Brokerage fees are an unavoidable part of forex trading. There are ways a forex broker may charge traders such as with a spread cost or a commission fee. In this comparison, we look at brokerage fees and show the best broker to save for each type.
Below we look at the different types of forex brokerage fees and costs
No dealing desk (brokers) brokers (sometimes called A-book brokers) typically use computerised systems such as Electronic Communication Networks (ECN), Straight Through Processing (STP) or Direct Market Access (DMA) to connect you directly with liquidity providers including global banks, major financial institutions and even individual investors.
By cutting out the middleman, NDD brokers can offer the “purest” or “rawest” possible spreads, as prices are set by the liquidity providers without price interference from the NDD broker themselves. This differs from dealing desk brokers (often called ‘market makers’ or ‘B book’ brokers) who own or buy the liquidity used for trading and are your counter-party for each of your trades, meaning they determine the prices quoted.
To keep spreads at their ‘raw’ or market rate, brokers charge a commission rather than ‘artificially’ widening the spread so they can recoup costs for their services. As these brokers profit through commission not spreads, it is not in their interest to increase the spread cost. Instead, NDD offers tighter spreads in the hope lower costs will encourage more trading.
Commission accounts using ECN, STP or DMA are especially popular with the following traders:
When using a Commission Account, you will have the following basic trading cost when opening and closing your position.
Each pip in the spread will cost you USD$10 (converted to your account currency) and the commission will vary for each broker. Most brokers charge around US$3.50 for each lot.
So if your spreads are 1 pip when you open and close your position, then you will pay USD10 + $3.50 to open (side-way) and USD10 + $3.50 to close (round-trip).
The below table displays the average spreads taken from ECN brokers websites (where available). These spreads are average, not minimum, as this better reflects the spreads you can expect from each broker.
Data taken from broker website. Accurate as at 02/04/2021
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While spreads available from forex brokers differ for each currency pair. IC Markets consistently offers the lowest spreads across the board. Pepperstone and FP Markets are other brokers that offer consistently competitive spreads. These brokers’ average spreads offer lower spreads than others because they connect you with competitive liquidity providers.
IC Markets is the trading name of International Capital Markets Pty Ltd, a financial services provider licensed and regulated by the Australian Securities and Investments Commission (ASIC). IC Markets (EU) Ltd is a subsidiary operating in Europe, which falls under the regulation of the Cyprus Securities and Exchange Commission (CySEC).
IC Markets’ global client base can trade through IC Markets Global, an entity regulated by the Financial Services Authority of Seychelles.
This brokerage trading firm offers three account types:
Traders can gain access to currency markets via three powerful trading platforms (MetaTrader 4, MetaTrader 5 and cTrader with desktop, web-based and mobile variations), deep and diverse liquidity, reduced slippage and exceptional order execution speed of less than 40 ms on average.
Before trading the Forex market with real money, retail investors have the opportunity to open a free Demo Account to familiarize themselves with trading platforms’ features and test trading strategies.
Detailed trading account type specifications are presented in the following table.
IC Markets offers 60 Forex pairs, 19 Commodity CFDs, 120 Shares CFDs, 17 CFD contracts on Stock Indices, 5 Bond CFD contracts and futures trading on 4 global markets.
IC Markets is among the best Forex brokers offering raw pricing. With prices being derived from up to 25 institutional-grade sources, the broker ensures no dealing desk execution and no requotes on its MetaTrader Raw Spread Account, which perfectly suits scalpers, high-volume traders or clients who use Expert Advisors.
Traders can also access Forex leverage of up to 1:500 and tight variable spreads, starting from 0.0 pips on major currency pairs such as EUR/USD, but will be charged $7.00 per round turn for 1 Standard Lot traded.
The broker’s cTrader Raw Account grants access to real-time Forex and CFD price quotes, full depth of market with all available ask and bid prices, multiple order types with no restrictions on limit orders, more sophisticated technical analysis tools and Smart Stop Out feature for maximum protection of clients’ trading accounts. IC Markets will charge a commission of $6.00 per round turn for 1 Standard Lot traded.
IC Markets allow for an effortless live account opening within 1 business day with a minimum deposit of $200 and charges no fees on deposits and withdrawals. Grab your FREE demo account by clicking the button below.
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Commission fees are usually found with NDD brokers, so the spread they can offer traders is the same as quoted their liquidity providers. Therefore, you will find markets makers do not charge commissions, market makers are your counterparty to your trades so make money by profiting through your losses (however some market makers may offer NDD trading account options).
The commission fee is typically charged by the broker when you open your position and when you close your position, however, some brokers may charge the opening and closing commission fee when you open your position. In either case, your final commission cost is the same.
With relative commission, the commission fee advertised is based on one standard lot. If you are trading with mini, micro or even the rare nano lots, then the commission cost will usually be a relative or pro rata amount based on the commission for a standard lot. Some brokers, however, may charge slightly more commission for smaller lots to encourage larger trades.
If the commission is based on the forex contract size, then:
Some brokers charge a fixed commission instead of relative commission. This means you will be charged the same regardless of the size and volume of your trade. This method is less common than relative commission.
While most brokers charge the same relative commission regardless of volume. Some brokers offer commission discounts when trading in large volumes. This means the more you trade, the lower your commission will be. This is known as variable or tiered commission.
Most brokers advertise the commission costs in USD. Unless stated by the broker, you will need to convert your commission costs to your home currency to determine your final costs.
The table below shows commissions for 13 different brokers ECN pricing accounts. Fusion markets come out on top when it comes to commission costs being around 36% cheaper than many competitors.
When trading with Fusion Markets you will be charged the following commission:
Fusion Markets is a trading name of Melbourne-based Gleneagle Asset Management Limited and is regulated by the ASIC.
The broker has the following features:
Fusion Markets also allow clients to open a Demo Account, which may have the features of either a ZERO or a Classic Account. Another option is to open multiple Demo Accounts (one functioning as a ZERO and one functioning as a Classic).
The broker offers:
Fusion Markets is among the best Forex brokers for commission fees. Its trading commission rate is nearly 36% lower compared to its competitor’s commissions. Fusion Markets charges a commission of as low as AUD$4.50 per round turn for 1 Standard lot traded on its ZERO Account, while spreads have no mark-up and start from 0.0 pips for Forex, Metals and Commodities.
In order to trade Forex in another base currency on the ZERO Account, clients will be charged a commission as presented in the table below.
Note* Apart from the spread and the trading commission, there are no other (hidden) charges.
We should note that Fusion Markets will charge no commissions on its Classic Account since they are included in the spread itself. Spreads are variable and start from 0.8 pips on major currency pairs such as EUR/USD and USD/JPY. Grab your demo account 100% risk-free for you to try it out by clicking the button below.
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70% of the $6.6 trillion daily forex trading volume is attributed to automated trading. This type of trading refers to the use of existing technologies such as computers, software and the internet to manage one’s trades in the forex marketplace. Automation tools can analyse more markets at one time that possible manually and then execute trades. Types of traders using automation include:
Automation trading present opportunities not easily achieved by manual traders. These features include:
The main thing in common with these features is the increase in buying and selling opportunities than what would be typical with positional or long-term traders. This means saving on costs is important, as costs will add up the more you trade, especially when using high leverage which can greatly accelerate your costs as it represents a percentage of your trading capital.
The below example shows why it’s important to choose a broker with the lowest possible spreads.
If you are a long terms trader with an expensive broker and you buy 1 lot of AUD/USD with $50k and your spread is 2 pips, then your cost will be $20. This is not a big deal if you hold your position long term and the pair moves 10% in your favour. $20 isn’t much as you will still have $4980.
On the other hand, if you are a frequent trader then you might buy 10 lots of ten different currencies pairs in one day at 1 pip using $5,000k for each trade making your cost $100. then you will be relying on an average of more than 10% across the ten currencies to earn more than the long-term trader.
In this example, even though you have invested the same amount in both scenarios and the long-term trader has spent more on the spread, the long-term trader has come on top.
If you are using automation and plan to trade frequently with high volumes, then it is important to choose a broker with the lowest spreads.
The below table shows Pepperstone is one of the best brokers when it comes to low spreads.
Pepperstone is the best forex broker for automated trading strategies and automated copy trading platforms.
While most forex brokers technically support automated trading, some might come with restrictions, including:
Pepperstone doesn’t come with any types of restrictions and allows its clients to gain access to the foreign exchange market, including a good selection of CFDs. Pepperstone’s main goal is to keep the spreads low while giving FX traders access to a wide range of automated trading options, including:
Note* Pepperstone’s automated trading platforms support different programming languages that can be used for developing trading bots, Expert Advisors (EAs), custom indicators, MT4 scripts, algorithms and backtesting capabilities.
The top-notch technology for automated trading offered by Pepperstone comes with low spreads for trading forex and trading CFDs. Algorithmic trading is a great opportunity to build a source of passive income, but it comes with strings attached. The automated trading strategies are profitable if the broker charges tight spreads. The difference between the bid price and ask price can play a major factor in your profitability as a trader.
Pepperstone low spreads enable clients to use algorithmic strategies more efficiently and come with the following advantages:
At Pepperstone, spreads are determined by the account types they offer (Standard vs Razor account). Generally, online brokers can offer tight spreads if:
During prime hours when the forex liquidity abounds, the spreads can go as low as 0 pips on EUR/USD. However, the average spreads offered by Pepperstone are 0.13 pips on EUR/USD and USD/JPY, while the AUD/USD average spread is 0.18 pips.
Pepperstone also accommodates automated forex trading with fast order speeds, which reduces slippage for automated trading. In the world of currency trading, fast order entry is necessary for automated trading systems. Pepperstone handles high amounts of trading volume with an average execution speed of 80 milliseconds (for market orders).
Note* The execution speed simply measures the time from the moment you submit your order until the order reaches the broker’s servers and it’s executed internally or by the broker’s liquidity providers.
Pepperstone’s lightning-fast ECN execution speed will ensure the following advantages:
Below, we’ve ranked the best forex brokers and the real order execution speed, not the advertised numbers by each online broker.
Pepperstone is the go-to forex broker for automated trading with low spreads. There is no one size fits all when using automated trading software, which is why Pepperstone offers different programming languages (MSQL 4, MSQL5 and C#). Forex traders can develop automated strategies and benefit from significant advantages including:
If you’re searching for the cheapest FX broker for automated trading, you can open a demo account by clicking the button below before you risk any real money. Your money is safe with Pepperstone, which is a regulated broker by the world’s most powerful financial watchdogs Financial Conduct Authority (FCA) and the Australian Securities and Investments Commission (ASIC).
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Most brokers, regardless if they are an A-Book or B-Book broker, will offer what’s commonly called a standard account. This type of account is a spread only account, meaning there are no commission costs. Rather than charge commissions, spreads are widened so brokers can earn profits.
NDD brokers, much like with commission accounts, connect you with liquidity providers using ECN, STP or DMA trading execution. Unlike with commission accounts, the broker (or liquidity provider) will artificially widen the spread, this is done as there are no commission charges.
The number of pips added to each spread will vary with each broker. Some brokers add the same amount of pips for all currency pairs they offer, and others will have a variable number of pips which can change through the trading day. Brokers that vary their pips will usually add fewer pips to major currency pairs and widen more for minor and exotic pairs.
Most brokers will typically add around 1 pip to the spread. If the market rate for a currency pair is 0.3 pips, then the standard account rate will be 1.3 pips.
Dealing Desk (DD) brokers own or sources the liquidity you will trade with. This allows DD brokers to set their own bid and ask prices and are your counter-party for each trade you do. This type of broker profits when you lose and loses when you profit.
While DD broker certainly has their own interests as your counter-party, a good market marker can still offer competitive spreads. The forex broker industry is competitive, so it’s not in the broker’s interest to offer spread that is not competitive with the market. Some DD brokers even peg their prices to prices set by liquidity providers.
Spreads with Standard accounts are always going to be wider than with commission accounts. So you will pay more for the spread however there is no commission. Overall costs will generally be higher than an ECN pricing account.
Standard accounts are popular with:
IG traders can choose between over 17,000 financial markets with spreads for the following
The table below demonstrates the range of markets and spreads IG offers:
As a world-leading CFD provider, IG is required to meet the tighter regulatory frameworks imposed by local financial authorities, including the UK’s FCA, the USA’s CFTC and NFA and the Australian ASIC. Besides tight spreads, a wide selection of CFD instruments and strong regulation, other major IG features include:
IG is a well-established FTSE 250 company that has strong relationships with a wide network of liquidity providers. IG’s access to deep liquidity allows this brokerage trading firm to offer some of the lowest spreads in the forex industry. IG’s liquidity venues include Tier 1 banks, exchanges, MTFs, investment banks and non-bank liquidity providers.
With IG, there is no minimum account balance to create an account.
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ECN and Standard accounts use variable spreads (sometimes called floating spreads) which means they are constantly changing in line with liquidity supply and demand. As the prices are changing so fast, you will occasionally experience slippage, which means you the quoted buy or ask price can’t be filled due to the execution lag time. Slippage means there is a risk of large losses should be the market change against you suddenly and dramatically with little warning.
Fixed spreads provide certainty as the broker’s spreads do not fluctuate. This provides cost predictability, transparency and a level of protection from surprise when the market is volatile and therefore prevents unexpected losses.
If you choose to trade with fixed spreads, you will find the spreads are wider than with ECN and Standard account which means they are more costly. This is because the broker needs some margin or reserve as they will bear the costs differences between the market price and fixed price when the market prices differ to quoted prices.
While fixed spreads are wider and will cost you more in normal trading conditions, they can save you on costs in volatile conditions when variable spreads may become wider than the broker’s fixed spreads.
The below table is compiled using the spreads advertised on the website of forex brokers that offer fixed spreads. As they are fixed, there is no need to find the average.
Of the brokers compared, AvaTrade clearly offers superior spreads than other brokers. Some spreads AvaTrade offers are better than many of the average spread brokers offer for Standard Accounts and even some poorer performing ECN brokers.
AvaTrade offers fixed spreads across all its account types and across 7 different financial markets. You can review below AvaTrade’s trading conditions for each asset class and their spread cost:
There are five global regulatory bodies that oversee AvaTrade and authorized this brokerage trading firm to offer financial services, including the CBI, ASIC, FSCA, FSA and FRSA.
Note* AvaTrade fixed spreads come with 5 major advantages, including transparency, lower total costs, compatible with news trading, protection against volatility (spreads don’t widen) and efficient for scalping.
AvaTrade clients also have the option to choose between a wide range of trading platforms, including:
With AvaTrade Education centre, both beginner and advanced traders can fine-tune their skills. AvaTrade offers top-notch educational materials, including trading video tutorials, trading e-books, articles, free webinars and daily market analysis.
AvaTrade also has excellent customer support that is available in over 21 languages. On top of that, AvaTrade is the official partner of Manchester City, one of the best football teams in Europe.
Traders can open a live trading account with a minimum deposit of only USD 100 (for accounts with US Dollar as their base currency) or 100 euros for the EUR-based accounts.
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With 1/3 of the world’s population of Muslim faith, many forex brokers offer a swap-free account which meets the sharia law requirements of Islam. Islam forbids business profiting through usury (called a riba in Islam) fees. That is any financial transaction where interest is involved in the transaction. In Islamic law, the lender must share in the borrower’s risk, when interest is charged, all the risk is taken by the borrower which is considered exploitative by the lender in Islam.
In forex trading, brokers apply a swap fee (also called rolling interest or overnight fee) where a trader keeps their position open after closing (usually 5 pm New York time). With this swap rate, you will either receive or be charged interest on all your open positions held overnight based on the differential in market interest rates for the currency pairs held. This fee is not acceptable in sharia law.
In place of a swap fee, brokers will use other means to recover the costs. This is will usually be in the form of a daily, weekly or monthly administration fee (sometimes called a carrying charge) for the currency pairs you own, this usually is usually applied only if you have held your position for minimum 3 or 5 nights or with wider spreads (less common).
When researching brokers, ensure the broker offers an Islamic account that meets your needs.
ThinkMarkets offers great Islamic Account. Fees are charged only every 6 days, and you can choose spreads that match either their zero or standard account.
ThinkMarkets is our top pick for Muslim traders that want access to swap-free forex trading. ThinkMarkets Islamic accounts are compliant with the Islamic Sharia law. However, in order to compensate for not charging its clients overnight interest rate, ThinkMarkets will charge its clients a “weekly administrative fee.” The ThinkMarkets administrative fee varies between:
For a detailed overview of ThinkMarkets’ fees for Islamic traders, please study the table below.
Note* Muslim traders will not have access to swap-free trading the following currencies: CNH, HKD, HUF, MXN, PLN, TRY, ZAR.
As one of the top Islamic forex brokers, ThinkMarkets offer the following advantages:
One of the most powerful features offered by this multi-asset brokerage trading firm is the in-house mobile platform ThinkTrader. ThinkTrader is an award-winning mobile app that uses the latest software technologies that can be accessed directly from the palm of your hand.
ThinkTrader has been downloaded more than 240,000 times and has over 15,000 5-star reviews on the App store. Additionally, ThinkTrader platform can be accessed from multiple devices including phones, tablets and desktop. According to the data collected from April 2019 through April 2019:
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The forex brokers earn an income by matching buy and sell orders and execute them on the interbank market. Forex brokers typically make money through the bid-ask spread cost (fixed or variable), commissions, rollover fees (also known as the overnight swap rate) and other alternative sources, including:
The cost of trading forex varies from broker to broker. The typical trading cost varies from $0.9 to $3.0 per one standard lot or up to $6.0 round-trip spread costs. More, to access interbank spreads (the raw spread account) FX brokers are going to charge an additional commission that can vary from $2 per side ($4 round-turn commission) and can go as high as $5 per $100,000 units traded.
Pepperstone offers competitive raw spread account. For a complete review please check Pepperstone Razor vs Standard Account.
No, trading forex is absolutely free, forex traders only need to deposit a small amount of money to start trading. However, a monthly (or yearly) inactivity fee might be charged to your account if there is no trading activity for the past year. The monthly inactivity fee varies from broker to broker and on average you can expect to be charged around $15.
If you hold your position overnight, then the broker will charge you swap fees. In the forex market, all currencies have interest rates set at the interbank level and these costs are passed onto you when you have an open position once the market has closed. This will usually be 5 pm New York time. This charge is known as swap fees, which are sometimes called overnight interest rates or rolling costs.
The overnight interest is the difference between the interest rates of the two currencies that make your pair. This means your swaps could be an expense or a source of revenue, depending if the difference in interest between the pair is positive or negative. When choosing a broker, you may want to check the broker is passing on the swaps, as some untrustworthy brokers may keep your swaps when these costs are positive for you.
Swap costs will increase the larger your position is and the more leverage you use. This is because swaps are percentage-based.
When swaps are costs
When swaps are revenue
Spreads costs, commission fees, swap rates, administration charges (for Islamic accounts) are considered direct costs as these are costs are directly tied to your trading activities. These costs are unavoidable. Trading may also result in indirect costs and sometimes called hidden fees. These costs are usually avoidable unless your action or inaction makes these costs necessary.
Many brokers implement an inactivity fee when there is no trading activity on your account for a certain period of time or have not met minimum trading volume each month, quarter or year.
While most (but not all) brokers only activate inactivity charges when you have not traded for long periods of time, most charge the inactivity fees on a monthly basis so this can add up. If you are not an active trader and tend to leave your account dormant for long periods, then a broker with no inactivity fees might be an important consideration.
When it comes to fees on deposits, most leading Forex brokers have already waived such charges. However, there may be fees on fund withdrawals, which vary depending on the payment method.
Withdrawals via Debit Card or Credit Card are usually fee-free, but withdrawals via payment service providers such as Skrill or Neteller involve a particular fee.
Additionally, withdrawals via bank wire transfer involve fees that are charged by the corresponding banks. The corresponded bank usually charges a transfer fee between USD 25 and USD 75 for facilitating your transfer.
Note* Top brokerages such as IG Markets, Hot Forex, Pepperstone, Fusion Markets, or IC Markets will not charge clients any withdrawal fees.
Forex brokerages may also charge some additional fees for add-on services they offer. Examples of these include:
Brokers may charge extra to access advanced risk management tools. Risk management tools that may incur costs include:
Most brokers include complimentary Market Analysis and Education tools as part of their service, but some may charge extra fees for in-depth market analysis, daily trading signals, or for private trading education classes, education materials and webinars.
Retail clients with good understanding of Forex basics, fundamental and technical analysis, as well as money management, will probably find these options as unnecessary. Clients with little knowledge of the market, there exists a plethora of web sources offering trading guides and other educational materials completely free-of-charge.
Top forex brokers will often offer additional tools to help with your trading. This might be social/mirror/copy trading tools such as MyFxBook, Pelican, Mirror Trader, DupliTrade or charting tools such as Autochartist, Trading Central and even platforms such as RealTimePro. Sometimes these tools may be complementary, but often there will be a monthly access fee or widened spread.
When trading Foreign Exchange, if, for instance, a trader places a EUR/GBP trade in his/her USD-denominated account, the profit or loss registered along with all trading fees will be converted to USD and will incur a conversion fee. At brokers such as OANDA, the conversion charge will be based on the mid-price of the applicable FX spot rate for the conversion, plus an extra spread of 0.5%.
In the example above, the trade will settle in GBP and will be converted to USD at the GBP/USD mid-price +/-0.5%.
Justin Grossbard has been investing for the past 20 years and writing for the past 10. He co-founded Compare Forex Brokers in 2014 after working with the foreign exchange trading industry for several years. He also founded a number of FinTech and digital startups including Innovate Online and SMS Comparison. Justin holds a Masters Degree and an Honours in Commerce from Monash University. He and his wife Paula live in Melbourne, Australia with his son and Siberian cat. In his spare time, he watches Australian Rules Football and invests on global markets.