Lowest Spread Forex Brokers.
When a slew of forex broker options are available, making the right choice can become a major task. It takes careful comparative analysis to choose the forex broker with the tightest dealing spreads that also align with your interests and needs. Regulation, trading costs like commissions and spreads, funds security, ease of trading and customer service can all be key criteria for selecting a broker. Here's how to find the lowest spread forex broker.
Get Started.
Earn cash back on your FX trades.
Open an account in as little as 5 minutes. Spot opportunities, trade and manage your positions from a full suite of mobile and tablet apps.
Get Started.
Table of Contents [ Show ]
Quicklook: Best Lowest Spread Forex Brokers 3 Best Lowest Spread Forex Brokers How Spreads Make a Difference in Forex Trading What to Look for in a Low-Spread Forex Broker Choose the Best Low Spread Forex Broker for You.
Quicklook: Best Lowest Spread Forex Brokers.
Best for Most Currency Pairs: FOREX.com Best for Non-US Traders: Pepperstone Best for Trading Multiple Markets: IG Markets.
3 Best Lowest Spread Forex Brokers.
Take a look at the following forex brokers that made the list.
Forex Investing.
get started securely through Forex.com's website.
1. FOREX.com.
FOREX.com allows trading in over 80 currency pairs, indices, over 220 shares, commodities and cryptocurrencies.
The account types offered are standard and commission accounts. Cost of trading with a commission account is a low variable forex spread plus a flat $5 commission per standard lot chargeable at the time the trade is executed.
Typical spread for some of the major currency pairs are as follows:
EUR-USD: 1.2 pips GBP-USD: 1.9 pips USD-JPY: 1.3 pips AUD-USD: 1.6 pips.
FOREX.com has all three proprietary platform options, namely desktop, web and mobile. It also offers the widely used MetaTrader 4 platform. Currently, FOREX.com only offers spreadbetting in the UK.
Customer Service.
Open an account securely through Pepperstone's website.
2. Non-US Only: Pepperstone.
Pepperstone is an Australian online forex broker which allows trading in index CFDs, precious metals, energy and cryptocurrencies. Its standard account charges zero commission. The average spread for the EUR-USD pair is 0.16 pips, the USD/JPY is 0.25 pips and so on.
The Razor account is charged with a commission of AU$3.5 per 100,000 lot traded , and the average EUR-USD spread is 0 to 0.8 pips. The Razor account mandates an account minimum of AU$200 or its equivalent. There is no dealing desk involved, which gives traders direct market access.
Pepperstone is regulated by the U.K.’s Financial Conduct Authority (FCA) and the Australian Securities and Investments Commission (ASIC).
It offers 11 trading platforms, including MetaTrader 4 and cTrader, thereby providing the best trading software and tools on the market. A demo account is also offered so you can test out platforms and strategies.
Forex Execution.
get started securely through IG Markets's website.
3. IG Markets.
IG Markets is also based out of Australia and allows trading in forex, bonds, stocks, commodities, cryptocurrencies, indices and futures. The firm offers 60 currency pairs and allows up to 1:500 leverage.
The average spread for IG Markets’ ECN account is 0.1 pips for the EUR-USD pair, 0.2 pips each for USD-JPY and AUD-USD pairs and 0.4 pips for GBP-USD pairs.
An ECN account facilitates using electronic communications networks for giving clients direct access to other participants in currency markets. Apart from the spread, a commission is also applicable. The MetaTrader 4 True ECN commission rates for a U.S. dollar-denominated account is $0.035 for a micro lot and $3.50 for a standard lot.
For a standard account, where only spread is applicable, the average spread for the EUR-USD pair is 1.1 pips, 1.2 pips for both USD-JPY and AUD-USD pairs and 1.4 pips for GBP-USD and 1.5 pips for USD-CAD and USD-CHF.
IG Markets provides traders access to the desktop, online and mobile versions of the MetaTrader 4 and MetaTrader 5 platforms as well as the cTrader platform. IG Markets is regulated by ASIC.
How Spreads Make a Difference in Forex Trading.
Forex brokers are the intermediaries through which retail currency traders route their transactions. Although some accounts involve paying commissions, online forex brokers are typically compensated just by the dealing spread. The spread is the difference between the bid and the ask or offer exchange rates the market maker is willing to deal at.
Bids and Asks.
The bid is the exchange rate at which a broker or market maker is willing to buy a currency pair. This is also the rate that their clients will be able to sell at.
The ask or offer is the exchange rate at which a broker or market maker will sell a currency pair. A trader will be able to buy at that rate. The bid rate is generally lower than the ask rate.
The width of a dealing spread is usually expressed in pips. A pip is the smallest exchange rate movement for a currency pair. A one pip shift typically occurs in the fourth decimal place of an exchange rate quote, which involves a movement of 0.0001 in the rate.
Currency Quotes.
Currencies trade in pairs in the forex market. A currency pair’s exchange rate quote expresses the value of the base currency in terms of the counter or quote currency. The base currency appears first in the standard notation for a currency pair, while the quote currency appears second.
An example of this notation would be EUR/USD in which the EU’s euro or EUR is the base currency quoted in terms of the U.S. dollar or USD. Assuming the EUR/USD pair has a bid rate of 1.1363 and an ask rate of 1.1365, the dealing spread is 2 pips. If you are trading a €10,000 lot in EUR/USD, the cost of that 2 pip dealing spread is €10,000*0.0002 = $2.
Spreads.
The width of the dealing spread is influenced by factors such as market volatility, trading volume and liquidity. A wider spread is indicative of high volatility or risk, while tighter spreads indicate low volatility and high liquidity.
Wider spreads are especially common around the release of market-sensitive news or in the wake of some unexpected geopolitical event that has major forex market ramifications. Wide spreads can also be due to a lack of liquidity, as can occur when a major money center closes for a holiday.
If the spread for a pair widens appreciably while you’re holding a position, then you should prepare for a risky market move. A prudent step to take might involve reducing the size of the position if you are using a high leverage ratio. This helps you avoid a margin call or an automatic closeout of your position in case the market moves unexpectedly against you.
The spread used in forex trading can be a fixed spread or a variable spread. A fixed spread is kept constant and does not vary depending on market conditions. It’s usually set by dealing desks or online brokers that also act as market makers. Most online brokers offer variable spreads that can change depending on market conditions.
What to Look for in a Low-Spread Forex Broker.
Do some careful research, since a promise of low dealing spreads may not always guarantee that a forex broker offers the lowest trading costs for your particular strategy. Watch out for these situations:
Most brokers offer different spreads for different currency pairs and account types. Some accounts might tempt traders with the promise of a low dealing spread while also charging a high commission. Make sure you are aware of all dealing costs involved. Be cautious when a broker promises a fixed spread. It could mean the spread is wider than average, additional trading fees will be charged or the broker may be trading against you by acting as a market maker. Some brokers that offer low spreads can require a high minimum deposit. When you have to make a choice among brokers offering the lowest spreads, look for brokers regulated in your country. That way, if a problem arises, it is generally much easier to litigate in your own country. Trading with brokers that offer a convenient and inexpensive mode of local payment can also help you avoid extra deposit, withdrawal and currency conversion charges.
Choose the Best Low Spread Forex Broker for You.
Tighter spreads can definitely give forex traders an edge, but look out for hidden costs. These might include commissions, rollover fees for holding overnight positions, data feed fees, charges for not maintaining a minimum account balance, etc.
Along with spreads and commissions, there are other factors that should be considered when selecting a forex broker in order to trade safely and optimally given your trading strategy.