Forex Broker Commissions

Most forex brokers do not charge commissions. GFT Forex Brokers, like other forex brokers, are compensated by revenues from their activities as currency dealers, including proceeds from buying, selling, converting and holding currencies, interest on deposited funds, and rollover fees.

Many may wonder how brokers work without commissions. The forex dealer is like a middleman. Considering forex broker commissions, the forex dealer will let the trader buy from him at 1.1971 and will let the trader sell to him at 1.1967. The difference 0.0004 is known as the spread. And this spread is where the forex “middleman” makes his money.

If the trader were to buy at 1.1971, then the instant the trader buys, he is “down” 0.0004, because if the trader wanted out of the trade, the best price he could sell it for is 1.1967. So as the forex dealer takes varying trades from people, each buying or selling, he can make money from this price gap. Each minimum increment, 0.0001 is referred to as a “pip”. So the spread in this example is 4 pips. In terms of dollars, for a forex contract of $100,000, this transaction would cost you $40 ($100,000 x 0.0004) or 4 pips. So the trader will find that some companies will advertise a spread of 3 pips on some currencies, usually ranging up to five on others. In forex trading, the tighter the spread is, the better.

Automated Forex Brokers

GFT Forex is an automated forex broker, whose DealBook FX 2 software offers the investor both a demo and a live forex trading tool in the currency market. This forex trading software offers the investor direct access to some of the tightest spreads, through a stable, standalone forex trading platform, 24 hours a day.

The DealBook FX 2 software shows live, dealable prices, real time data, free real time world and financial news, forex charts, more than 65 technical indicators, and the ability to build the investor's own indicators.

GCI Financial Ltd., another automated forex broker, provides trading software that tracks real time prices in 20 major currencies, live charts, and real time profit and loss account tracking. The software is offered as a demo also. Market orders are confirmed within seconds at prices clicked on or accepted by the client.

The FX3K is an online automated dealing and trading platform used by automated forex brokers. The FX3K online trading environment includes real time quotes, charting, technical analysis tools, and news. FX3K integrates the client, dealer, back office and system administrator functions. Product features include high speed execution of client orders and the ability to monitor real time margin availability, net exposure and profit and loss on all open positions. FX3K has chat options to allow trader-dealer conversations.

The COESfx Level 1 Trading Platform is used by automated forex broker as an Electronic Currency Network for the execution of best prices for buyers and sellers of foreign exchange. It offers traders live and executable prices, thereby making each participant a market maker. Traders gain access to "best bid/best offer" quotes directly from price providers and other traders. COESfx pricing is derived from a number of partners in the network such as banks, Futures Commission Merchants (FCM's), Introducing Brokers (IB's), fund managers and other traders on its Electronic Currency Network.

Online Forex Brokers List

A comprehensive forex broker list includes investment banks with dealing rooms, commercial banks with treasury operations, and online brokerages that serve a larger market. The investment banks with forex trading capabilities include Morgan Stanley, Merrill Lynch, Goldman Sachs, Salomon Smith Barney, Lehman Brothers, Credit Suisse First Boston, Deutsche Bank, JP Morgan, Prudential Securities and Bear Sterns).

Some of the brokerage services are not directly accessible for all customers. For example, inter-bank market dealers and treasury operations in commercial banks handle large customer orders themselves.

Some of the top commercial banks for forex brokerage, having inter-bank and treasury operations, include JP Morgan Chase Bank, Bank of America and CitiBank.

A list of online forex brokers includes: Forex Capital Markets, MG Financial Group, CMS Forex, Global Forex Trading, GCI Forex Direct, Forex.com, GAIN Capital, Real time Forex SA (Geneva), Global Forex, Commerce Bank and Trust, FX Solutions, Forex MHV, swissDirekt (Swiss), Goetz Financial Forex, NY Broker Borsentermin AG, Act Forex, Online Trader, Shield FX Online Currency Trading, Forex Trade Signals, CMC Group PLC, Foreign Currency Direct Limited (UK), FX Advantage, FXCM, Forex Millenium, ACM REFCO, REFCO Spot, Easy Forex, Online Forex Trading Inc., Lincoln Corporation, Global Trade Waves, Ltd., and CIBC FX Web Dealing.

Online Forex Brokers

An online forex broker is a firm that facilitates retail trading using Internet technologies. Global Forex Trading (GFT), one of the popular online forex brokers. It provides retail traders with a free demo trading account, allows users to open a live account, gives live help, provides software called DealBook FX 2, and allows viewing of account documents. (DealBook FX 2 can be downloaded for the demo trading account).

Gain Capital Group’s Online Forex offers 200:1 leverage. In some cases, the total return on investment is higher due to leverage. For example, with $1000 cash in a margin account, the investor can control up to $200,000 in notional value. Of course, trading on leverage magnifies both the investor’s profits and losses.

GCI Financial Ltd. offers commission-free online trading in forex. GCI offers Internet trading software, fast and efficient execution, and 0.5% margin requirements. This broker offers USD or Euro denominated trading accounts. The spreads are 3 pips in EUR/USD and USD/JPY, and are 4 to 5 pips for other major commissions. Clients can hedge by opening positions in the same currency in opposite directions. Risk to the investor is limited to the deposited funds. Market analysis and research, real-time charts, and forex trading signals are available at no charge.

ACM, part of the REFCO group, offers 3 pip spreads on all major currencies, which works out to between 0.02% and 0.03% on the dollar value. They also offer commission-free trading, and forex trading with a 1% margin, which means that a trader can control $1,000,000 with $10,000 in his account.

There are many online forex brokers that offer free demo accounts for potential forex traders to practice trading. It is only a matter of registering and starting demo trading to get a feel for forex trading. In addition, at most sites, traders can find free forex news to assist them with their trade strategies.

Best Forex Brokers

The best forex brokers are: Saxo Bank, GAIN Capital, GCI Financial Ltd., and CMS Forex

Forex broker CMS Forex accepts no commission, demands a small amount of only $200 to establish a mini account, provides users with a Free Demo account, provides leverage as high as 400:1, and has a 3 to 4 pip spread on major currencies.

Saxo Bank’s ForexTrading.com offers 24 hour online trading, streaming news from three major providers, detailed analysis from in-house experts, direct online chat to dealers, and a secure trading environment.

Forex brokerage firm GAIN Capital gives its asset managers robust technology, wholesale dealing spreads, consistent liquidity, fast execution, and access to a wide range of sophisticated tools. GAIN Capital’s proprietary trading technology today supports over $60 billion in monthly trade volume. GAIN Capital’s FOREXTrader has streaming prices in 14 currency pairs, real time profit and loss account information, sophisticated risk management tools, a variety of simple and complex order types, and full reporting capabilities.

Professional dealing practices and a service-oriented approach has earned GAIN Capital a reputation as a world class provider of foreign exchange services. Client and partners from over 110 countries currently rely on their technology, execution and clearing services, and administrative tools.

For individual investors, GAIN Capital operates FOREX.com, which offers advanced, yet easy-to-use trading tools along with lower account minimums and extensive educational resources.

GCI Financial is one of the world’s largest online brokers offering commission-free trading in Forex. GCI Financial offers Internet trading software, fast and efficient execution, and the low margin requirements. GCI Financial’s free trading software gives the investor the edge in execution, market information, and account management.

GCI Financial offers forex and indices on an online dealing platform. In their forex trading platform the trader can add and remove instruments from the ""dealing prices"" window to fully customize the trading.

Forex Brokers

Any market forum can be frenzied when developments are swift. The forex market is the most liquid and vigorous, sometimes aggressive, trading forum in the financial world. All the more reason for superior forex brokers to be disciplined so they can draw on their expert knowledge of analytical tools during crises.

In fact, skilled forex brokers are prepared for any eventuality because they are experienced. With depth of knowledge comes immediate insight into events in the market. Experience and knowledge should lead to greater objectivity in analyzing any market situation.

Money Management Techniques of Forex Brokers

Intimate knowledge of money management techniques characterizes the best forex brokers. Components of this knowledge are understanding of trading signals, ability to analyze rapid changes in market conditions, and comprehension of such market factors as interest rates. Capable currency traders apply their time-tested methods in a logical, consistent manner.

Theories are plentiful among traders. Pragmatic approaches, based on track records and outcomes, are adhered to by the most disciplined brokers. Through perceptive application of respected money management techniques, brokers take intelligent positions in the market, and garner profits for their clients.

Why It’s Good To Have An Account With A 24/7 Forex Broker

Even if Oanda isn’t a forex broker that is suited to your forex trading needs then I would highly recommend that you set up an account with them regardless!

Why?

Well, as far as I know - and correct me if I’m wrong dear friends - Oanda are the only forex broker that allow you to trade 24/7. Most forex brokers, especially the main players that I’ve reviewed, only operate between Sunday 1700 NY EST and Friday 1700 NY EST.

What happens if something happens over the weekend?

That’s two days of NO trading activity - nearly 30% of the week is taken up during the weekends… but does that mean that because the forex broker’s are closed the world closes too?!

Of course not.

If something occurs over the weekend, by having instant access to a market quote you can amend existing orders or enter new ones… and even if you don’t use Oanda you’ll at least be able to enter into trades that will hedge existing open trades from your closed forex brokers.

Think about it.

An Informative Forex Broker Review

According to our forex broker review, Gain Capital and Oanda come out on top.

Forex broker Gain Capial has set a high standard with trailing stops. The trailing stop can only be entered as a separate order. Once the investor is in an order he can enter his trailing stop limit in pips to trail the market the distance the investor has set with the closest distance the investor can go being 10 pips. Gain Capital also has a facility whereby a trader can download 5 years of tick data on the 6 major currencies. In addition, an investor can also download a free DDE application whereby he can obtain live quotes.

While most brokers allow only the standard ($100,000) or mini ($10,000) lot size, Oanda gives traders the ability to trade any lot amount. Another attractive quality is that has its own user forum. In addition, Oanda has the capacity to have multi-denominated sub accounts other than in USD with no minimum deposit. The different currency accounts available include AUD, EUR, JPY, GBP, CAD & CHF. This allows the user to transfer between their primary account and their sub account easily, with the only restriction being that the investor cannot externally withdraw funds from a sub account, and withdrawals must come out of the primary account only.

FXCM Review

What’s The Attraction?

I lost my forex trading virginity with FXCM. When I had learnt the basics of the forex trading world and felt ready to open a live account I thought that by trading with the largest forex broker in the world I would no doubt be trading with the best.

Unfortunately FXCM began to wear quite thin quite quickly - the large spreads (at that point in time) were one of the largest in the business and their platform was nothing spectacular. I immediately began to wonder why they were the largest in the business as there certainly wasn’t anything that kept me attracted to it.

So, after being a client of FXCM for a couple of years I failed to see the reason for the large attraction. Maybe it was their large advertising budget… maybe it was their ability to large land clients… or maybe it’s their ability to offer such a great commission to referrers who land clients for them (FXCM pay the highest commission to referrers who open a live account and have their clients trade with them). Whatever it is though I think you too will be pleasantly surprised at why this featureless forex broker is the largest in the business.

But then again maybe that is the attraction: FXCM is just simple. I know from my personal experiences in life that the simple things are often the best! Maybe FXCM have been able to successfully apply this adage to their business!

Therefore, if you’re looking for a good reliable platform then look no further than what FXCM has to offer.

Live & Demo Differences

One of the best aspects to FXCM is that there are no differences between their demo and live accounts. What you see in the demo account is what you will get in the live account. In fact all you need once you have a live account is to simply flick the switch on your login entry screen from “demo” to “live”. That’s probably the only difference!

What We Liked About FXCM:

Once upon a time the best feature at FXCM was its ability to honor stops. Unfortunately those days of guaranteeing stops are no longer around especially around volatile announcements such as the Non Farm Payrolls.

But what we do like about FXCM is its ability to offer 18 different currency pairs with the 4 majors having 5 pip spreads bar the EURUSD which has 4 pip spreads (FXCM has changed and they now offer 3 pip spreads on the EURUSD & USDJPY) which remain fixed regardless of the underlying market conditions.

FXCM also offer mini accounts ($10k contract sizes) with leverage of 200:1 alongside their standard accounts ($100k contract sizes) with leverage of 100:1.

What We Didn’t Like About FXCM:

Some of the restrictions recently imposed by FXCM weigh on the negative side for FXCM. As FXCM seem hell bent on maintaining a no slippage policy they have resorted to these restrictive measures to help the “client”. These measures deny any stop or limit orders being placed 5-15 minutes prior to a major announcement, and deny any stop entry orders being filled if the currency never trades at your stop entry price! This makes designing a forex system very difficult if your forex system utilizes stop entry orders, because now you have to wonder if FXCM wouls have been able to enter you into your hypothetical backtesting trades… and if they wouldn’t have then you’ll have to reanalyze your backtesting data!

Another problem we found was that you can only open an account in USD. This is fine for the majority of forex traders that live inside the US, but can be a little annoying for our international partners who have a currency that is appreciating against the USD and thereby has to lose capital while the US dollar continues to depreciate. Of course this can work the other way too. I think it would be great if FXCM could offer the ability to have multiple currency denominated accounts so that the customer can have their capital appreciate over the long-term by transferring funds into the currency that will appreciate the best in the long-term. The client receives the income from their trading activities, plus the appreciation of their capital. Other forex firms have this capability with Oanda being the smoothest.

We also particularly didn’t like FXCM’s news and charting platforms - two klunky programs that need a LOT of polishing.

Lastly, we found that mini positions do not accumulate interest during rollover. This is only a minor issue, but other forex brokers pay interest regardless of what the position is, one notable forex broker that pays rollover interest on mini positions is CMS.

In summary then…

FXCM PROS:

• One of the largest forex brokerage firms in the world (has partnered with the Refco Group)
• Excellent platform, easy to use
• 100:1 leverage
• Good 24/7 Support
• 3 pip spreads on some majors

FXCM CONS:

• FXCM’s entry order restrictions
• Charting and news packages could be better
• No rollover interest received on mini positions
• Platform fairly basic and featureless

Every forex broker is evil?!

I'm just new to (cash) Forex trading. After some information gathering, I have a feeling every forex broker is evil since we have conflicting interests. They trade against us. They wish us to lose. They make many fabrications in order to deceive you, and so on.

Now I'm going to list all the reasons why the claim is valid.

False Advertising & Fabrications

- "No commissions" is plainly deceiving

Brokers deceive you about there being no commissions. $30 minimum/round turn (called the spread) is in reality a commission that eats up your capital at an astonishing rate. Even winning traders lose money and end up with negative results because of this outlandish overhead. Trading futures, you should never have to pay a broker more than $10/round turn, and usually quite a bit less than that.

- The truth about guaranteed fills

True but¡K The only way a broker can guarantee fills is for the broker to become the buyer or seller of last resort. That means the broker is running a bucket shop. All forex brokers are the buyer and seller of last resort.

- Lying about the volume

Brokers do not tell the truth about volume. They show the volume for all forex trading, which doesn't even come close to the volume they truly have at their own brokerage, which is where you are trading. Volume in currency futures is considerably higher than the volume traded at any single forex broker, often greater by a factor of ten.

Defraud of your money

- Leaning

Brokers say they are charging you a 3 pip spread to trade the popular currency pairs. But in reality a broker may be making as much or more than 10 pips on your trades. He does this by skewing prices. Since you are not trading at an exchange, the broker can feed you any price he wants to feed you. He can buy at the bank for perhaps 7 pips less than he sells to you. He then charges you 3 pips for the privilege of being ripped off for a total of 10 pips.

- Skewing price quotation

What is the true price? A forex broker can only give you the price of a currency as quoted to him by the bank through which he trades. Banks have differing prices for a currency. You never know what the real price is because there is no central exchange through which all prices flow. Besides not knowing the true price from the bank, you can also be deceived by "leaning" or "skewing" of the real price at the bank. Forex brokers commonly lean the prices.

- Immoral Stop Running/Hunting

You are told by forex brokers that there is little or no stop running. This is one of their biggest and boldest fabrications. The truth is there is far more stop running in forex than in futures, and possibly as much stop running as in the stock market. I have friends who work in forex as well as many traders who of necessity have to trade forex. One of my students is a market maker in forex. These are people who should know, but in case you don't want to believe me or them, simple observation of forex trading will reveal the vast amount of stop running that takes place there. Who is it that runs the stops? Why it is your friendly forex broker. The broker has a vested interest in seeing to it that your orders are filled. Stop running is nothing more than order filling. The broker sees to it that everybody's order gets filled.

- Wipe you out by "false" spike

Sometimes, there's very quick spike in candlestick on a broker's chart, but there is nothing happening on the others' chart. A stop-loss is triggered simply due to that suspicious spike.

- ban you if you can win their money

Probably you have heard that if you are winning regularly in forex, you may be barred from trading. Is this true? Yes it is. The fact that it is true is just another proof that when you trade forex you are trading at a bucket shop. In the book, "Reminiscences of a Stock Operator," we are told that Jesse Livermore was banned from trading at certain stock brokers because they couldn't stand him beating the house. The same thing is true with many forex brokers. Since they are the ones guaranteeing you a fill, they are in effect the buyer and seller of last resort. The truth is that most forex brokers have precious little liquidity at their firms. In order to give you the impression that there is liquidity, it is the broker who gives you your fill. It is the broker who does the stop running that supposedly doesn't exist in forex. But if you are regularly beating the socks off the broker, he will ban you from trading at his firm.

Potential Danger about Forex Brokerage Firms

- Unregulated

Forex may sound like an exchange but it isn't. It exists entirely in cyberspace with every broker and every bank having different prices for any particular currency. There is little or no regulation, even for brokers who register with the CFTC and the NFA. Forex brokers do not have to mark to market each day as do futures brokers. If your forex broker files for bankruptcy or absconds with your money you have zero recourse.

- No guarantee

If a forex broker does go out of business, you could lose all your money. There are no guarantees and no one standing behind it. Futures brokers are required to mark to market at the end of every session every day. They have to put up cash to cover every open trade on their books. Futures brokers have gone broke, but no futures customer has ever lost one cent of the money in his trading account because of a failed broker. Nor have they had to wait for their money. It is immediately available.

Forex futures is a wise choice

You can get exactly the same action in the Euro forex futures as you get in the "Euro" cash forex. Commissions are as low as one tenth per round turn depending on volume, through a regulated broker, trading electronically at an exchange where you know the true price of the currency. All the problems/risks above don't exist in forex futures.

But when to trade cash forex?

We do not advocate forex trading unless you have a particular reason:

Special needs on time

You may wish to trade forex if, for some reasons, you need to trade during the middle of the night (U.S. Central Time), but if you are able to trade during U.S. market hours (7:20am-2:00pm U.S. Central Time) you are much better off trading currencies in the Chicago currency futures markets.

Special needs on currency pairs

You need trade cash forex if you have a specific need to trade in currency pairs that do not involve the U.S. dollar.

Another reason is liquidity of some thinly-traded U.S. dollor currency pairs. While it is true that total cash forex volume is greater than in the futures, futures' volume at the exchange is greater than the volume at your broker for the most popularly traded currencies. The only place where the liquidity differential matters is in currencies like the Mexican peso, the Brazilian real, and somebody's drachma. Those thinly traded currencies may be more liquid in forex. But if you trade anything but the few most liquid and popular currencies, you are going to be paying at least 5 pips, and often more. Unless you have a particular commercial need to deal in Polish zlotys, Indian rupees, or some other thinly traded currency, you don't need forex.