Here's a question that I get asked all the time and if you have been reading this blog for awhile, you know the answer. But for newer traders, I thought I would go over which broker I think is best and why. This is something that should have written about a long time ago and I only recently realized that I have not written a post about it.
I don't get any commissions for writing this post.
This really is the broker that I trade real money with and I really do believe that they are the best. There are a few other excellent brokers out there, so this is just a personal preference.
If you have any questions about choosing a broker outside of the US, you should talk to someone like Justin, who understands the rapidly changing broker landscape much better than me.
Other Brokers
Before I reveal which broker I like the best, it is important to go over what I have seen go wrong at other brokers so you know what to look out for.
Inactivity Fees
This pisses me off…
Some brokers will charge you a monthly fee if you do not trade that month. I think that is completely ridiculous. This forces newer traders into taking bad trades because they “have to” trade.
I experienced this with one broker and I was furious. It was my fault though, I didn't read the fine print. I was charged like a $30 fee in a $300 account.
That's a big hit!
Be sure to check for inactivity fees. If there is one, move on…there are better brokers out there.
Sketchy Foreign Brokers
Some foreign brokers are going to promise the world and you may be tempted to trade with them. Don't do it.
You need to use a broker that is in a country that will protect you if the broker does something illegal or goes out of business. Usually the attraction to foreign brokers is the increased leverage.
If you can't make money at 50:1, you won't make money at 500:1.
Start small and learn to trade well.
Bad Ticks
Some smaller brokers may not have accurate data feeds and that can lead to large gaps or triggering your stops when they shouldn't have been triggered. The reputable brokers will have accurate data feeds.
Can't Access Certain Pairs
I have traded at a broker that only allowed me to trade 5 or 6 (I forget the exact number) currency pairs in a mini account. It's not as though I will be trading every single pair at the same time, but if I so happen to backtest a strategy that works best in GBPCHF, for example, I do want the ability to trade it. Needless to say, when I discovered that I couldn't trade the GBPCHF and the GBPJPY with that broker, I moved my money immediately.
Difficult To Withdraw Money
Another thing some brokers do to keep your money with them is make it an act of god to withdraw your money. Whenever you start trading with a broker, you should start by putting a small amount of money in first to test them out.
Do some trades and deposit and withdraw from your account. If they give you a hard time, move.
My Vote For Best Forex Broker
I'll get to the point…my favorite Forex broker is Oanda. They are really easy to deal with and I have not have any of the issues listed above. They offer Metatrader for excellent charting, but that is not always good for day trading. If you are a day trader, I have found that their Java platform works very well.
The best of both worlds.
One thing that separates Oanda from other brokers is the fact that you can trade nano lots. What does that mean? Well, in plain English, that means that you can tailor your lot size all the way down to $0.01 per pip. That will allow you to take almost any trade with almost any sized account, while still using proper risk management. Even with mini lots at other brokers, you may still be over trading with one mini lot in a small account.
Trading nano lots for $0.01 per pip will allow you to take a trade with a 100 pip stop in a $100 account and still only risk 1%. Try doing that at any other broker.
You can integrate Oanda with MT4i and MyFxBook for automated trading reports. Oanda also has some of the lowest spreads in the industry. This is one of the main reasons I trade with them instead of with some of the other big brokers.
Above all else, they are financially stable and meet all financial requirements (last I checked). Of course, there is no guarantees with any company, but my research showed that they are one of the best.
Again, there is no benefit for me to mention this, but I do because I have had a great experience with them. Which broker is your favorite and why?
Hi Hugh! I noticed the first comment is from 2012 so I”m wondering is this still your broker of choice? I also have an account with Oanda (haven’t funded it yet). I’ve read so much about that they are an MM and therefore bid against you, their spreads vary all of the time and their leverage sucks. I’m relatively new at trading so I’m not certain what is important versus what is not. I’ve heard that they are one of the few regulated for US residents and that regulation is the most important to ensure withdrawal of funds. Can you elaborate on any of this?
BTW, I just found your blog and am sitting here reading through a bunch of your posts now 🙂
Hey Sonja,
Yes, I still use Oanda. The leverage is fine, you shouldn’t be trading with more than 50:1 anyway, especially when you are first starting out.
Honestly, even the best brokers can run into trouble. That’s one of the risks of trading. Here’s a post about it: https://www.tradingheroes.com/3-simple-ways-avoid-fxcm-alpari-like-broker-risk/
You need to do your own homework and feel comfortable with the broker, but Oanda has worked for me and several professional traders I know.
…and I don’t get paid to say that (although I wish I did 🙂 )
Hope your trading is going well!
I would just like to point out that Oanda stores all your passwords in clear text in their database. I was thinking of funding my demo account with them, but I couldn’t do it knowing that the only thing that stands between a hacker and my money are developers who think encryption is a terrible idea.
@kleaders Thanks for the heads up, I’ll contact them and see where they are on this. They are a great broker, but they can be a little behind the times when it comes to tech. It took them forever to get trailing stops and MT4, haha.
Hi Hugh.
I also currently trade with OANDA and also like them. But I’m thinking of (literally, physically) moving offshore (especially if Trump is elected) to trade larger amounts. After reading about these security issues, I’m even more motivated.
As you know, OANDA just introduced their new V20 platform. Do you know if that’s any more secure? Or were you able to find out if their existing platform is now more secure? I’d love any insight you can offer. I had intended to migrate to Dukascopy before the (relatively) recent US money-laundering and tax-evasion laws made that impossible. Unless you have an overseas address.
It also seemed as if kleaders’ comment may have been based on limited information, given it was a demo account and OANDA is US regulated. Thoughts?
Look forward to hearing back from you. Also looking forward to possibly talking more frequently. For some time now, I’ve been seeking out an “accountability partner” at a similar performance level. It sounds like you could be that person. (I’m full-time).
And, since I’m not interested in selling my knowledge or books — I wouldn’t mind being able to recommend someone in my place when I’m asked to give a talk on the topic. Cheers!
P.S. Just started following you on Twitter. I haven’t really been active there. Was using the account to test a trade reporting platform when first looking for an accountability partner.
Hi Laura,
I’m not sure if the V20 platform is more secure. Their technology tends to lag behind the times, but it is usually an improvement over the previous version, so I would assume that security is better in V20.
I was never able to find any information backing up that they store passwords unencrypted, but I assume that he was talking about a demo account. I’ve worked at a bank and given all of the US regulation, I don’t see any way that this could be the case for live money accounts.
Here’s the thing with brokers…in talking with a lot of pro traders and working at a hedge fund right after 9/11, I learned that you can’t really trust any broker. So as you probably know, this means having accounts at multiple brokers and keeping a good portion of your risk capital at your bank and not in your brokerage accounts. A certain amount of due diligence should be done on a broker, but at the end of the day, the best course of action is not to have all your money in one place.
Cool, let me contact you privately about a possible mastermind type arrangement.
Hope you are trading well!
Cheers,
Hugh