thebest forex brokercommissions are often a fraction of what online stock brokers charge. But the biggest edge is margin requirements and leverage. You dont need a big infusion of capital to begin a career as a forex trader, just the right tools and the right broker.
Traditional stock brokers in the United States oftenoffer margin tradingto their clients. The broker will lend money to the client for additional stock purchases and then make money in interest when the loan is repaid. Margin rates vary, but most online brokers charge clientsbetween 5% and 9%to borrow money, depending on the amount. Why would clients want to borrow money for thestock marketfrom their brokers?
Leverage refers to how muchborrowed moneyis involved in a trade. In most stock brokerages, investors can get 2:1 leverage, which means they need $50 in their account to trade $100 in capital. Obviously, leverage adds risk to any trade. Since you dont just lose your capital if it goes bad, you owe your broker money.
Excessive leverage has killed many financial firms, including Lehman Brothers and Long Term Capital Management. But when its used properly, you can generatetremendous profitswith little upfront capital.
In forex trading, leverage can often beas high as 500:1.Since currencies move incrementally compared to stocks, using leverage doesnt carry the same risks. When trades are measured in fractions of a penny, 500:1 leverage doesnt seem excessive. Forex brokers use margin requirements to determine how much leverage currency traders can use per trade. This is expressed as a percentage, such as USD/EUR trades that require a 2% margin.
Forex trading is subject tostricter regulationsin the United States than most countries in the world. Europe and Australia have no aversion to leverage as high as 500:1, but U.S. law limits forex brokers to 50:1 leverage.
Additionally, many forex brokers offer contracts for difference (CFDs) on indices, bonds, commodities and even cryptocurrencies. These products are highly speculative and banned entirely in the U.S., which meansMetaTrader 5 has practically no uptake.
Choosing a forex broker depends not only on your trading preferences but also thecountry you live in. United States forex traders wont be able to use the highest available leverage or use popular trading programs like MetaTrader 5. When you pick a broker, here are a few things to pay attention to:
: In the United States, margin requirements are limited to 2% (50:1 leverage). Internationally, you can lever trades up to 500:1 on most major currencies. You dont need to use high leverage on all trades, but make sure to pick a broker with limits that work for you.
: Forex brokers make money in two ways: from commissions or from the spread. Many brokers have spread-only and commission accounts available, and commission accounts get reduced spreads. Brokers have fee charts on their websites. Make sure you understand all charges before you open an account.
: Many forex brokers have their own proprietarytrading software, but also offer popular platforms like MetaTrader 4 and cTrader. If you like to trade using MetaTrader 4, make sure the broker you choose supports it!
: Capital required to open an account varies by the broker, as does the amount needed to complete a trade. Some brokers may have no account minimum, but all will have trade minimums.
Using the above criteria, Benzinga has identified the best high leverage forex brokers on the market today. High leverage in the United States islimitedto 50:1,but for international brokers to qualify, they must offer 500:1 leverage for at least a few major pairs.
Forex traders in the United States are at a disadvantage. Leverage is limited to50:1and products like CFDs are completely illegal. With those caveats out of the way, American currency traders still have good options available to them and m is one of the best.
has over 70 forex pairs to choose from and youll get2% margin(50:1 leverage) on major pairs EUR/USD, USD/CAD, and EUR/CAD. Most other major pairs rest between 3% and 5% margin. Forex.com offers three different account types: standard, commission and direct market access (DMA). The standard account is spread only, while the commission account lowers spreads but institutes a $5 commission on every 100,000 units.
FOREXX.com supports MetaTrader 4 and NinjaTrader and has its own proprietary trading system available ondesktop. High-volume discounts are available and Forex.com will even refund bank fees you incur on wire transfers.
When we set the parameters of this brokerage list, we said 500:1 leverage was a must for international brokers. NordFX, established in 2008, goes above that level by offering1,000:1leverage on all three account types. Account holders only have 33 currency pairs to choose from, but1,000:1 leverageis hard to ignore.
NordFX has three forex trading account types: Fix, Pro, and Zero. Fix and Pro are both commission-free accounts, with spreads from 2 pips for Fix and 0.9 pips from Pro. Fix has a$10 account minimumwhile Pro has a $50 minimum. The Zero account is a commission account with reduced (or sometimes non-existent) spreads which charge traders 0.0045% per trade.
NordFX is an award-winning brokerage that supports both MetaTrader 4 and MetaTrader 5. The company has offices in India, China, Thailand, Russia, and Sri Lanka, but unfortunately, U.S. clients are barred from opening accounts.
XM is a member of the Trading Point Group, a London-based investment company. XM specializes in forex and CFD trading and claims to provide over 1,000 instruments to trade over seven different asset classes. Like NordFX, XM offers three different account types; two spread only and one commission-based. But unlike NordFX, leverage is limited to500:1on the first $20,000 (and decreases from there).
Over 55 currency pairs can be traded at XM, all with 500:1 leverage if the account holder prefers. The standard and micro accounts both have $5 account minimums and allow traders to hold 200 positions at once. On the commission-based Zero account, spreads areas low as 0.0but theres a $100 account minimum and commission are $3.50 per 100,000 units.
XM.com is regulated in the U.K. and supports both MetaTrader 4 and 5. CFD products based on stocks, indices, commodities, precious metals and cryptocurrencies.
Touting itself as the worlds largest true ECN forex broker, Australian-based IC Markets is known for itsfast service, plentiful product options and support for popular forex trading platforms. Over 60 currency pairs are available and spreads are as low as 0.1 on commission-based accounts.
IC Markets has two types of True ECN commission-based accounts, one for cTrader and one for MetaTrader. The MetaTrader account has a $3.50 commission on 100,000 units, but the cTrader account option isonly $3.00 per 100,000. The standard account has no commission and spreads start at 1.0 pips. All accounts can use leverage up to 500:1.
ECN stands for electronic communications network, which means IC Markets offers traders very fast execution, low spreads and access to multiple liquidity providers.Account minimums are $200, which is a lot higher than previous brokers on this list.
Another Australian entry, Vantage FX provides ECN and STP forex trading accounts with leverage as high as500:1. Over 40 different currency pairs are available and since Vantage FX has no trading desk, theres no payment for order flow and clients have greater control over their trades.
Three account types are available: Standard STP for traders who want no commissions, Raw ECN for traders who prefer low spreads and Pro ECN for institutions and money management professionals.Spreads start at 1.2 pipsfor STP account holders, while Raw ECN account holders pay a $3 per lot commission. Pro ECN has a lower $2 commission, but account minimums start at $20,000. For the retail trader, Raw ECN accounts have a $500 minimum and Standard STP has a minimum of $200.
Vantage FX supports MetaTrader 4 and 5 and even has an application for MetaTrader on Macs. Additionally, its education materials are some of the best available in the forex brokerage industry.
Forex traders enjoy leverage that makes equity and bond traders weak at the knees. Leverage of 500:1 isnt uncommon for most forex brokers, but U.S. clients can only get 50:1. Leverage shouldnt be the only factor when deciding on a forex broker, either.
Consider the trading platforms andcurrency pairs available, the costs and fees associated with trading and the capital needed to open an account.
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