Forex trading costs are not easy to break down. Reasons why trading costs can be impacted: bid/ask spreads can vary across venues (because forex is decentralized), spreads may be either fixed or variable (floating), and variable spreads may widen or narrow (vary) at different rates across brokers.
Furthermore, execution policies vary across firms in terms of how orders are handled (slippage/rejections), even when all else is equal. Brokers may be acting as market makers (dealers) to execute your trades and/or may be acting as agents for execution (relying on other dealers to execute). Spreads may include a round-turn commission.
To assess brokers, we took into consideration how much beginners, average traders, and even more seasoned traders would pay, looking at average spreads for standard forex contracts (100,000 units) as well as mini accounts (10,000 units) and micro accounts (1,000 units), where applicable. We then calculated the all-in cost by including any round-turn commission that was added to prevailing spreads.
When the dust settled, IG came out as the best broker for commissions and fees, earning it first place among the 20 brokers we reviewed in 2017. With an average spread of just 0.7 pips on its EUR/USD pair for the period we reviewed, IG offered the most competitive all-in cost to trade. In addition, it doesn’t matter whether you have a small deposit, are a beginner, or even a more experienced trader – great all-around pricing is provided.
In second place was CMC Markets. Although CMC Markets spreads weren’t the lowest among the brokers we reviewed, the company offers competitive spreads that are the same for all clients. For example, while assessing commissions for our review, average spreads on the EUR/USD at CMC Markets were 0.8 pips, regardless of account type or trade size.
Rounding out the top three on the podium in 2017 was Dukascopy Bank. Using the broker’s default commission tier of $7 per round-turn and low underlying average spreads of 0.22 pips on the EUR/USD during the assessment of commissions for our review, the all-in cost to trade started at 0.92 pips (0.22+ 0.7 commission) on Dukascopy’s brands. A highly competitive offering.
Following closely in fourth place was Saxo Bank, with its commission-based pricing, and in fifth place was Interactive Brokers, marginally ahead of FXCM’s Standard account offering.
While the all-in cost to trade can be critical for many traders, it is important to look at the whole picture in terms of how a broker’s overall offering could best suit your needs. Questions to ask include: What are average spreads for the account types offered? How will differences in margin requirements or execution affect my trading volumes and related trading costs? These are just some of the questions that can help traders consider key differences between offerings.