Best Forex Brokers & Forex Trading Platforms Compared In The UK.
Forex brokers let you speculate on the price of currency pairs going up or down with leverage through spot FX, CFDs and financial spread betting. Forex trading in the UK is one of the most heavily traded markets because of constant economic news flow, high liquidity and 24 hours tradable FX pairs. We have ranked, compared and reviewed some of the best forex trading platforms and brokers in the UK that are regulated by the FCA.
Our picks of the best forex trading platforms in the UK reviewed.
Use our forex trading platform comparison table of what we think are the best forex trading platforms to compare how many forex pairs a broker offers, what it costs to trade major currency pairs, minimum deposits, what type of accounts they offer and how much it costs to hold FX positions overnight.
We have chosen what we think are the best forex trading platforms in the UK based on:
over 7,000 votes in our annual awards our own experiences testing the forex brokers with real money an in-depth comparison of the features that make them stand out compared to alternatives. interviews with the brokers CEO and senior management.
City Index: Best forex broker 2022.
Forex pairs available: 182 Minimum deposit: £100 Account types: CFDs & spread betting Equity overnight financing: 2.5% +/- SOFR Pricing: EURUSD 0.9, GBPUSD 0.9, USDJPY 0.9.
69% of retail investor accounts lose money when trading CFDs with this provider.
City Index won “best forex broker” in our 2022 awards as they offer a huge amount of forex pairs (182), with tight pricing and a wide range of different account types, including spread betting and CFDs. For forex traders that want a bit of added value rather than just a click-and-trade account, they also offer free Forex trading signals through SMART Signals City Index also provides some insightful analysis of your previous forex trading with their Performance Analytics.
On the FX trading platform, currency pairs are listed by major pairs and also separated by base currency so you can easily see EUR, USD and GBP FX crosses. You can trade forex options as a CFD or spread bet. As well as trading FX, you can also invest in the currency markets through a range of ProShares and Invesco ETFs. One really nice feature of the platform is that when you trade forex you can set your price tolerance, so if you want to place a limit order rather than market or fill or kill, you will still get filled within a few pips (depending on how many you set) of your limit rather than missing out entirely.
Trading Central is also integrated into the platform, which will show you which currency pairs have the most “market buzz” and see a constantly updated stream of technical analysis highlighting potential forex trades with pivot points, an indication of whether to go long or short, alternative scenarios and key support and resistance levels.
Pros:
✔️Smart forex trading signals ✔️Post forex trade success analytics ✔️Forex trading news, research and analysis.
Cons:
❌No on exchange forex futures ❌Forex options only as a CFD or spread bet.
Capital.com: Easy to use and intuitive forex trading platform.
Forex pairs available: 140 Minimum deposit: £20 Account types: CFDs & spread betting Equity overnight financing: Long -0.0014% Short +0.0052% Pricing: EURUSD 0.6, GBPUSD 1.3, USDJPY 0.8.
84.19% of retail investor accounts lose money when trading CFDs with this provider.
Interactive Brokers: Good for advanced and professional forex traders.
Forex pairs available: 100 Minimum deposit: £2,000 Account types: CFDs, DMA, futures & options, investing Equity overnight financing: -3.188% / -1.188% (BM -/+ 1%) Pricing: EURUSD 0.0008%, GBPUSD 0.0008%, USDJPY 0.0008%
60% of retail investor accounts lose money when trading CFDs with this provider.
Interactive Brokers is by far the most advanced forex broker we feature if you need it to be. Interactive Brokers is one of the best forex trading platforms for advanced and experienced traders but is also simple enough to be used by beginners who want to stick with one brokerage as they progress.
IBKR has two different forex trading platforms, IBKR Trader Workstation for advanced traders, which comes with some very complete order routing tools for larger orders. The Interactive Brokers web portal platform is much more suited to more casual forex traders and lets you go long or short currency pairs based on position size rather than lots by placing limit, and market entry orders and you can set your stop and limited exit orders based on P&L rather than price.
It’s also worth noting that if you want to trade margin products with Interactive Brokers you need at least $2,000 in your account.
Pros:
✔️Lots of FX pairs ✔️Excellent forex trading platform ✔️Los commission on raw prices.
Cons:
❌HQ in the US ❌No spread betting.
Spreadex: Best forex broker for customer service.
Forex pairs available: 60 Minimum deposit: £100 Account types: CFDs, spread betting Equity overnight financing: Tom Next +0.8% Pricing: EURUSD 0.9, GBPUSD 0.9, USDJPY 0.9.
69% of retail investor accounts lose money when trading CFDs with this provider.
Spreadex focuses on tax-efficient forex spread betting but has recently added the ability for traders outside of the UK to use their platform by trading Forex CFDs. The platform has recently had a facelift and provides a very clear overview of the major markets, with clear order tickets, with key fx pairs trading info prominently displayed.
The desktop version of the forex trading platform is tabular which saves automatically on exit so you can spread it over multiply screens in one browser, window or detach modules to run separately. Spreadex, have built the trading platform in house, and they have some very good charting functionality where it is quick and easy to overlay technical indicators, that other forex brokers do not offer like VWAP.
it’s a good platform to get started on as you can trade forex from as little as £0.5 a point. One advantage of spread betting on forex is that your P&L will be in £, so you do not have to worry about FX fees on your resulting profit and loss. Spreadex also offers guaranteed stop losses, for added risk management and trailing stops, which move along with your profitable positions. For forex traders, that look at futures levels, you can also work limits with a time limit, so you don’t need to worry about leaving GTC orders open indefinitely.
But one, of the key benefits of Spreadex’s forex trading platform, is customer service. They have experienced dealers, that you can quickly get through on the phone, or via the platform’s chat functionality, plus voice brokerage. The ability to trade forex over the phone is something that few brokers offer nowadays, so it’s good to know that you still can, if you need to.
Pros:
✔️Excellent customer service ✔️Good range of FX pairs ✔️Competative overnight financing rates.
Cons:
❌No DMA forex trading ❌Limited FX options.
CMC Markets: A very customisable and intuitive forex trading platform.
Forex pairs available: 338 Minimum deposit: £1 Account types: CFDs, spread betting Equity overnight financing: Tom Next +0.98% Pricing: EURUSD 0.9, GBPUSD 0.9, USDJPY 0.9.
76% of retail investor accounts lose money when trading CFDs with this provider.
CMC Markets is suitable for forex traders who want tight pricing with robust technology, but also the options to trade peripheral markets should opportunities occur. CMC Markets won three awards in 2022 for its FX product, including our own Good Money Guide Best Forex Broker award, and it remains one of the best services out there.
Based on our broker matrix CMC Markets offers the most currency pairs of all the forex brokers we compare. 338 at last count. This is made up of both cash markets, but also CFDs and spread bets based on future prices (not DMA futures, but OTC derivatives based on the cost of carry). The Fx platform lets you rank all 388 fx pairs based on change and market so you can see what is most volatile and what are the cheapest and most expensive crosses to trade. They are also split into developed markets, which will traditionally have more liquidity and emerging markets, where prices may be more volatile.
There are a few things that are unique to CMC’s forex trading platform, which are quite handy, for example, the web version is modular so you can set it to update all windows (news, pricing, sentiment, charts etc.) when you click on a new pair, or you can keep them separate. Which can give you either a good market overview, or let you focus on an individual asset.
They also have 12 “Forex Indices” which are baskets of currency pairs that track the same base currency. So instead of speculating on the USD versus a specific currency, you can speculate on how the USD will perform against a broad range of economies, like a sector position in stock trading.
There are a couple of FX ETFs to trade that track GBP, EUR and USD, but there are no OTC options markets, nor can you trade on exchange futures with DMA.
However, as well as being a client-facing forex broker, CMC Markets also provide liquidity to a wide range of smaller brokers. This means that there should always be good FX liquidity capable of filling large and high-frequency orders from even the most active traders.
And of course, you can see what other traders on the CMC platform think of specific forex markets with the “market pulse” tools. The client sentiment indicator shows how many clients are long or short an FX market, and the Chart forum gives analyst views from a technical perspective.
Pros:
✔️Tech heavy Fx trading platform ✔️Wide range of forex pairs to trade ✔️Good forex sentiment indicators.
Cons:
❌No DMA forex trading for retail clients ❌Limited forex options.
Pepperstone: Good for automated forex trading strategies.
Forex pairs available: 62 Minimum deposit: £1 Account types: CFDs, spread betting Equity overnight financing: (1/FX Rate) * (Trade Size*Tom Next) Pricing: EURUSD 0.26, GBPUSD 0.59, USDJPY 0.26.
74% of retail investor accounts lose money when trading CFDs with this provider.
Pepperstone has two forex trading platforms, MT4/MT5 and cTrader and is generally one of the cheapest brokers for forex trading. Forex trading is cheap with Pepperstone because they focus on FX as a core market rather than offering lots of stocks and less popular assets. As such, Pepperstone are able to offer some of the tightest forex spreads and commission for major FX pairs. You can also trade minor and exotic FX crosses as a spread bet or trade CFD. Although no currency futures or options. Liquidity, pricing, and execution time on Pepperstone’s platform are good, given its access to multiple Tier 1 banks.
Pepperstone’s USP, when compared to other forex brokers, is their MT4 offering for traders who want to automate their forex trading strategies. Pepperstone has done partnerships with FX Blue which measures currency strength and also has a free (for clients) package of MT4 indicators which can be used to set up and simulate, then go live with trading algorithms based on technical indicators and price action.
For forex traders, who want manual execution, the cTrader forex trading platform offers good functionality where you can trade directly from the charts, as well as drag and drop stops and limits.
Pros:
✔️Good MT4 forex indicator package ✔️Automated forex trading ✔️Tight forex spreads.
Cons:
❌No forex futures or options ❌Limited forex pairs.
IG: Excellent all-round forex trading platform for most types of FX trader.
Forex pairs available: 51 Minimum deposit: £250 Account types: CFDs, spread betting, DMA, investing Equity overnight financing: Tom Next +0.8% Pricing: EURUSD 0.9, GBPUSD 0.6, USDJPY 0.9.
73% of retail investor accounts lose money when trading CFDs with this provider.
Due to its size, IG offers some of the best liquidity for forex trading, meaning that smaller clients get tight pricing and high-volume forex traders won’t find it hard to execute larger orders. IG’s forex trading offering is one of the best around with a wide-ranging and competitive margin FX service across several dealing platforms which will comfortably meet most retail traders’ needs.
You can trade forex as either a spread bet or CFD in the UK, and on the platform forex pairs are grouped by, major, minor, exotic and emerging crosses, which is rankable by the popularity of an FX pair.
To trade an individual forex pair, the platform “workspace” gives a good overview with quick access to news, analysis, and integrated trading signals (from Autochartists and PIA). The market data page also gives some good indicators of IG client sentiment, how much a forex pair has been traded within the last hour and month, what excepted price ranges are and what volatility has been like.
You can also hunt out upcoming trading signals, which are directly linked to a trading ticket (with corresponding stops and limits) for quick execution. These stops can be guaranteed stops (which will always be filled at your price no matter is the market gaps below) or trailing stops that move based on how profitable your position is).
You can trade forex options on a daily, weekly or quarterly basis for major pairs from £1 per point, if you want to take limited-risk forex positions. One of the lesser used but most helpful features through is the ability to trade forex when others can’t over the weekend. IG provides a weekend market for EURUSD, GBPUSD and USDJPY on Saturday and Sunday. Pricing is obviously wider, it does help provide some more control over your positions.
Pros:
✔️Excellent range of forex pairs ✔️Good forex news, analysis and signals ✔️Deep FX liquidity.
Cons:
❌No forex futures ❌Forex options only available as a CFD or spread bet.
Saxo Markets: Excellent on-exchange and DMA forex trading platform.
Forex pairs available: 84 Minimum deposit: £500 Account types: CFDs, futures & options, DMA, investing Equity overnight financing: Tom/Next Swap +/-0.60% Pricing: EURUSD 0.7, GBPUSD 0.7, USDJPY 0.7.
70% of retail investor accounts lose money when trading CFDs with this provider.
Saxo Markets is an excellent forex broker suitable for experienced traders who want a robust forex trading platform with an institutional pedigree. The ability to trade on exchange forex futures or on-exchange FX options gives Saxo Markets the edge over most forex brokers who just offer CFDs or spot FX.
Saxo Markets offers traders a choice of their own proprietary forex trading platform SaxoTraderGo, as well as MT4, although SaxoTraderGo, is in my view by far the better platform. You can view major forex pairs and rank them by performance, change of various timescales, volume on the bid/offer, market spreads.
If you need trading ideas, in the standard FX watchlist you can also see emerging, bullist and bearish forex trading signals. Once you click on a signal (which is displayed based on the time scale, 1D, 4h, 30 mins etc.) an order ticket is created that gives the expected direction, the technical pattern name and type as well as the success probability, the quality of the signal and the option to add a stop loss or take profit limit. You can also filter Forex pairs, by percentage returns sub-categorising major, minor and exotic markets.
Saxo Markets forex trading research tab on the platform also provides insights from their analysts, about which markets are in focus and what economic indicators may have an upcoming affect on prices. They have also have good educational articles, videos and podcasts for those that want to learn more about forex trading risk management.
Despite being an institutional grade forex trading platform, I actually fine it one of the easiest to use, with the ability to drag and drop a forex pair between charting, options chains, research and your positions tab.
Pros:
✔️DMA & on-exchange forex futures and options ✔️Good forex analysis and research ✔️Discounted forex pricing for large accounts.
Cons:
❌No forex spread betting ❌High minimum deposit of £500.
eToro: A simple forex trading interface and the ability to control your leverage.
Forex pairs available: 41 Minimum deposit: $10 Account types: CFDs & investing in USD Equity overnight financing: 6.4% +/-2.9 SONIA Pricing: EURUSD 0.8, GBPUSD 2, USDJPY 0.8.
77% of retail investor accounts lose money when trading CFDs with this provider.
There are two aspects to eToro’s forex trading offering that makes it stand out. Social trading where you can copy other forex traders trades and the ability to set your own leverage.
As forex trading is notoriously difficult, and I would say that the majority of eToro’s client are early-stage traders, the ability to reduce the amount of leverage is a very useful. When you reduce your leverage it means you reduce your risk, by putting up more margin when trading forex. So, for example, when you open a forex dealing ticket, your leverage is set at 30x, but you can reduce this to 1x. Meaning that if you want to speculate on $1,000 of GBPUSD, on 30x leverage, you would only have to put up $41 in initial margin, meaning you are potentially risking $959 that you don’t have. But, if you set your leverage to 1X yo have to put up the whole, $1,000 which reduces the temptation to take on excessive risk, with money you do not have.
The other feature that is unique to eToro is the ability to follow other forex traders through copy trading. However, it should be noted, though that if you are planning to trade forex by copying what other traders do it can be as hard as choosing your own trades. Just because a trader has done well in the past or if you think their trading ideas look good it does not mean they will be profitable in the future. Social trading is really only good for idea generation, which means you ultimately have to decide if you agree or disagree with another traders outlook.
Pros:
✔️Social and copy forex trading ✔️Easy-to-use forex platform ✔️Can change your FX leverage.
Cons:
❌Accounts must be in USD ❌High FX conversion charges ❌Limited FX market range.
What's in this guide to the best forex brokers? show.
How to choose a forex broker.
Market access – how many forex pairs do they offer? Spreads & fees – how much does it cost to trade and how wide are the spreads Minimum deposit – are you able to start trading with a small amount? Account types – does the forex broker offer spread betting, spot, CFD and DMA trading?
Different types of forex trading platforms.
These are the main different types of forex trading:
Spot – where you buy and sell physical currency in full or on margin CFDs – “contracts for difference” is when you technically enter into a contract based on the opening and closing price of a trade. However, in reality it is similar to Spot Spread Betting – is placing a bet for an amount per pip a currency pair moves Futures – on exchange futures contracts are for set amounts and for certain dates in the futures, usually for more experienced traders Options – you can either trade on exchange or OTC currency options, through a options trading platform.
How do online forex trading platforms work?
In this interview, we cover what forex trading is, why and if you should trade forex, what forex pairs to trade, types of forex orders, what are the main risks of forex trading, trading forex around economic figures, technical analysis versus fundamental analysis as well as managing fx risk.
Forex broker FAQ:
Forex brokers like Saxo Markets and Interactive Brokers offer DMA currency trading through currency futures.
For spot FX there is no central market – foreign exchange prices are determined through various liquidity providers.
Platforms like Currenex offer a form of DMA, whereby the platform aggregates orders from multiple brokers showing liquidity depth. Although this is still an OTC market.
You can work orders inside the price, but it’s not as functional as an established exchange.
Also, when trading SPOT FX, your positions are rolled T+1, rather than settling at a set date in the future.
Things to consider when trading FX DMA:
With DMA FX trading there will be a commission added to the trades. With CFD FX brokers and spread betting commission is generally built into the price making it easier to calculate P&L. It may not be worth trading DMA FX if you only have a small account. DMA brokers tend to only offer accounts with competitive pricing to large private and institutional accounts.
We have ranked Pepperstone as the best forex broker for trading EURUSD with spreads starting from 0.13 pips.
For this ranking of the best forex trading platforms to trade EURUSD we have ranked by which forex broker has the cheapest trading costs.
For a more in-depth comparison of forex brokers that offer EURUSD trading view our EURUSD forex trading platform comparison.
We have ranked Pepperstone as the best broker for trading GBPUSD based on their spreads of 0.44.
For this ranking of the best forex trading platforms to trade GBPUSD we have ranked by which forex broker has the cheapest trading costs.
For a more in-depth comparison of forex brokers that offer GBPUSD trading view our GBPUSD forex trading platform comparison.
We have ranked Pepperstone as the best broker for trading USDJPY based on their spreads of 0.25 pips.
For this ranking of the best forex trading platforms to trade USDJPY we have ranked by which forex broker has the cheapest trading costs.
For a more in-depth comparison of forex brokers that offer USDJPY trading view our USDJPY forex trading platform comparison.
CMC Markets offers the most currency pairs with 338 currency crosses to trade.
There are as many potential FX trading combinations as there are currencies in the world, however, not every single currency is tradable or liquid, and in developing markets in particular, exchange controls are often in operation, which limits the availability of that currency.
On the face of it, that shouldn’t affect the cash-settled, non-deliverable contracts traded in rolling spot FX and spread betting. However, in practice, it does because these contracts are priced based on the underlying deliverable markets.
Alongside the FX majors, we have what are referred to as crosses. Crosses are FX rates that don’t include either the US dollar or the euro. So, for example, GBPCHF, the British pound versus the Swiss franc, is a pair that’s composed of two currency majors, but not the dollar or the European single currency.
In the table below, we have set out some examples of tradable pairs and crosses but there are many more combinations available. However, margin FX brokers do not make prices in all FX pairs and crosses largely due to liquidity constraints and the cost of dealing, or the width spreads in the less liquid offerings.
The most you should expect to see on offer are between 50 or 60 combinations, although many brokers may have a more restrictive list than this. It is also worth noting that leverage ratios can be tighter in less liquid FX rates as well.
Whilst it is important to note that having a wide range of forex pairs to trade is helpful if you scanning the entire market for price patterns (for example with City Index’s SMART Signals), the more exotic (or less common) a currency pair the harder it will be to trade. Exotic currency pairs are generally harder to trade because there is less liquidity, meaning fewer buyers and sells, which results in wider prices (bid/offers) which means the market has to move more before you can lock in a profit on a trade. There is also less news flow than on vanilla (more common) currency pairs, which is one of the major factors that move currency prices.
IG, City Index, Saxo Markets and Pepperstone allow scalping on forex markets.
Scalping the forex markets is a very popular form of trading as it involves trading in and out of positions very quicky trading to make short-term profits on very small price movements.
Scalping is a well-established FX trading strategy. However, these days, it’s becoming increasingly automated and time-sensitive. So, whilst retail traders can pursue a scalping strategy, they will probably want to find a decent and reliable trading bot or expert advisor to help them with both spotting opportunities and trade execution.
To be effective, scalpers need to have low network latency and maximum platform uptime, and they may wish to consider using a VPS service, which creates a virtual trading platform on a server that is co-located in the same data centre with the broker’s own servers. That service will usually come at a cost, or with minimum volume requirements attached.
Some forex platforms ban scalpers because they find it difficult to hedge smaller positions and some traders take advantage.
The most effective way to scale the forex markets is by using an ECN or STP broker, however, you will want to ensure that you know exactly what your cost per trade is because one of the most important facets of scalping is being able to cut or scratch non-performing trades for the lowest possible costs, and of course to make profits on those trades that you don’t cut. But to book a net profit, your trading P&L will need to exceed your trading costs.
There is no such thing as a free lunch they say, and that rings true in trading. Brokers have costs and they need to meet those costs somehow, whether that is through the spread and/or commissions or trading against their clients via B-book. Where brokerage services are offered free, for example, in trading US equities, the broker is paid by a market maker or high-frequency trader for their client’s order flow. The adage that if something looks too good to be true then it probably is, remains good advice.
City Index offers the most trading signals (though Smart Signals and Tradign Central) and constantly updated analysis and fx news flow.
In our forex platform reviews, we always highlight what a platform does to help traders perform. For example, IG has trading signals from Autochartist, City Index has SMART Signals and CMC Markets provides information on what their profitable clients are trading so you can see where the “smart money” is going.
FX trading and the terminology involved can seem quite daunting to new traders, so it’s important that you feel comfortable with a broker’s offering, and that things that you don’t understand are explained clearly to you. Whether that’s through a website Q&A section or suite videos on YouTube or a help desk. If you find that the broker isn’t able to explain things to you clearly and concisely, then maybe they are not right for you.
In my view, the better the quality for education and added value the better the trading platform. This is because forex brokers that want to form long-term relationships with their clients want them to be profitable traders and to do that traders need to be educated, guided and helped. Forex platforms are not allowed to provide direct advice to clients (see should you use an advisory broker) but they are able to provide educational material to help you become a better trader. After all, the more you trade the more the broker makes from you as a customer.
All retail forex brokers regulated by the FCA offer the same margin of 3.33%
Being able to trade forex on margin means that you can leverage your risk capital (money) to get more exposure to the market.
The main advantage is that you only need to put down a small deposit to open forex positions, for retail traders the FCA has stated that you need to put down a minimum of 3.33% of the value of a trade. So with brokers like City Index or IG, if you want to trade £100,000 you only need to put down £3,330 as margin (this is called initial margin). You will of course need to put down more if the trade more if the market moves against you to cover your losses (this is called variation margin).
The obvious disadvantage is that it is possible to lose money quickly and losses are multiplied significantly. If you are putting down a margin of 3.33% it means you are trading with 30 times leverage so if you have a position using £1,000 in margin on a £30,000 position and the market moves against you by 1% that means that you lose, £300, which is nearly 30% of your initial margin (deposit).
It is possible to lower your margin rates with a forex trading platform like eToro who let you set your own leverage if you want to reduce your exposure. It is also quite common for brokers like City Index to let you trade via an amount rather than on a per pip basis. It is possible to get higher leverage if you are trading through a professional trading account, but that is only for sophisticated and very experienced high net worth traders.
Yes, it’s possible to make money trading forex. As with any financial market if you call the market right you can close profitable positions. However, speculating on the currency markets is very high risk and many traders do not make money.
All forex trading platforms in the UK must be regulated by the FCA.
Forex trading is a highly regulated industry, for the benefit of traders and brokers. The UK regulator, the FCA (Financial Conduct Authority) ensures that forex brokers are adequately capitalised (have enough money) to provide forex trading services, that they treat their customers fairly and adhere to strict standards of compliance and anti-money laundering.
Never trade with a broker that is not FCA regulated. You will see many adverts for offshore brokers offering forex trading online, as it is possible for offshore brokers to offer forex trading to UK residents. Being regulated in Cyprus also means that a broker can show that they are regulated in the UK and show up on the FCA register. So if you check the FCA website to make sure a broker is legit, they will show up. But, if they are not fully authorised and regulated by the FCA then client funds are not protected under the FSCS. The FSCS basically protects a certain amount of clients funds should a broker go into administration, see their website for more information here. If your broker is only based offshore you’ll have little hope of getting any money back.
On the Good Money Guide, we only feature forex trading platforms that are regulated by the FCA.
Markets.com accepts deposits as low as £5.
The phrase Day Trading refers to a style of trading that carries no overnight positions; rather, day traders enter and exit a trade within the same business day. This serves two purposes: firstly, it eliminates overnight risk – that’s price changes and news flow that can happen while you are asleep – and secondly, it means that traders don’t incur any overnight financing charges or rollover swaps because their business is traded intraday.
The most popular currency pairs for forex trading are the G10 forex crosses as they are the most liquid with the most news flow. Of those the top three traded forex pairs are, EURUSD, GBPUSD and USDJPY. For more information read our guide to the top ten forex pairs for trading.
Day trading is a very popular trading style but of course, it does limit a trader’s time horizons and tends to push them towards short-term swing and trend following trading strategies.
An FX day trader based in Europe might start their day by looking at what’s happened to the major FX pairs in the Asian session and for price movements that look likely to continue in European trading or indeed those that look like they’re running out of steam.
What might a day trade look like? Let’s imagine that the dollar-yen has changed overnight and the yen has continued to strengthen against the US dollar. Headlines in the European and overnight press suggest US rates will remain lower for longer and a dovish Fed Governor and board member is speaking later that day. In these circumstances, our imaginary day trader might well sell dollar-yen expecting the rate to fall further.
In the late afternoon, towards the end of the UK business day, the Fed board member speaks and intimates that interest rates in the US will stay lower for longer and the dollar-yen FX rates fall, allowing our day trader to close their short position for a profit.
Slippage is the difference in price between a take profit or stop order being triggered and the execution of the same. It can occur in fast or illiquid markets and comes about because stop and take profit orders are executed at the next available price in the market after they are triggered and FX prices can move significantly, even within a fraction of a second.
The only way to eliminate slippage is to trade with guaranteed stop losses, however, they usually have a cost attached to them and are not as flexible as a standard stop-loss order. To reduce potential exposure to slippage, it’s best to trade in the most liquid portions of the market in terms of both choice of instrument and times of the trading day.
We can also use limit orders to fix the price at which we are prepared to execute. Though of course, we have to weigh up when to use that order type and when it’s best to close a position, regardless of price.
The best times of the day to trade in FX are the points where the main sessions overlap and business moves from one region to another. This happens first thing in the morning GMT, as Asian markets wind down for the day as London opens for business, and then again mid-afternoon London time, as US markets become active and London trading heads towards the close. The handover from the US to Asian FX centres later in the day is probably the least liquid of the three overlaps.
City Index is one of the best forex brokers for beginners as it has a wealth of educational videos, analysis and trading signals as well as offers forex CFDs and spread betting.
Established names like IG Group score well as a broker for those that are new to trading or have a small deposit. However, there are alternatives to consider as well. Both CMC Markets and Spreadex can accommodate smaller deposits and new forex traders. Both of these businesses have straightforward intuitive trading platforms.
Trading with smaller deposits is popular among new traders who are reluctant or unable to commit a large amount of capital to FX trading. Over time, they may increase their trading deposit as they become more familiar with the way FX trading works and more confident in their ability to make a return on their trading capital.
Further reading: If you are new to forex see our how to trade forex guide.
Please also note that trading forex on leverage is not suitable for complete beginners. For a limited risk way to speculate on currencies you might want to consider purchasing an ETF that tracks a currency pair.
Interactive Brokers offer one of the best solutions for trading on exchange forex futures as they are one of the cheapest and biggest brokers globally.
Most FX futures are denominated in USD and traded through exchanges like the CME.
Further reading: You can see more info on the CME FX Futures here.
FX futures are set in lot sizes and deliverable at a certain date in the future. So the price will be slightly different from the underlying mid-market because the futures price is based on the cost of carry (determined by the prevailing currency interest rates).
When trading on exchange you can see the order book (in lots) and work bids and offers inside the market prices, just like trading stocks on the stock market.
When trading on exchange FX, you can also trade FX options – to do so you need a futures broker (not a CFD broker).
Yes. CMC Markets offers some of the tighest spreads on the most forex pairs for those that want to spread bet on currencies.
As an alternative to trading CFDs on forex , individuals and UK taxpayers can spread bet on foreign exchange.
Spread betting, as the name suggests, are wagers on the performance of an instrument or market rather than a trade, and though the methodology and pricing of these two types of transactions can look very similar, the tax treatment of any profits made in them is very different.
Profits made from trading are subject to UK capital gains tax, whilst under current legislation, profits generated through spread betting are tax-free. By the same token, losses made in trading can be offset against capital gains made elsewhere, whilst spread betting losses cannot.
For more information forex trading tax, read our Q&A: Do you have to pay tax on forex trading?
The tax treatment is the principal difference between the two forms of speculation, however, some spread bets may be priced in a similar way to futures contracts; that is with the cost of carry or financing included in the quote at the outset, rather than being charged daily, as is the case in forex trade. Spread bets are also likely to have a fixed expiry, whether that’s daily, weekly or quarterly. While FX trades, which are effectively CFD trades, have no fixed expiry unless you are trading a currency future or option, rather than the rolling spot contract.
The mechanics of spread betting on FX are very similar to those of trading FX. Of course, you will need to open a spread betting account to spread bet, rather than a trading account. You will also want to familiarise yourself with the bets that spread betting providers offer and the contract lifetimes, and the way that they are priced that could be very different for say a rolling daily bet, a weekly bet or indeed a monthly or quarterly bet.
One obvious thing to try to do is to match the contract you are going to be betting on with your time horizons, and style of speculation daily bets won’t be much use to you if you have a two- or three-week-time horizon. Equally, a quarterly contract may not be your best choice if you are an intraday bettor.
Forex trading platforms make money charge clients by either widening the spread or charging commission after you trade.
The benefits of using a broker that widens the spread are that you always know exactly what your entry and exit points are and don’t have to factor commission into your P&L. When brokers widen the spread they are including their commission in the bid/offer price that you trade at, so for example if a brokers commission is equivalent to 1 pip and the interbank buy price EURUSD is trading at 1.05123 you will be able to buy it at 1.05124 a 1 pip mark up. The disadvantage of using a broker that charges by widening the spread is that you have to trade at their prices and cannot work bids or offers in the market. City Index is an example of a broker that includes commission in the spread, and average spreads for EURUSD are 0.5, GBPUSD is 0.9 and USDJPY is 0.9 pips.
In our comparison table of forex speads we averaged out the top ten traded forex pairs and to see which forex trading platform was the cheapest. Pepperstone came out as having the overall cheapest spreads for forex trading with an average spread of 0.323 followed by XTB (0.446) and then Spreadex (0.451).
The other way forex trading platforms charge is to add a commission after you trade. When this happens the bid/offer price you can trade at will be better, but you will be charged a commission from your account. This could be for example 1 pip per trade, with a minimum commission fee. This type of trading is more suited to higher volume or larger traders who scalp the market for short-term profits, or work large orders over the available volume on the order book. Interactive Brokers for example, caters to sophisticated forex traders and charges a commission of 0.0008% on forex trades.
IG Group was voted the winner in the Best Professional Trading Account category in our 2022 awards, whilst Saxo Markets won Best DMA Broker for those that would like to trade on exchange FX futures.
For high-net-worth individuals who are likely to have deposits over the £85,000 FSCS limit, it’s important to look for a provider with a decent balance sheet and a good track record. For example, IG Group has a market cap of £2.79 billion and has been in business for more than 40 years. Fineco is a fully-fledged and listed Italian bank with a market cap of €9.0 billion. Whilst privately held Saxo Bank Group had a total balance sheet equity of DKK 7.082 billion in 2022 and is 50% owned by Chinese conglomerate Geely Holdings.
Professional traders need to meet strict criteria around experience, knowledge of volumes traded and financial wherewithal. If you do qualify as a professional trader, you will enjoy higher rates of leverage and access to a wider range of products than retail traders. Professional traders are the most profitable group for FX brokers and they tend to offer those clients additional perks as well.
Saxo Markets is the best broker for trading forex options as they offer them as CFDs or on exchange contracts and have an intuitive and robust currency options chain on their SaxoTraderGo platform. Interactive Brokers, is also an excellent choice for on exchange Forex options, they are slightly cheaper but do not have the personal service or voice brokerage that Saxo Markets provides.
Forex options are exchange-traded and listed currency options on the CME, which offers 24 different contracts. Options are a form of derivative that confers the right but not the obligation on a buyer of the contract, to be able to buy or sell a predetermined amount of the underlying instrument that the options contract is over.
Sellers or writers of options contracts are obligated, however, and must buy or sell the specified amount of the underlying instrument if they are called upon to do so during the lifetime of the contract.
Options trading allows a trader to speculate on a potential outcome over a fixed time with a small stake. Options contracts are traded in series, for example, on a monthly rotation, and options are offered over a range of levels above and below the current price, which are known as strike prices.
Options also come in two different flavours: Call options, which confer the right to buy, and Put options, which confer the right to sell.
So if we have a rotation or series of 12 monthly contracts with 20 strike prices in each month, and both puts and calls available, we have 12*20*2 potential trade combinations. That’s 480 opportunities, and that is just what’s available for one instrument. That compares very favourably with the binary choice of buying or selling in a standard FX trade.
Options have a finite life and to some extent, the valuation or price of an option over its lifetime is predictable in advance. Largely because the time value of options decays at a known rate and with a particular profile. The time value component of an option erodes more quickly the closer we get to the expiry date, and once the time value of the option has been eroded, the option contact only has an intrinsic value if it is in the money.
That is, the strike price of the option is advantageous compared to the current price of the instrument that the option is over. Such that you can buy the underlying more cheaply than the current offer price, via the option, in the case of a call. Or sell the underlying at a higher price than the current bid in the case of a put option. The more in the money an option is, then the higher its value.
Option prices are driven by other factors, including interest rates, volatility, or the propensity for rapid price change in the underlying instruments, and they are sensitive to changes in key ratios used in pricing models. Those sensitivities are known as the Greeks, as they are named after letters in the Greek alphabet.
As well as exchange-traded options or CFDs over the same, there are OTC options on FX and among those are exotic options. Options are considered complex products and exotic options even more so, and as such, these are not products for inexperienced traders. Only those with a clear understanding of the pricing mechanisms and risk-reward profiles of options should consider trading them.