By Jeffrey Cammack / Updated: Wednesday, April 17th, 2019
Forex brokers have become complex in recent years, with different approaches, accounts and platforms making the decision of which broker to sign up with more difficult. FX-Australia writers have experience from trading with each of the brokers, and from reviewing them according to our process.
Overall, the best Forex brokers in Australia are:
Best ASIC Broker: AvaTrade
Best MT4 Broker: Pepperstone
Best Account Options: XM
Best STP Broker: FxPro
Best Educational Material: IC Markets
Best Social Broker: eToro
Most Innovative Broker: easyMarkets
The first decision a trader is going to have to make is how much money they want to invest in an account. Some brokers take deposits as small as $5 and those that take a minimum of $1000. Forex trading does carry risk, so consider that all the money that you deposit can be lost.
Advісе given tо new trаdеrѕ is tо ѕtаrt оut small, whісh mеаnѕ looking fоr a Forex brоkеr who wіll lеt уоu ореn an account with about $250-$500. Micro accounts with a lower minimum deposit are available, but if you are going to use leverage in your trades, you will need to have deposited funds to be able to take the potential loss.
ASIC has good advice for those considering the amount to deposit into an account. It needs to be per your trading plan.
If you are considering borrowing money to invest in this market, they continue with their warning as it comes with additional risk.
Borrowing to invest is a high-risk investment strategy for experienced investors only. If you are looking to use this strategy, ask yourself these questions:
- Do you have secure income from other sources such as your salary to top up the loan if you get a margin call?
- Do you have a high marginal tax rate to make the most of any tax benefits?
- Are you in it for the long haul? Gearing is generally a medium- to long-term strategy (at least 5 to 10 years).
- Is your strategy flexible enough to allow for changes in your circumstances, such as having children or a drop in income?
- Will you lose sleep at night if your investment performs poorly?
The next thing to consider is the regulation of the Forex broker. Regulation is the oversight of the broker, and while there are several active regulators around the world, ASIC is the Australian regulator. It could be that ASIC regulation is crucial to you, and thus a list of ASIC regulated brokers may be more appropriate.
The vast majority of Forex brokers are regulated. But not all brokers are regulated by all authorities, and a broker can decide if they want to apply for regulation at any time they wish. It is often the case that the larger the customer base of a broker, the better chance that the broker has regulation is more than one jurisdiction.
A couple of the larger regulators of Forex brokers are:
A stringent and traditional regulator. They are not usually the ones to set new policy, but they have a robust auditing procedure and have a good track record of protecting clients. Official Website
CySEC is a leading regulator as it relates to policy and is the first regulator to start banning bonuses and aggressive marketing to new clients – a change that had a strong positive impact on the industry. CySEC is the fastest to adapt to the changing market and works alongside other major regulators to maintain a safe trading environment. Official Website
Another traditional and some would argue, the best regulator of the group. Stringent policies surround FCA regulated brokers, and this is seen as the best regulation you can get. Official Website
We mentioned above that comparing brokers can be complex, so here are some other things to consider when choosing a broker.
- Trading conditions. Tight spreads, the leverage offered, and the number of currency pairs available to trade is all going to affect your experience with a broker. Tighter spreads and leverage will make trades more profitable, and the number of currency pairs will give traders a greater variety of trading opportunities.
- Platform choices. MT4, MT5 and cTrader are industry standard trading platforms that are supported by most brokers. However, there are brokers who have built bespoke trading platforms which improve the user experience and add additional features that are not common at all brokers. Speciality platforms exist too, which are targetted to niche experienced traders. In making a decision about which broker to select, consider which of the trading platforms you wish to use.
- Broker type. ECN, STP and Market Maker brokers all have different business models which affect the levels of conflict of interest created between the broker and the trader. On one end, STP brokers don’t have any conflict of interest as they are passing trades straight through to the market, while Market Makers create a market, and the broker is always the counterparty to the trade. While STP brokers are seen as the best because of the lack of conflict of interest, they are don’t offer much by way of training material and additional perks, while on the other hand, the Market Makers usually create a better start for beginner traders.
Best Forex Brokers in Australia
In my time trading and researching brokers, I have a few comments on those who I consider the best for new traders. Different brokers have characteristics that stick out, making them better than others. So this is a little of my personal experience with a few select brokers to give you a feel for how I compare them to each other, and why I recommend them.
Avatrade is a fully regulated broker in Australia with good educational resources and support for MT4. I appreciate that Avatrade has the combination of good leverage, a low minimum deposit, and tight spreads; this setup will give you a good starting point for successful trading. Avatrade offers mobile trading so if you want to trade on the go, this could be a good feature for you.
ASIC-regulated, Pepperstone has support for all three of the major trading platforms – MT4, MT5 and cTrader – on both mobile and desktop and award-winning ECN execution speeds. A simple account offering with spreads from 1 pip are commission-free. A structured education section is available for beginners who enjoy this approach to learning.
If you are looking for a serious broker, with low first deposit amounts, then XM could be for you. XM has many account options including one account called “Zero” where you have Zero pip spreads on some of the major pairs. This combined, with the massive leverage, strong regulation, and good customer support make this a good place to trade.
It seems that whenever FxPro is at an award show, you can count on them taking home a good portion of the hardware. An internationally respected FCA and CySEC regulated broker, they claim over 870,000 clients from 173 countries. FxPro has tight spreads starting with their standard account, support for MT4, MT5 and cTrader, and a wide range of currency pairs to trade. For traders looking for a well-known name in trading, with the right conditions to make trading profitable, and award-winning support, FxPro is a name to consider.
I enjoy trading with Easymarkets. I have always felt that they make it easy for me to trade, and their customer service is the highest I have ever had with a broker. The spreads can be low as a VIP member, and the leverage is high, which gives me the ability to trade in the way that I want without restriction. EasyMarkets has been around for a while, and they are regulated by both the Australian and European regulatory bodies – the name is one of the more trusted out there. I recommend this broker to those who want top customer service, good leverage, decent spreads and comfort in knowing they are trading with one of the best.
Etoro were pioneers in social trading. I enjoy the social aspect of the broker, where you can follow what investments other traders are making and choose to follow them and mimic their trades or learn from their analysis and understanding of the market. Etoro has designed their software to be easy to use which appeals to the novice trader and those who want to trade on mobile devices. eToro is probably the best choice for new traders who want to learn by watching others rather than going it alone.
How to Compare Forex Brokers?
There are a lot of different brokers, and their trading conditions are always trading. To compare brokers, you need to know what makes brokers different technically, and then from that shortlist find one that suits you best. We only feature brokers we believe are suitable for the trader, so we have already started that shortlist for you. We have strict editorial guidelines for reviewing brokers that can be reviewed on our about us page.
- Market Maker vs ECN/STP. There are two distinct ways that a broker can manage your trade after you have requested it to be placed on the market. Market makers may interfere with it indirectly while the ECN/STP will allow the trade to go market without that conflict of interest.
- Regulation is your only safety net with a broker. Ensure that your broker is regulated with one of the major three regulators I listed above and you should be fine. Regulated by two is always better than regulated by 1.
- Spreads on the most commonly traded currency pairs called the major currencies. Brokers with high spreads are hard to make a profit with, as the broker will take the first part of your profit as their fee for handling the trade.
- Account types are key. A broker does not need to offer many, but they need to be clear, and you need to understand how they are different from each other. Before you fund an account ensure your expectations for what you are going to get are aligned with what your broker has told you directly.
- The software platform support by the broker is essential. Many brokers will use MT4 or MT5 (MetaTrader) which is a traditional industry standard, but other brokers will offer their platforms that add on additional features like social trading that you may want.
- Customer support is important. Feel confident you can get the attention of the broker when you need it. Opening hours should be posted on the page, and if a dedicated account manager will be assigned, that is even better.
- Withdrawal options are central to trust and is one of the highest priorities for professional traders. The rules, fees, and the timeline for getting your money back should be obvious. Companies that deliberately go slow here should not be engaged.
Not all brokers support MetaTrader, but most of the older and traditional brokers do. MetaTrader is not usually by brokers who have built a proprietary platform to be able to include newer technologies or different features that are not yet standard for the industry. This could consist of brokers that have robust social trading functionality, or brokers who have built websites or apps that make trading easier on the go.
Leverage is available from all brokers in Forex trading. Without it, the small movements on the currency market would not generate a profit for a trader. Most brokers will offer at least a 200:1 leverage, and some much higher than that. It is a common practice for responsible brokers to limit the leverage that traders use until a trader has proven to be successful in mitigating the risk against both the trader and the broker. For more, we have written an article to calculate the leverage you need and margin requirements.
Minimum lot ѕіzе varies frоm one broker to another, and from account to account at the broker. Generally, 100,000 trаdіng units оf сurrеnсу іѕ considered a standard lot, 10,000 оf trаdіng unіtѕ іѕ a mini lot, аnd 1,000 trаdіng unіtѕ іѕ a mісrо lоt.
Some Forex brokers offer cryptocurrency pairs. These are usually pairs that contain one major currency and a cryptocurrency. An example would be the Bitcoin to US Dollar or BTCUSD.
There are more and more brokers that offer a wide range of cryptocurrency pairs, and some brokers offer a limited offering on currencies only so they can get their foot into the game. If you want to trade crypto, then you should explore the currencies offered before depositing.
Most customer service offices are open 24/5 and closed on weekends, and some are open 24/7. Some brokers will offer a designated account manager for the more VIP account types. The most common issues that customer service answers are questions about deposits, withdrawals, and information related to their trading conditions.
Deposits & Withdrawals
Forex traders value easy access to the money in their trading wallets, and the brokers understand this. It is relatively standard for brokers to process the withdrawal request within one business day. It can then vary on how long it takes for you to receive the funds – based on how the funds are being returned.
Select Forex brokers also accept PayPal and other e-wallets like Neteller and Skrill for deposits, but if you deposit using this method, then you will also need to withdraw your money through the same way. This is to prevent any money laundering or tax evasion that could take place.
Things not to worry about when choosing a broker.
- You don’t need 3000:1 leverage on your account if you have some sense of risk management. You probably are only going to use up to 100:1 leverage for most of your trades, so don’t be attracted to the broker with the highest leverage.
- Minimum deposit. If you are going to use leverage on your trades, you need to make a deposit that will allow you to hold the position open without your broker closing it for you. Brokers will close your trades in a margin call if you don’t have the funds in your account to protect against a loss. So, brokers with low minimum deposits are not better than those with $200 minimums.
How Do Forex Brokers Make Their Money?
Forex brokers make money by taking a commission either as a part of the spread, or commission per lot traded. This will also vary between accounts as well.
Thе Fоrеx ѕрrеаd іѕ thе dіffеrеnсе in price between buy price and sell price in the quotes оf thе сurrеnсу pairs. The spread is not everything when it comes to choosing a broker, but you do want to make sure that their spreads are competitive. If your broker has wide spreads on the pairs you often trade, this could mean less of a profit on your trades.
What is an ECN & ECN/STP Forex Broker?
There are three types of brokers, of which ECN is one, each with different trading conditions offered. For more details on top-rated ECN brokers read this.
ECN Brokers: These brokers get quotes directly from the Interbank market, meaning they are as up-to-date as you can get them. The downside of these broker types is that if you put in an order and there is no liquidity available, the trader is going to get requoted for a different price as the order is placed.
ECN/STP Brokers: These brokers operate just as ECN brokers, but if there is ever not enough liquidity in the market, then the broker
Market Makers or Dealing Desks: There brokers set their rates for the currency pairs, and often take counterparty to the trader. This means that as you buy a currency, they sell the currency to you.
Do Forex Brokers Trade Against You?
Market Makers (Dealing desks) do this, but not ECN/STP or ECN brokers. Market Makers do this to give you the liquidity when you need it and to make a profit. If you don’t want to have a broker that could have a conflict of interest with you, ensure that you are using a non-dealing desk broker.