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Forex Broker Review 2011

2011 Review of Forex Brokers

With all of the complicated pricing schemes, terminology, regulations, and trading technologies, selecting a forex brokerage may seem like an overwhelming task. Fortunately, our seasoned forex veterans spent hundreds of hours sifting through brokerage sites, downloading platforms, and analyzing spread data. The result of this effort is the most comprehensive and unbiased forex broker review available. Our ranking system breaks down and dissects seven major categories that brokerages should be offering their clients.

  • Trade Costs: The transaction structure of the forex market is notably different than that of the equities, options, or futures markets. Our review not only explains what costs are involved, but highlights the solutions that are the most cost efficient.
  • Platforms & Tools: With such rapid growth in both the forex market and technology, it's important to know what functionality is available for traders. We've reviewed the most powerful platforms and the newest tools so you know how best to empower your trading strategy.
  • Research & Commentary: Quality research is hard to come by, but when it's made available, it helps traders make accurate and informed decisions about their trading. We've scoured brokerage sites and outlined whose research and commentary is most useful to a variety of trading styles.
  • Education: A broker's educational material speaks volumes about their dedication to customers. If a broker can effectively educate and develop their traders, they create a winning situation for everyone. Within this review, we've outlined which brokers are best at developing both beginning and experienced traders.
  • Customer Support: The 24-hour nature of the forex market demands brokers provide trading support around the clock. Required communication channels include phone, email, and live chat.
  • Investment Offerings: A wide range of investment offerings give investors more complete control over their finances and more opportunities to make gains in otherwise inaccessible markets. The number of currency pairs, exotic currencies, metals, managed account services, and currency settlement services were all considerations lent to this category.
  • Mobile Trading: Technological progression will place more and more emphasis on our smart phones and tablets. A broker's ability to stay technologically up-to-date is important to satisfy customers and be prepared for future innovation.

Within the past decade, forex trading has exploded in popularity among traders and investors. The foreign exchange market is a truly unique environment that offers an unprecedented hybrid of investment potential.

For traders, the lure of forex comes from the fast paced, highly leveraged, 24-hour market activity. For longer-term investors, the market creates an atmosphere that harnesses fundamental analysis and the ability to forecast price movement and exploit trending markets.

Regardless of your trading experience or style, our 2011 online broker review will help you discover and understand new tools, offerings, research, and find the best brokerage to give you a competitive edge.

Trade Costs

A tremendously important — yet often overlooked — aspect of investing and trading is the cost of entering into a position. While paying $5 or $10 per trade on your stock portfolio might be “splitting hairs” in the overall scheme of your investment strategy, higher frequency trading — and especially highly leveraged products like futures contracts and currency — will result in a large negative impact from high commissions and poor market spreads. When reviewing the associated costs with trading stocks, options and futures, the information is relatively straightforward. The brokers are offering access to the same market. The only difference is the commission charged for entering and exiting trades — “apples to apples,” you might say.

Unfortunately, forex requires much more investigation to unearth the hidden costs and commissions charged by each respective broker. Many brokers advertise “commission-free” accounts. Obviously, brokers aren’t going to offer completely free trading, so here’s the catch: The spread between the bid and the ask price is increased to compensate the broker for the trade. Other brokers will offer “raw” spreads and charge a flat-rate commission based on the trade volume. One method is more transparent and honest than the other, but we will break down the best forex brokers with the lowest costs per trade.

The best brokers selected for the commissions and fees section of this review are based on their spreads, cost transparency, premium accounts offering reduced costs, and their overall costs felt by you as a trader.

The broker offering the cheapest forex trading is MB Trading. MB Trading scores points with us on almost every level. To start, they offer no premium accounts or tiered commission structure to speak of. Unlike many brokers, MB Trading provides the low-cost trade structure to all of their traders. Whether you have $500 or $500,000 in your account, you will trade the same market with the same low commission rate. MB Trading is what we refer to as a commission-based “raw spread” forex broker, which means they offer some of the tightest spreads with no markup. Not all “raw spread” brokers are created equal. MB Trading delivers market spreads on the major pairs that can go as low as 0.1 pips on the EUR/USD, and charge a flat commission rate. They advertise this commission rate very clearly ($2.95 per 100K USD in volume), which equates to $5.90 for a round trip market order. In addition to their low market order rate, MB Trading recently started paying their traders back $1.95 of their commission for using limit orders in lieu of a market order. Limit orders create liquidity, which helps MB Trading deliver their clients even tighter spreads. Therefore, if you use limit orders, you will end up paying only $1 to $2 per round trip. When compared to a typical no-commission broker, there is no-contest — MB Trading is a runaway victory.

Not far behind MB Trading is Dukascopy. Dukascopy is a Swiss bank boasting a proprietary high tech clearing network that links large Swiss banks together to provide loads of liquidity and super tight spreads. Their spreads go head-to-head with MB Trading as being some of the tightest raw market spreads among major currency pairs. Dukascopy only loses out on its base commission rate, which starts at $4.80 per 100K USD in volume ($9.60 round trip). Important note: Their commission rates are heavily stratified. Their base rate begins with accounts of $5,000 or less, but if you have more money in your trading account or you move more trading volume each month, their commission rates begin to go down drastically. For example, accounts with $50,000 will pay only $1.80/100K and accounts with greater than $5,000,000 pay only $0.90/100K. Traders with large trading accounts will find that there is almost no cost difference between MB Trading and Dukascopy, and the added benefit of trading with a bank may put Dukascopy at No. 1 under specific circumstances.

Because forex trading has such high leverage and traders often enter and exit trades intra-week and intra-day, the overall trading costs can accumulate to large sums — and even bring an otherwise profitable account to break-even or into the red. Trade cost is arguably the most important factor if you are an extremely active trader and profiting with a more expensive broker — choosing a cheaper broker will improve your returns substantially.

Platforms and Trading Tools

In nearly any field, a professional is only as good as the resources at their disposal. Investing and trading currency is no different, and the trading platform and tools provided by brokers must be robust and flexible to fit every trader’s needs. We compared each forex broker’s premier trading platform, tools, and automated trading functionality and selected the brokers that offered all traders the overall best set of tools to get the job done.

The best brokers for trading platforms, tools, and automated trading were selected based on the following criteria:

  • The functionality, usability, and features of their proprietary trading platform.
  • Offering of different platforms, including third-party platforms like Metatrader, and third-party tools like Autochartist.
  • Platforms and tools with scripting, automated trading and order management features.

Coming in at No. 1 is FXCM, by a hair. FXCM’s primary trading platform is the Trading Station II platform, which is offered to all of their trading clients, regardless of account size. Trading Station II is one of the most robust platforms for traders looking for one-click trading execution and an intuitive interface to track currency pairs, open orders, research, indicators, and charting. For more serious traders with $50,000 or more in their account, FXCM offers their Active Trader platform, which features tighter spreads, level 2 quotes, and indicators for short term market liquidity. FXCM also offers two platforms with powerful automated trading features: Strategy Trader, which comes preloaded with several popular strategies and powerful back-testing capabilities, and the ubiquitously popular Metatrader 4, which already has a large secondary market with hundreds of automated systems to choose from.

Although we feel that FXCM’s Trading Station II pales in comparison to thinkorswim’s thinkDesktop platform, FXCM provides more powerful automated trading tools and offers the widely used Metatrader 4 platform. Clients who may have dozens of indicators and systems built for MT4 can easily transport them from their old broker to FXCM. With six platforms to choose from, any trader can find a trading environment that fits their needs.

Coming in just behind FXCM and nearly tied for first is thinkorswim by TD Ameritrade. Thinkorswim is, hands down, the most powerful trading platform available. With up-to-the-minute research, live CNBC streaming commentary, and the ability to trade stocks, options, futures, and forex, thinkorswim is perfect for investors involved in the stock market who want to diversify with currencies. However, since this review is focused on forex trading, we believe the thinkorswim platform could use more FX-related features. While thinkorswim provides “drag-and-drop” programming for automated systems, they don’t provide an automated trading environment that is as robust as FXCM, or any broker offering MT4 for that matter. For manual, fundamental traders, thinkorswim provides the best trading platform and a user-friendly interface. If you’re focused on completely automated trading and/or wish to code your own systems and indicators from scratch, look to FXCM.

An honorable third place mention goes to GFT. The GFT dealbook 360 platform is user-friendly and has a very quick learning curve. Layouts can be completely customized and saved. With pop-out charts and quote windows, you can create a unique layout that works even with multiple monitor formats. Dealbook 360 also comes with automated trading features that don’t require loads of programming or code. However, if you’re interested in serious automated trading, GFT now offers Metatrader 4 as well.

Starting with any of the top three brokers here will give you an ideal starting point to finding a trading platform that suits you. Think of your trading platform as your golf bag. Having the right club for each shot gives you the versatility and consistency needed to keep your scores low. Having all of your favorite investment resources at your fingertips will position you to make clear-headed and informed trades. Fortunately, every broker we’ve tested offers free demo trading on their platforms. So take a few swings, and pick the platform that fits you best.

Research

The research & commentary category of our review is based on a broker's provision of in-depth, fundamental and technical research, commentary, forecasting, and analysis. Available information is expected to be up-to-date, accurate, useful to traders, and well organized. Other considerations include breadth of market coverage (stocks, bonds, commodities), as well as consistency and frequency of updates.

As a whole, Dukascopy stands out as the forex broker offering the best research and commentary. This is because of Dukascopy's ability to create an environment where market information can be digested quickly and effectively. Dukascopy not only delivers market updates twice a day, but they also provide an easy-to-navigate archive of previous commentary. The archived commentary proves advantageous for judging the accuracy of Dukascopy's "Market Expectations," as well as reviewing previous market activity. Where Dukascopy really begins to flex its muscles is with its alternative research offerings. Developments such as "Dukascopy TV," "Movers & Shakers," "Currency Index," and "FX Market Signals" are proprietary concepts that can't be found anywhere else. Another strong reason for the prominent delegation of Dukascopy is its highly developed phone application. Dukascopy gives smart phone users the ability to access a massive amount of research and commentary from anywhere their mobile device can connect to the Internet.

If the ranking for this section was centered exclusively on commentary, GFT would've been selected for the top spot. With more than 30 years of combined experience, GFT's Kathy & Boris deliver unique forex commentary that is both insightful and professional. Each day, Kathy and Boris provide two commentary pieces that summarize market activity and discuss unfolding economic themes. Furthermore, everyday readers have the ability to directly interact with the GFT contributors by posing questions on the commentary. The professional grade commentary, coupled with author feedback, is not a concept you see often and is a major factor in GFT's favorable ranking. Outside of commentary, GFT offers an economic calendar, proprietary technical analysis, and intra-day price forecasts.

For beginner traders, FXCM's daily FX provides a great learning environment. Their active forum and beginning material make it easy for a trader to ask questions and quickly grasp new material. As a trader becomes more developed, their abundance of market commentary and technical research assist traders in making informed investment decisions.

The brokers deserving of an honorable mention in our 2011 review are Forex.com & FXPro. Forex.com helps deliver an edge to its traders by providing commentary from a variety of resources. By offering outsourced market commentary from providers such as Trading Central and Aspen Trading, Forex.com traders are able to seek out a commentary provider that suits their trading style. FxPro does an excellent job of delivering (e-mail) market commentary and updates prior to the opening of each trading session (Asia, Europe, U.S.). The commentary is a combination of FxPro and Dow Jones News Service.

Ultimately, traders need to be able to rely on the information that is presented to them. This information should contribute to a trader's market analysis, as well as their specific trading strategy. In the end, Dukascopy does the best job of presenting information that is factual, timely, and organized.

Education

The education provided by forex brokerages has a substantial impact on the development and growth of a trader. This material is what helps instill new ideas and open doors to new opportunities. A broker's educational content should be progressive, well organized, and provide a medium for questions and constructive feedback. A particularly heavy weighting was applied to beginning educational material. It is this entry level instruction that provides the foundation for what could be the beginning of a lucrative endeavor into trading currencies. Without an easy-to-follow introduction, new traders are susceptible to making novice mistakes that could bankrupt their trading account and leave them feeling ripped off, which has been an unfortunate trend in leveraged trading. We also expect that traders of a "higher caliber" are appropriately accounted for within a broker's education. Whether this comes in the form of advanced wave theory or the exploration of algorithmic trading, we expect a brokerage to teach us something new.

Ranking first in our 2011 review of education is FXCM. FXCM ranks first for several reasons: First, their dedication to beginner traders is unparalleled by any broker in the industry. This is clearly depicted through their development of sites such as microlot.com and dailyfx.com. In addition to their introductory content, FXCM's trading courses provide a highly effective learning environment. Each course (Bollinger Bands, Elliott Wave, Carry Trade, etc.) has two video lessons, an "instructor take," a homework assignment, and the ability to ask questions. Combined with FXCM's interactive chat room and forum, FXCM has the means to add depth to anyone's pool of trading knowledge. FXCM gives a 7-day free trial of their online courses; otherwise, a live account is required to utilize their educational lessons.

Ranking second in this year's educational review is GFT. GFT is able to pull away from the masses by offering diverse education through several mediums. Most notably, GFT offers 7 live webinars every trading day. The webinars are conducted by GFT's education and analysis team, with topics ranging from "Fibonacci Trading & Theory" to "Advanced Indicators & Strategies.” Such topics help introduce traders to new analysis methods, as well as develop and fine-tune their current trading philosophies. Another GFT advantage comes from their partner site, fx360.com. Through this site, GFT provides their own unique technical analysis methods, which they support with additional education and commentary. The extra material helps its trading base to learn, apply, and build upon GFT's trading techniques. Overall, GFT empowers traders by providing educational material that fosters creativity and promotes trader development.

While not as well rounded as FXCM or GFT, both Forex.com and Alpari provide unique educational content that is worth mentioning. Forex.com offers 8 professional-grade forex videos that hit home on their respective topics; we just wish there were more than 8 of them. The entry level education provided by Alpari is a bit underdeveloped, but where they go above and beyond is with their "Technical Analysis Trading Guide," as well as their library of 30 educational videos.

Each brokerage has its own educational niche and takes its own approach to educating and developing its client base. Overall, FXCM does the best job of accommodating a variety of trading styles and delivering material that is highly focused and professionally developed.

Customer Support

When broker representatives interact with current and potential clients, their demeanor should be professional, timely, and leave the client with an enjoyable experience. Outside of the obvious traits of friendliness and competence, we expect broker reps to be efficient in helping clients understand some of the more complex forex concepts (swap, leverage, margin, etc.). Due to the 24/6 nature of the forex market, it is also imperative that brokers offer trading support Sunday through Friday, 24 hours a day. Having established our criteria, we've outlined the brokers offering the best customer support for forex trading.

MB Trading earned the top spot in our 2011 review of customer support. MB Trading covers all of the basic requirements such as 24-hour support and offering a variety of contact methods (chat, phone, email, Skype). Where they begin to set themselves apart is their departmentalization of support — by providing several contact numbers, clients can quickly get you in touch with the appropriate department. When contacting forex support, we're routinely put in touch with the same representatives and can request the assistance of a specific rep who has previous experience dealing with our support topic. MB Trading has routinely demonstrated their attentiveness to customer support, the competence of their representatives, and their ability to quickly resolve issues.

Thinkorswim also comes in with five stars for customer support. In addition to the basic criteria that all forex brokers should be providing, thinkorswim also offered multiple avenues of contact for each specific inquiry; tech support, forex, futures, retirement accounts, even inquires for new accounts. We noticed that by segregating support departments we were able to get in touch with someone who could answer our questions without having to transfer us numerous times or put us on hold. Their site is also easy to navigate and investors can find their exhaustive list of contacts very easy from the front page, or begin a live chat session with one of their representatives. Thinkorswim’s representatives were knowledgeable, prompt, and treated us the same regardless of our prospective account size.

PFG and GFT earn honorable mentions. Both pass our criteria with 24/7 email, phone, and live chat support. Notable for PFG is their email service that reports trade confirmation and exposure. Upon executing orders from both their desktop and mobile platforms, customers instantly receive email notifications detailing the specifics of their position. Additionally our live chat experience with GFT was excellent. They were prompt and give clients the feeling you have a real person on the other end instead of just scripted responses.

Customer service isn’t normally the deciding factor when initially choosing a broker. Typically, a trader is looking to save money on commissions or get access to better trading tools. However, a single bad experience with a brokerage can be the deciding factor in whether or not someone continues to do business with them. Good service is about consistent quality, regardless of net worth. It’s no wonder that these brokers, which are committed to good service, also score well in all of our other categories.

Investment Offering

Foreign exchange rates are affected by myriad factors, ranging from central bank rates to fluctuations in commodities and stocks, and even global disasters. Sooner or later, traders are going to want to incorporate investment strategies that include different securities outside the typically traded major currency pairs and crosses. For the category of investment offering, we rated brokers on their range of markets based on the number of currency pairs they offer, as well as futures, stocks, and options trading availability. Other factors we considered were currency settlement services, or unique account management services that give the trader more options to secure their money or utilize exchange rates to hedge their other investment risks.

Since the investment goals between individual traders will vary greatly, it doesn’t make sense to rank each broker. Rather, we highlighted some of the key features of the brokerages that scored 5 stars in investment offering. Even among 5-star brokerages, there will be small factors that might make one of them a better fit for a particular trader’s investment strategies.

A handful of brokers listed on StockBrokers.com offer stock trading alongside forex, however, only two of them offer it in a seamless trading environment with a single account. thinkorswim and MB Trading offer a full range of investment offerings, including stocks, options, futures, and a large number of currency pairs. thinkorswim provides access to 117 different currency pairs, including many exotic currencies like the New Israeli Shekel and Korean Won. MB Trading has other features for investors who are serious about emerging automated trading technologies, offering free VPS hosting, FIX gateway, quote API, and even a development kit for traders looking to code their own systems directly to MB Trading’s server backbone.

Two other 5-star investment offering brokerages are PFG Best and CitiFX Pro. CitiFX Pro is owned and operated by Citi Bank, and while they don’t provide access to markets outside of forex, they provide the most currencies to their clients with more than 130 pairs. With Citi, your trading account funds will earn interest and CitiFX Pro is also the only retail brokerage that offers FDIC insurance on trading account funds. In addition to futures trading, PFG Best also offers unique currency investment solutions such as professionally managed trading accounts. These accounts are traded by professional money managers with the purpose of diversifying client assets to markets not correlated with equities. Then, for even the smallest investor, PFG offers their forex accumulation program. The FXAP allows traders and investors one time or monthly purchases of foreign currency to take advantage of dollar-cost-averaging. With real foreign currency, you can hedge your portfolio against currency fluctuations and accumulate interest.

Depending on your investment goals and trading strategies, there are brokerages that offer more than just the standard set of major currencies. If you want to take advantage of emerging markets, protect your weakening dollars, or hedge international business exposure, examine your options and find a broker that is offering something more. Remember, with rapid globalization, forex isn’t just for day traders anymore.

Mobile Trading

More and more consumers are relying on their mobile devices and smart phones for assistance with daily tasks and routines — and the retail trading front is no exception. In our globalized environment, traders need the ability to monitor positions and stay in touch with market developments while away from their computers. Today's mobile technology enables traders to track positions, move stop levels, set alerts, execute trades, and research markets from virtually anywhere in the world. The forex brokerage that can deliver the most efficient and productive mobile experience not only builds customer satisfaction, but demonstrates their foundation for continual advancements in mobile trading technology. Areas of consideration include: trade execution, charting, news delivery, commentary, extra features, and ease of use.

Ranking first in our mobile trading review is Dukascopy. Forex traders will easily become consumed in Dukascopy's rich and interactive trading application. Segments such as "Movers & Shakers" and an extended economic calendar quickly deliver the most important market happenings in an easy-to-digest layout. The full screen charting functionality allows users to select from more than 35 currency pairs on up to 11 timeframes (including tick charting). What really catapults Dukascopy to the top of the mobile trading review is their inclusion of Dukascopy TV. Each day, approximately five specialized videos are made available from their mobile application. These videos range in topic from "economic calendar breakdown" to "midday snapshot.” From an application standpoint, this functionality is only rivaled by CNBC and Bloomberg.

In reality, traders want a mobile experience that is as close as possible to the platform they know and love. thinkorswim's mobile trading application is a spitting image of the thinkDesktop. With thinkorswim, clients are able to trade and analyze the forex, stock, commodity, and options markets wherever their smart phone can connect to the Internet. In addition to this breadth of market coverage, traders gain access to TOS charting, live market radio, and price alerts. None of this may seem like a big deal, but when you add the fact that the mobile charts support more than 100 indicators, you can choose from three different radio stations, and the alerts immediately synergize with your desktop platform, it becomes a pretty serious trading tool. Particularly impressive is their radio tool; TOS has designed this radio to work, regardless of where you are browsing in the mobile app. This means you can listen to the trading analysis while you look at charts and view your open positions.

Not mentioning Forex.com's mobile trading application would render this review incomplete. A simple swipe of the finger allows you to easily switch between currencies, chart, news, and price data. Also included within the app is market commentary, an economic calendar, and a frequently updated news feed. What really stood out with this app is its inclusion of educational material. Traders have access to eight educational videos, as well as dozens of instructional articles and even a button that says "Talk to a forex specialist.” If pressed, it will connect your phone to forex.com's customer support division.

The progression of both smart phone technology and mobile trading functionality gives traders more abilities than ever before. All things considered, we've found Dukascopy to deliver its customers the most complete mobile trading experience.

Overall Ranking

  Broker Name Commissions & Fees Platforms & Tools Research & Commentary Education Customer Support Investment Offerings Mobile Trading Overall
1. MB Trading Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 5 Stars
2. thinkorswim* Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 5 Stars
3t. GFT Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 4 Stars
3t. Alpari Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 4 Stars
5. FXCM Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 4 Stars
6. Dukascopy Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 4 Stars
7. PFG Best Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 3 Stars
8. CitiFX Pro Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 3 Stars
9. FxPro Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 3 Stars
10. Ava FX Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 3 Stars
11. Gain Capital Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 3 Stars
12. Interbank FX Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 3 Stars
13. FXDD Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 3 Stars
14. Questrade Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 2 Stars
15. Zecco Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 2 Stars
16. eToro Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 2 Stars

* - thinkorswim platform owned by TD Ameritrade. Merger to be completed in 2011.