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Best Forex Brokers In Australia Of April 2020
To help choose a broker the Aussie team at CompareForexBrokers.com for the fifth year running compared 39 ASIC regulated Australian forex brokers. The 2020 top-rated forex broker categories include the best trading experience, best beginner account and lowest fee trading account.
View the forex broker Australia comparison below.
By Justin Grossbard / Updated: Wednesday, April 01st, 2020
Top 8 Australia Forex Brokers
Based on Aussie trader core requirements here are the best ASIC regulated forex brokers.
- Pepperstone – Best Forex Broker In Australia
- IC Markets – Lowest EUR/USD Currency Spreads
- Plus500 – Top Forex Platform For Beginners
- AxiTrader – $0 Minimum Deposit FX Account
- eToro – Best Aussie Social Trading Platform
- CMC Markets – Top CFD Broker + Stockbroker
- IG Group – Largest foreign exchange broker
- City Index – Low cost cryptocurrency trading
Regulations and Licenses
Markets and Instruments
Trading Platforms + Tools
Pepperstone Is The Best Forex Broker In Australia
The Pepperstone Razor Account offered the best trading experience for Aussie traders with the:
Lowest spreads on some currency pairs
- 6 types of pending orders (MT4 has 4 types)
- Depth-of-Market (MOM) and economic calendar included
- Fast multiple back-testing facilities
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- Detachable next-generation charting with level II pricing
- Fast execution entry speeds to make quick trades online
- Automated options through the cTrader dedicated platform
- Overall Client Satisfaction
- Customer Service
- Execution Speeds
The other main trading fee is the commission which is based on a side-turn of a lot (100k traded). The rate Pepperstone charge is $3.50 AUD per charge when the trader chooses the Aussie dollar as their base currency. The Pepperstone commission rate is one of the lowest of the major Australian fx brokers.
|Commission Per Side||Pepperstone||FP Markets||IC Markets||AxiTrader||Admiral Markets||FXTM||IG|
|AUD Base Currency||$3.50 AUD||$3.50 AUD||$3.50 USD||$3.50 USD||$4.00 USD||$4.00 USD||$6.00 USD|
To further assist traders, Pepperstone utilises Price Improvement Technology (PPI). This intelligently routes currency trading orders to detect liquidity hot-spots to ensure optimal pricing for Australian traders. In simple terms, when you place a trade and the market moves in your favour (between placing the trade and it’s execution) the PPI technology detects the movement and when possible, fills the order at the improved level. This does not involve re-quoting but rather the traders just receives the improved price.
Pepperstone combines smart technology with low spreads + commissions.
Pepperstone also offers a standard account for beginner traders with no commissions. View our Standard vs Razor account comparison if you’re unsure which one to choose. Both accounts also offer the option for trading across 13 stock indices. There are no commissions on CFD trading and no dealing desk.
Pepperstone Execution Speed Comparison
2) MetaTrader 5
The MetaTrader 5 (MT5) platform is similar to MT4 but focuses more on CFD trading. For example, Pepperstone clients can trade Share CFDs with MT5 but not with MT4. It was built off MQL5 language with the main MT5 features including:
Primarily used by expert Australian forex traders, this forex platform is commonly used by day-traders. Expert strategies that utilise automation are executed for financial services with other features:
Most fx brokers in Australia don’t offer the choice of all three forex platforms. Below shows the main forex brokers in Australia and which of the three mainstream platforms they offer traders.
|Pepperstone||Admiral Markets||AETOS||AVATrade||AxiTrader||BMFN||City Index||CMC Markets||Core Liquidity Markets||Direct FX||easyMarkets||EightCap||Forex.com||Forex FS||FP Markets||Fusion Markets||FXCM||FXGiants||FXOpen||Global Prime||GO Markets||Hantec Markets Australia||IC Markets||IG||Invast||JB Alpha||KVB Kunlun||OANDA||PhillipCapital||Plus500||Royal Financial Trading||Rubix FX||Saxo Bank||Synergy FX||ThinkMarkets||USGFX||Vantage FX||XM|
All forex platforms offered by Pepperstone have a demo account. Each demo account is loaded with $50,000 of virtual funds to simulate forex markets. This demo account can be transitioned to a live account at any time. To learn more about these accounts view our demo page. Pepperstone also offers smart trader tools on the MetaTrader 4 platform when a deposit of at least AUD $500 is made. The 10 smart trading applications give MT4 traders the edge, helping trade smarter with detailed insights into currency and CFD markets. These tools assist forex trading with expert trade execution and management, advanced alarms, decision assistance as well as broadcast features providing market information to traders.
Overall, Pepperstone Offers The Best Forex Platform Features
The combination of offering the two most popular forex trading platforms combined with the enhanced functionality of “smart trading tools” led to Pepperstone winning the category.
Cryptocurrency Trading With Pepperstone
Pepperstone’s forex platform allows CFD cryptocurrency trading with up to 5:1 leverage, fast execution speeds, no commissions and low spreads including the following:
The most popular cryptocurrency in 2020, this blockchain technology allows diversification from traditional financial markets. The market capitalisation in 2020 is over $65 billion USD and has become one of the most traded elements on the markets.
Now the third most valuable cryptocurrency (Ripple is 2nd at the start of 2020), this serves more industries and purposes giving it a competitive edge. Key uses of Ethereum include blockchain application platforms through to smart contracts.
“Digital Cash” (shortened to Dash) focuses on enhancing anonymity and processing speeds of cryptocurrency. Dash is used worldwide as an efficient payment system. This popular use has led to increased liquidity and volatility within the asset class.
Discover more on the official Dash website.
This was launched after Bitcoin in 2020. The aim was to speed up transactions with the use of a simpler algorithm. The result has led to its increase in popularity and market capitalisation. This has made it a great alternative to Bitcoin to trade. More can be found on their P2P site.
By offering 5:1 leverage on mainstream cryptocurrencies, Pepperstone enhances the potential profits or losses of this volatile sector.
Customer Service & Client Satisfaction Of Pepperstone
Pepperstone is a relatively new Australian forex broker compared to some global players but in Australia has quickly gained a dominant market share. They have a strong customer service team in Australia of individuals who actually trade themselves making them an excellent choice of intermediate to expert traders.
This was acknowledged in when Investment trends survey of 15,000 Australian forex traders ranked Pepperstone number 1 in:
Pepperstone’s Australia customer support team is based out of Melbourne. There can be the possibility of talking to an overseas customer support team during off-peak periods such as Friday night.
The main forms of customer support including:
1) Live Chat
Pepperstone uses the Zendesk live chat interface to communicate with customers. This is available during the same hours as the call centre team. Our team used Pepperstone’s live chat several times and found that we could engage with an agent within 5 minutes and the operator was helpful with in-depth knowledge. Overall, live chat was the fastest was to get the answer and assistance we needed when making this forex broker review.
There is 24-hour support via a 1300 number (or an international number for traders outside of Australia). This is available from Monday through to Friday. There is also a telephone number for their Shanghai and Dallas office.
Each Pepperstone call-centre location also has an e-mail contact. This is the slowest way to send enquiries and get a response but it’s useful for long enquiries that require attachments.
Pepperstone has won the most awards in Australia for customer service.
Summary Of Why Pepperstone Is The Best Australian FX Broker
Pepperstone Group Limited is regulated by the Australian Securities and Investment Commission with the AFSL number 414530 while in the UK they trade as Pepperstone Limited with FCA 684312. Pepperstone also offers the maximum Australian forex broker leverage of 500:1. The high risk this leverage level is not suitable to all traders and losses can exceed deposits made. It’s best to understand the risks associated with high leverage before trading forex. Pepperstone Group Limited is the ASIC regulated body for Australian forex traders with AFSL 414530.
Pepperstone won most of the categories from customer service, forex platforms, execution speeds to high leverage.
With low spreads and commissions intermediate to expert traders should consider the broker.
The overall rating is based on review by our experts
EUR/USD Lowest Spreads = IC Markets
CFD Brokers have three main trading costs:
- Funding/Withdrawal Fees
The benchmark spread rate is the Euro / US Dollar (EUR/USD) currency pair. The top forex brokers publish their average spread rate for EUR/USD and IC Markets has the lowest rate of any Australian forex broker.
- IC Markets = 0.1 pips
- Pepperstone = 0.16 pips
- IG = 0.36 pips
- AxiTrader = 0.44 pips
- ThinkMarkets = 0.50 pips
- Plus500 = 0.60 pips
- City Index = 0.70 pips
- CMC Markets = 0.81 pips
The spreads above are applicable for the most popular Raw Spread account (formally known as the true ECN account) for MetaTrader 4 or MetaTrader 5. IC Markets archives these low spreads by not been a market maker and having STP with large liquidity pools. While the account isn’t called the true ECN account, the spreads are set by the market which is why over 10 currency pairs minimum spread is 0.0 pips including the EUR/USD, GBP/USD and AUD/USD.
As shown above, the commission of IC Markets main raw account is $3.50 per lot, per side. If the base currency is set for the Australian dollar then the commission is AUD $3.50 while US dollar base currency customers pay a higher commission rate of USD $3.50. Other key commission rates are for GBP base currency customers GBP 2.50, Euro base currency customers at EUR 2.75 and Singapore Dollar base currency SGD 4.50.
The third main trading fee component is deposit and withdrawal fees. IC Markets have a $200 minimum deposit fee and from this amount to large transactions, there are no additional fees. This applies for both withdrawals and deposits.
The reason that IC Markets don’t state there are no fees is that a number of financial institutions (eg banks) charge their own fees and NAB who IC Markets utilise charge $20 for International Wire Transfers. Overall though, IC Markets doesn’t directly charge deposit or withdrawal fees further making them one of the lowest fee brokers.
Summary Of Why IC Markets Have The Lowest Spreads
IC Markets is the lowest spread ASIC regulated MT4, MT5 and cTrader with AFSL number 335692. Only those looking for Iress platform should consider a different broker (FP Markets).
With ECN spreads matched with low commissions and no deposit/withdrawl costs, IC has the lowest trading fees.
IC Markets is recommended for those looking for a low fee retail investor accounts with a low minimum deposit requirement of $200.
Best Beginner Forex Platform = Plus500
The Australian Investment Trends CFD report awarded Plus500 the best platform with:
- An easy to use desktop and webtrader interface
- Advanced mobile CFD platform
- Risk management features for different trading conditions
Why The Plus500 Forex Platform Is Ideal For Beginner Forex Traders
Trading CFDs from Bitcoin, forex to commodities can all be done on the one trading platform with Plus500. There is a downloadable Windows 10 Trader or a WebTrader for shared devices. As shown below there are also apps for Windows Phones, Android, iPhone and iPad devices. This makes the trading experience relatively similar regardless of the device a trader uses.
The Plus500 Mobile Platform
Investment Trends runs a client survey of CFD traders annually and found that Plus500 had the best mobile platform. This was based on the ease of use, functionality and range of contract for difference tradable. Learn more on our Australian platform page.
Risk Management Features Offered By Plus500
Trading CFDs involves a high level of risk due to leverage which in Australia is up to 300:1 (Plus500AU Pty Ltd). Other regions such as Cyprus (CYSEC) and the UK (FCA) have lower leverage. For beginner forex traders to manage higher leverage, Plus500 has three key risk management features including:
- Limit and Stop Loss (closes a position once a profit or loss limit is set) – No charges
- Guaranteed Stops (guarantees a position will not lose more than a defined amount) – Extra spreads applied
- Trailing Stops (closes a position when a trade moves in the wrong direction by a set number of pips) – No charges
It should be noted that another risk management feature is negative balance protection only offered by a handful of brokers like easyMarkets. This ensures a Plus500 online trader never loses more than their deposit no matter what the trading conditions. For a beginner forex trader, this is an excellent feature to have.
Conclusion Of Why Plus500 Is Ideal For Beginner Forex Traders
Plus500 provides a trading experience ideal for beginners with an easy to use trading platform, a large range of tradable CFDs (such as Bitcoin) and risk management features. Plus500AU PTY LTD is the ASIC regulation subsidiary for Australian forex traders holding the AFSL number 417727. They are regulated in several other locations such as South Africa (FSCA), NZ and the UK with an FCA licence (formally FSA).
Lowest Minimum Deposit = AxiTrader
AxiTrader is the only Australian broker that has a $0 minimum deposit on both their standard a pro account types (often referred to as the ECN broker account). There are also no setup costs as shown below when opening either MetaTrader 4 account.
The deposit methods for funds are shown below and their availability for forex traders in Australia vs overseas. It should be noted that some credit card providers may view payment to AxiTrader as a cash advance. This may lead the provider to charge additional fees so it’s worth calling them to confirm if this will be the case.
|Deposit Method||Australian Traders||Overseas Traders|
|Electronic Funds Trander (EFT)||No Fees||N/A|
|Bpay (Australian Dollars)||No Fees||N/A|
|Telegraphic Transfer||Not Available||$0 Fees|
|Debit Card||$0 Fees||$0 Fees|
|Credit Card||$0 Fees||$0 Fees|
|Neteller||$0 Fees||$0 Fees|
|Skrill||Not Available||$0 Fees|
|Global Collect||$0 Fees||$0 Fees|
|China Union Pay||Not Available||$0 Fees|
Other AxiTrader Features
The AxiTrader overall trading fees are one of the lowest of the forex brokers. This includes their EUR/USD spreads which our analysis showed were the 4th lowest. Their commission is $3.50 USD per side ($7.00 per round trip). Only Pepperstone had a lower commission rate of $3.50 AUD when a trader chooses the Australian Dollar as their base currency. AxiTrader is the ASIC regulation holding the AFSL number 318232.
Summary Of AxiTrader’s Trading Conditions
AxiTrader is ideal for those looking for low trading fees and lower exposure with the option of a small deposit. With a $0 initial deposit requirement, no opening fees, deposit or withdrawal fees, they provide the most flexible trading conditions for an Australian trader.
Best Social Trading Broker = eToro
eToro offer specialist services suitable for some individuals looking for:
- Social Trading
- Copy Trading
- CFD Trading
eToro has a unique platform that has inbuilt social trading functionality. With over 300 million trades done on eToro up to 2020, there is a large community that interacts on their social network. This allows traders to discuss strategies, ideas and decisions on their social feed. The social trading functionality exists on the desktop and mobile platform.
A social trading opportunity eToro offers are copy trading. This allows an individual to select a trader based on past behaviour (such as returns and risks). The individual will then make the same trades (copy trades) making the same profit or loss percentage. The reason by eToro has the most popular copy trading facility is that traders are rewarded when others follow them.
eToro offers a range of CFDs from crypto, EFTs, Indices, Stocks, Currencies to Commodities. These are all tradable on the one platform with a range of leverage. An example is 17 cryptocurrencies from Bitcoin, Ethereum to Ripple.
If social trading is important to you or you want to copy a past trader then eToro is the recommended Australian broker for you. Note that eToro has some unique fees including withdrawal fees to consider before joining the broker.
Best Stockbroker + CFDs = CMC Markets
CMC is an all-in-one broker offering:
- Share trading (stockbroker services)
- CFDs including 330 currency pairs
Some traders will only choose from a range of forex brokers that also offer share trading. Having such a broker with a range of markets means they don’t require multiple accounts to trade different products. Two of the larger brokers in Australia are CMC Markets and IG and it’s no surprise that these offer currency and stockbroking services. CMC Markets as shown below offers active investor trading from just $9.90. This is significantly lower than popular stockbroking firms such as CommSec.
When choosing a platform, it is a good idea to select a CMC Markets platform that allows share trading. This is because not all platforms allow both CFD and stockbroker services. IG Markets offer L2 Dealer which allows both stockbrokers, forex and CFD trading options. View more on currency brokers that offer these services.
Most Popular Foreign Exchange Broker = IG
The most popular forex brokerage trading firm in Australia based on the range of markets, accessibility, popularity and ease of use is IG Markets. Research company Investment Trends awarded IG Markets as the number one online FX provider by primary relationships in the:
- 2020 FX Report
- and 2020 CFD Report
IG is an industry leader when it comes to providing top graded services to retail traders. The level of professionalism offered by IG is confirmed by a large number of clients who opt to speculate on the forex exchange rates via a wide range of forex platforms, including:
- Proprietary web-based fx platform
- Mobile Apps and tablets
- MetaTrader 4 (MT4)
- Advanced platforms or Specialist platforms (ProRealTime, L2 Dealer)
Over 178,000 retail traders from around the world enjoy trading on over 80 forex currency pairs and an additional 16,000 other markets (shares, indices, commodities, cryptocurrencies, etc.).
IG offers Variable Spread Model
On the most popular currency pairs, the AUD/USD and EUR/USD the minimum spread is 0.6 pips. However, since IG offers a variable spread model, the real spread widens being affected by:
- Time of the day
- During news and economic reports
The hallmark of the variable spread model is that you can have commission-free trading. To have a better view of the total trading costs, we’re going to expose the average spreads as calculated for the 12 weeks ending 31st May 2020. For example, the average AUD/USD spread is 0.76 pips respectively 0.70 pips EUR/USD average spread. For a complete spread review, please study the table below.
Direct Market Access
For sophisticated investors, IG offers Direct Market Access (DMA) without dealing desk intervention. Traders must be aware that having access to IG Forex Direct comes with higher costs. The commission charged by IG is progressively applied via a volume-based scheme. For low volume traders, the commissions are quite high and in the long-term can eat from your profits. Below you can view the complete commission-based scheme charged by IG Markets.
For example, if you generate less than $100 million in volume per month, IG Markets will charge you $60 per $1 million traded. Compared to Pepperstone and IC Markets, IG comes lower in our star scoring system. On the plus side, the average spreads offered by IG are kept lower via Forex direct. The spreads from the table below are derived directly from the biggest banks in the world.
Summary of Why IG is the Most Popular Forex Broker
IG Markets is the world’s oldest foreign exchange broker and has been favoured by many Australian traders due to its rich history in serving retail clients of all backgrounds. When choosing a forex broker, it’s best to opt for a regulated FX provider. IG Market’s is well-regulated by worldwide financial watchdogs from Australia, UK and USA.
Lowest Cost Cryptocurrency CFD Broker = City Index
Australian traders have the option to trade cryptocurrencies with City Index. A live trading account at Citi Index will give you access to 8 different cryptocurrency pairs with the lowest trading fees. The following CFD cryptocurrency trading instruments can be traded on the WebTrader and the advanced platform AT Pro:
- Bitcoin (can be traded against USD, AUD, EUR and GBP)
- Bitcoin Cash
Aussies can speculate on the Bitcoin price movement via CFD trading without owning the underlying digital coin. Additionally, Bitcoin fanatics aren’t required to go through the tedious KYC process to open an exchange account or owning a Bitcoin wallet. The City Index leverage for Bitcoin trading is also very attractive. The maximum amount of leverage offered for cryptocurrency trading is 400:1 (by default is set to 200:1, but upon request, it can be increased).
Below you can view a close comparison between trading cryptocurrencies and owning cryptocurrencies.
Note: Cryptocurrency shorting is only available for Bitcoin and Ethereum.
CFD Trading Fees on Cryptocurrency
City Index offers some of the lowest cryptocurrency trading fees starting with spreads from:
- $35 on Bitcoin
- AUD 55 for BTCAUD
The market-leading pricing offered by City Index is derived from multiple cryptocurrency exchanges. The robust pricing model used by City Index produces a volume-weighted average price, which is why the Bitcoin spreads are among the lowest in the industry.
When placed side-by-side with other Australian-based brokers, only CMC Markets has competitive spreads on cryptocurrency that start from $37, while IG Markets offers a $40 Bitcoin spread. The total financing cost for trading Bitcoin is $39.32 for buying Bitcoin respectively $33.56 for selling Bitcoin. For a complete review and a full comparison of the total costs on cryptocurrency trading, please study the chart below.
Forex Trading Guides
Find the leading Aussie ECN broker based on spreads and speeds.
Best CFD Brokers
Compare brokers offering CFD trading across a range of instruments and markets.
Top Fx Platforms
View the top platforms for CFD and currency trading.
Frequently Asked Australian FX Trading Questions
What Are The Best Forex Trading Platforms?
The two best forex platforms for Australian traders are made by MetaQuotes:
- MetaTrader 4 is the most popular for currency trader and the best broker is Pepperstone
- MetaTrader 5 is the most popular for CFD trading (eg Shares) and the best broker is IC Markets
How do Forex Brokers make their money?
A forex broker main source of income is charging a spread or commission or a trade. While a buy and sell order will have a natural spread, forex brokers make money by widening this spread. ECN forex brokers avoid this income stream and rather charge a flat commission based on the trade volume.
How does the forex market work?
With over $5 USD trillion traded daily, the forex market is larger than any other financial market. There is no central trading location when currency trading with forex brokers both as market makers or through ECNs (electronic communication networks) buying and selling currency globally.
What foreign currency is the most traded?
The chart below shows what foreign currency pairings are the most traded as shown from the Bank of International Statements.
The ‘top 10’ foreign currencies traded (totalling 100%) are:
- 44% = United States Dollar
- 16% = Euro
- 11% = Japanese Yen
- 6% = British Pound
- 4% = Australian Dollar
- 3% = Swiss Franc
- 2% = Chinese Yuan
- 1% = Mexican Peso
- 1% = Swedish Krona
- 1% = New Zealand Dollar
The Chinese Yuan is the fastest-growing currency and is moving up the foreign currency table fast. You can read more about market growth of fx trading with our article.
About Australian Securities and Investment Commission (ASIC) Brokers
To help start trading with the right CFD broker we have collated brokers that only have Australian Securities And Investments Commission regulation (ASIC regulated). This means they hold an Australian Financial Services Licence (AFSL) for the financial instruments offered. Australian traders should only consider these regulated brokers to avoid scams that are normally associated with unregulated brokers. Below shows our forex brokers Australia regulated list updated in 2020.
|Australian Forex broker||Office Location||Max leverage||Forex Platform(s)||Regulation|
|Admiral Markets||Sydney||500:1||MT4, MT5||AFSL 410681|
|AETOS||North Sydney||200:1||MT4, Multi-Account Management||AFSL 313016|
|AVATrade||Sydney||400:1||MT4, AvaTradeAct,||AFSL 406684|
|AxiTrader||North Sydney||400:1||MT4||AFSL 318232|
|BMFN||Sydney||200:1||MT4, LMAX||AFSL 379035|
|City Index||Sydney||200:1||MT4, AT Pro||AFSL 345646|
|CMC Markets||Sydney||500:1||CMC Next Generation||AFSL No. 238054|
|Core Liquidity Markets||Sydney||400:1||MT4, Multi-Account Trader||AFSL 305539|
|Direct FX||Sydney||400:1||MT4, Multi0Account Manager , CQG FX||AFSL 305539|
|easyMarkets||Sydney||400:1||MT4, easyMarkets||AFSL 246566|
|Forex.com||Sydney||200:1||MT4, FOREX Trader PRO||AFSL 345646|
|Forex FS||Sydney||500:1||MT4, JForex,||AFSL 323193|
|FP Markets||Sydney||500:1||MT4, IRESS Suite||AFSL 286354|
|Fusion Markets||Melbourne||500:1||MT4||AFSL 226199|
|FXCM||Sydney||400:1||MT4, NinjaTrader, Trading Station||AFSL 309763|
|FXGiants||Sydney||200:1||MT4, Personal Multi-Account Manager||AFSL 417482|
|Global Prime||Sydney||200:1||MT4, FIX API, MAM/PAMM||AFSL 385620|
|GO Markets||Melbourne||300:1||MT4||AFSL 254963|
|Hantec Markets Australia||Sydney||200:1||MT4, Interbank Direct||AFSL 326907|
|IC Markets||Sydney||500:1||MT4, MT5, cTrader||AFSL 335692|
|IG||Melbourne||200:1||MT4, L2 Dealer, ProRealTime||AFSL 220440|
|Invast||Sydney||100:1||MT4, IRESSTrader, MaxxTrader||AFSL 438283|
|JB Alpha||Melbourne||100:1||MT4||AFSL 327075|
|KVB Kunlun||Melbourne||200:1||Forex Star||AFSL 226602|
|OANDA||Sydney||100:1||OANDA, MT4||AFSL 412981|
|Pepperstone||Melbourne||500:1||MT4, MT5, cTrader||AFSL 414530|
|PhillipCapital||Melbourne||100:1||MT4, Phillip CFD Trader||AFSL 246827|
|Plus500||Sydney||300:1||CFD Trading Platform Only||AFSL 417727|
|Royal Financial Trading||Sydney||400:1||MT4||AFSL 420268|
|Rubix FX||Melbourne||400:1||MT4, Rubix Prime||AFSL 337985|
|Saxo Bank||Sydney||50:1||Saxo Trader||AFSL 280372|
|Synergy FX||Melbourne||500:1||MT4, Social Trader||AFSL 403863|
|ThinkMarkets||Melbourne||400:1||MT4, Trade Interceptor||AFSL 424700|
|USGFX||Sydney||500:1||MT4, ZuluTrade||AFSL 302792|
|Vantage FX||Sydney||500:1||MT4, MT5, MarketTrader||AFSL 428901|
|XM||Sydney||500:1||MT4, MT5||AFSL 443670.|
While the ASIC regulated forex broker table above only have Australian regulated foreign exchange brokers, several other tables look at online brokers based on key requirements ranging from ‘low fees’ to ‘high leverage’. We also focused on other CFD providers such as FP Markets, GO Markets, FXCM, Fusion Markes, AvaTrade and IG Markets for those looking for more than just currency trading. Most of these forex trading platforms are nationally regulated as the authors rated higher brokers that offered Australians the higher level of security. If you’re located in a location such as the USA, these brokers may not be able to cater for you and other regulators brokers such as NFA are more suitable.
Forex Brokers Data Accuracy
This Australian foreign exchange broker comparison was based on individual brokers websites. Without the use of feeds or automation, the authors were able to give a more informed decision but it can lead to inaccuracies occurring. This is mainly due to foreign exchange brokers changing information (such as their average spreads) without notice. Please inform the authors if you see an inaccuracy. To ensure forex traders make the right decision we traders to broker websites to join so they can make a final check. At this point, the trader should verify the information found on this site to ensure the broker meets their requirements.
Published by Justin Grossbard
Wednesday, April 01st, 2020
Why do Forex brokers not accept US clients?
It is a common known fact that the Forex market trading goes on 24 hours a day, 5 days a week. This happens due to the fact that there are multiple centers all over the world where the currencies are traded. Yet, even though the New York session tends to have the most significant impact on currency rate fluctuations, the amount of US based retail traders tends to be quite small.
If you are from the US you can be quite puzzled by the amount of brokers that are offering the services throughout the world, but are still not present in the States. Even though the US is the major market for various goods and services, for some reason FX trading for individual investors is not so common.
US residents can trade Forex
Before we move on any further, it is vital to state that Forex trading in the US is not prohibited. A trader from the US can trade FX online as easily as a person living in Europe or Australia. However, the main difference lays in the variety of brokers a trader can choose from.
There are a few reasons why the amount of FX brokers is very low, let’s examine each of them below.
Licenses and Regulations
When it comes to the brokers that operate in Europe, the regulatory environment is rather simple. Once a broker has obtained a license from one of the European regulators, it can easily accept traders from all EU countries. In other words, a UK Financial Conduct Authority regulated broker can accept traders from Germany, the Netherlands, Bulgaria and other EU member states.
However, when it comes to the US, European licenses simply do not work. A broker that wants to have traders onboard from the US has to be regulated by the NFA, National Futures Association. At this point you may ask, there are brokers that have multiple licenses, like CySEC, FCA, ASIC and more, why would they not get another one to provide services in the US? The reason for this is quite simple – capital requirements. While a broker has to have around $100,000 – $500,000 of locked capital to obtain one of the European licenses, NFA requires quite an enormous amount of capital to be able to operate in the US – 20 million dollars.
This amount of money only corresponds to a deposit that a broker has to make and does not include any legal fees associated with obtaining the licenses, employment of lawyers to be placed on the register and executives. In other words, the US market is an expensive market to operate on.
Even though some brokers make profit enough to afford it, 20 million dollars is quite a large sum to allocate just for a license. On average, the world’s 15th largest broker would hardly earn 10 million USD in profit annually, hence allocating a profit of 2 years for the privilege to work in one country is an extremely serious investment.
The situation with capital requirements was quite different back in 2008 and at that time there were quite a few brokers that accepted US clients. However, today the amount of US friendly brokers is just less than five.
Now you may wonder, if there are only a few brokers in the US, why are more brokers not trying to penetrate the market? There are over 300 million people living in the US and it is quite hard to believe that there are no more brokers that could actually afford the NFA licensing. Well, the truth is that, although more brokers could deposit 20 million to operate, not every broker will find it profitable.
As you know, FX brokers earn from the volume traded, hence the higher the trader’s volume is, the more profit a broker makes. However, unlike European countries where a trader has access to the leverage of 500:1, in the US it is only possible to supply 50:1 leverage on majors and 20:1 leverage on minors. This means that a broker can expect to receive some 10 times smaller profit in the US than in Europe, provided that it has the same amount of traders with the same amount of deposits in the two regions.
Furthermore, yet needless to say, wages in the US tend to be quite high, so the whole process of financing the US-based operations is not cheap at all.
Even though it is already quite hard for some brokers to start operating legally in the US and then to become profitable, historically US authorities have also been seen as a hindrance.
Quite a few brokers have been heavily fined by the NFA for malpractice. While the impact of the reasons behind the fines could be quite insignificant, the fines tend to be heavy: ranging from $200,000 to $2 million.
In other words, a broker may spend a year working hard, and by the end of the year its profits (or even more) can be simply taken by the regulator as a result of certain misconduct.
US traders have also been much more inclined to stock trading, this is why they often choose to acquire shares over currencies. In most cases, trading stocks is actually more expensive for traders (or more profitable for brokers) than Forex. This is why US based brokers not only have to compete against each other, but also in order to take a slice of the stock brokers’ pie by increasing the awareness about online currency trading.
The limited amount of FX brokers in the US is certainly caused by the heavily regulated environment that requires brokers to deposit a substantial amount of funds and, at the same time, decreases brokers’ profitability by limiting leverage.
This also results in a few unregulated brokers offering their services in the US as they can better meet the needs of the traders, while their legal and operational costs are minimal. However, unregulated brokers that accept US traders should never be your choice.
Tactical Trading Concepts: Liquidity Pools and Stop Orders
Have you ever been stopped out, only to see price reverse from that very same level? Don’t worry: you’re not alone, and here’s why. Many traders tend to place their stops in the same types of places, without sufficiently weighting the fact that they are incredibly easy and worthwhile to hit.
In the grand scheme of things, these stops end up becoming little more than useful liquidity pools for larger players with the firepower to influence future market direction.
What is liquidity? Why is it important?
If you want to buy EURUSD at 1.1000, you need someone to sell it to you at 1.1000. The same thing applies in reverse: if you are selling, you need a buyer. This is just the nature of the market.
To keep things simple, saying an asset is “liquid” means it’s easy to find a counterpart. The opposite is “illiquid,” meaning it’s difficult to find a counterpart. Here’s Bill Lipschutz, discussing what liquidity means to him:
“I’m short the dollar and I’ve misjudged my liquidity in the market, I’ve tried to hold the market down, but it’s not going to work. And I can’t buy them back.” “All I wanted to do was to make it through to the Tokyo opening at 7 P.M. for the liquidity. If you really have to buy $3 billion, you can do it in Tokyo; you can’t do it in the afternoon market in New York – you can’t even do it on a normal day, let alone on a day when major news is out.” – Bill Lipschutz, New Market Wizards.
“Liquidity pools” are levels at which price frequently “makes a decision” as a large amount of orders hit the market. They are, so to speak, intersections of orders. This is helpful for managing open trades, initiating new trades, and adjusting stop losses. While it’s impossible to avoid losses in the market, it is important to understand the where and why of the market’s reaction.
How to Avoid Dumb Mistakes
The first order of business when talking about stops is to make sure we are not placing them too close to the market, and thus getting stopped out too frequently on volatility alone. Here are some reasons why traders get stopped out:
- doing the right thing (but running into timing issues);
- because we were unlucky (rogue spike: luck has a role in trading);
- doing the wrong thing (fighting evident flows);
- because we have no idea what we are doing (experience issues).
We want to avoid getting stopped out for the last two reasons. If we can eliminate obvious mistakes and understand why we are losing, then at least we’re losing intelligently.
This is already a big step ahead of many traders: especially those who don’t know why they are losing in the first place.
- Do not place your stop loss 1 pip below the most recent swing low, despite trading with the trend.
The market does not work off of precise levels and exact prices: levels can often be better thought of as “zones,” extending 10-20 pips around a given price point. (Depending on the pair in question, and your broker, you’re already looking at a few pips of variance just in terms of spread.)
Furthermore, it’s quite common for professional and retail traders alike to use swing highs/lows as logical places to place stops and/or reversal orders.
So, depending on the liquidity available in a given “zone”, price can dip into the zone, find orders, and get rejected. In the case above, we would get stopped out of our trade, right where we should be looking for clues on continuation or rejection.
- Do not place your stop too close to the market
In this example, we are still playing an evidently trending pair, and we’re trying to enter close to the recent range low. However, our stop happens to be within the Asian Range, and hence too close.
Liquidity is often found on either side of the Asian Range. As such, any trade taken in a range-bound situation like the one above should have a stop 15-20 pips outside the range barriers, to prevent being stopped out as a natural by-product of the market’s search for liquidity, or even just pure volatility.
- Do not fight evident trends
In the chart above, USDJPY is in an evident downtrend. Usually, traders that attempt to fight trends end up losing. The trend is your friend, until it ends. So be patient and play the trends, don’t fight them.
- Do not trade unless you have a logical and tested plan
Probably the worst mistake in the book is attempting to trade the market without any kind of sturdy plan in place to deal with the various situations the market can throw at you. If you fail to prepare, prepare to fail.
Order Flow Intersections
We previously talked about liquidity pools as intersections of orders. Let’s now return to the point with some more context under our belt.
Common retail traders don’t usually have to think about liquidity, since the market can quite easily absorb orders of up to $10m – far above the sizes they will trade, even usually with high leverage.
Traders who do trade above this size find liquidity to be a very real issue. They cannot think about the markets like common retail traders. Instead, they need to factor in where and how they are doing to deploy their strategy.
They need liquidity in order to deploy their bets without moving the market, and without being detected. They also need to have a clear idea of where they will be able to exit, whether the trade ends up being successful or not.
Large traders (think big funds and Central Banks) cannot simply accumulate or distribute a large position whenever and wherever they wish. Instead, they have to look for those places where liquidity is aggregating, and stops are helping them in an indirect way. Let’s look at an example:
In our example, we had hypothesized a stop inside the Asian Range, and just below a recent swing low on a sub-hourly chart. But many other traders were most likely making the same mistake.
In fact, once price probed below our stop and actually vibrated the Asian Session Low at 1.8400, it most likely hit a liquidity pool where, on balance, continuation “buy” orders overpowered “sell” orders. Don’t worry if this doesn’t quite make sense: it’s about to.
When price reaches the level at which we’ve placed our stop, our account triggers a reverse market order to get rid of our losing position as quickly as possible. This is to say that if I’m long, my stop loss will be a sell order. If I’m short, my stop loss will be a buy order.
Hence, in the example above, I’m being “forced” to sell because my account is going to do it automatically at that level. Somebody who believes there is value in buying here will want to take over my position, and so now we are flat and somebody else is long. And here’s where it gets really cerebral:
While it’s hard to imagine that your stop being hit can make somebody’s day, the fact is that it’s not just your stop. Imagine a hundred stops, or a thousand stops, being hit in quick succession.
Anybody looking to place a big order has a much safer opportunity to do so without showing his or her hand, or influencing the market too heavily. They don’t have to look or hope for liquidity if it’s already there.
Wherever stop-loss orders aggregate, there is a 2-way pool of liquidity being created. The traders that get “stopped out” are forced to issue opposite-side orders and that gives large traders the possibility to “fade” the stops that accumulate at those levels.
AUDUSD 4H Chart. Green = Buy Stops; Red = Sell Stops. Source: Pepperstone MT4
Since people are creatures of habit, they will usually use the same methods for deciding where to place their stops – just below a recent low, or x pips away from market price, for example. As we’ve discussed, those stop orders create liquidity because they issue a market order when they are triggered.
AUDUSD Daily Chart – Source: Pepperstone MT4
Major swing points on a major chart are the first place to look for liquidity. And it’s also the first place to keep an eye on what happens. Because following with the same logic, if large traders are active at these levels, then at these levels we have the first clues as to what the aggregate market knows and thinks.
- If an evident stop level gets broken (hurdled) and price continues in the same direction, that means the flow has become indigestible to the diverse participants and the price structure changes. This is usually driven by some kind of event or strong fundamental reason.
- If an evident stop level gets faded (a break, followed by a quick reversal) that means the flow is still in balance and it demonstrates that the fundamentals are still not strong enough to push forward.
AUDUSD 1H chart – Source: Pepperstone MT4
Stop Levels in Practice
GBPUSD 1H chart – Source: Pepperstone MT4
This is a recent example on GBPUSD. We know that fundamentally the market has been heavily discounting a “Brexit” and the Sterling is as volatile as the polls and headlines surrounding Britain’s exit or otherwise from the EU.
The blue and black lines are swing levels from the Daily chart. So with one eye on the drivers, and the other on the charts, potential entry points can be found simply by mapping “evident stop levels”. There is no guesswork here. We are simply observing the market’s reaction upon approach and at the level.
GBPUSD 15Min chart – Source: Pepperstone MT4
GBPUSD 15Min chart – Source: Pepperstone MT4
Exploit the Stops (Stop being Exploited)
Don’t get caught with the crowd. Understanding the dynamics of liquidity will help you protect your entries and understand where, on the price map, the market is likely to make important decisions. How?
- map evident swing levels created by the peak/trough action of the market
- observe price as it approaches and vibrates the level
- keep in touch with the drivers behind the move
- fake or break? The market’s reaction will most likely tell you.
The key, as with many things in the market, is to keep it simple and subtle.
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