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I've been recently looking at some of the online (electronic) foreign exchange brokerages out there, mainly out of curiosity. However, swamped by the choice, and despite having a somewhat decent idea of how these brokerages work, I am far from clear on which one to pick.

A few of the main points I'm looking to consider regarding the broker:

  • Reputation and Trust
  • Reliability
  • Commission/Transaction Fees
  • Spreads
  • API (availability and cost)

The obvious big ones out there are companies like Fidelity and Interactive Brokers, but I would tend to think there are other reputable ones, perhaps even small brokers.

As I said, this is rather hypothetical at the moment, but for the purposes of comparison you can assume trade sizes would be on the order of £100s to £1000s (capital) at most rather than more. Any advice would be appreciated.

closed as off-topic by Chris W. Rea, Victor, Daniel Anderson, Dheer, Ganesh Sittampalam Nov 1 '16 at 16:28

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7
+25

For "smaller trades", I'm not sure you can beat FXCM.com, a large, dedicated FX trading shop with extremely tight spreads, and a "Micro" account that you can open for as little as $25(US).

Their "main" offering has a minimum account size of $2k (US), but recommends an account size of $10k or more.

But they also have a "micro" account, which can be opened for as little as $25, with a $500 or higher recommended size.

I haven't used them personally, but they're well known in the discount FX space.

One strong positive indicator, in my opinion, is that they sell an online FX training course for $19.99. Why is that positive? It means that their margins on your activity are small, and they're not trying to get you "hooked". If that were not the case, they'd give the course away, since they'd be able to afford to, and they would expect to make so much of your subsequent activity. They do have some free online materials, too, but not the video stuff.

Another plus is that they encourage you to use less leverage than they allow. This does potentially serve their interests, by getting more of your deposits with them, but a lot of FX shops advertise the leverage to appeal to users' hope to make more faster, which isn't a great sign, in my opinion.

Note that the micro account has no human support; you can only get support via email.

On the other hand, the cost to test them out is close to nil; you can literally open an account for $25.

4

I used XE trade once several years ago. I found them quite easy to use after the slightly fiddly account setup process (needed for security/anti-money laundering I think). I trusted them because I'd been using their online FX rates for a long time. I can't really comment on the specific questions you ask though as this was a long time ago and I haven't needed one since.

  • Looked like a good service on first impression, but it seems it doesn't accommodate for speculative trading, which is what I want. – Noldorin Sep 3 '10 at 15:57
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Like Ganesh, I've used XE Trade - however I still do, fairly often. I have never had a single problem with them regardless of the method I used to move money -- Draft, Wire, ACH, bill payment through online banking, etc.

The type of trade I do most often is online bill payment to ACH -- i.e. I pay through my banking site and they pay through ACH. There's no fee and it takes 2 business days to go through. I do mainly CAD to USD conversions and I lose about 1.25 cents on the rate -- for example, if the CAD is worth 95 cents US, converting $100 CAD would get me $92.75 USD. The banks usually take 2.5% or so, so it's 50% savings.

It was free and pretty simple to sign up, all online -- and besides the standard info all they required was for me to upload a scan of a bank statement.

As for an API, I have no idea if they have one.

3

The following have been recommended to me for the UK:

When I was doing my investigations, all had good reputations but Interactive Investor looked to have the nicer service and their fees seemed a bit more reasonable. TD Waterhouse has the advantage of a number of sites serving local markets (TD Ameritrade for the US, for instance).

  • Thanks, I'm checking into the first two and will let you know shortly. – Noldorin Sep 3 '10 at 21:02
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I used Oanda.com for Forex trading a couple years ago. I am in the US but I think it's available in the UK as well. At the time, they had no commissions and their spreads were comparable or better than other brokers. The spreads would just quite considerably when a big event like a Fed meeting or the unemployment figures come out, but I suspect that that is the same everywhere (or they have constant spreads and reject trades). They did not push the high leverages like other brokers were at the time. I considered this to be very reputable, because though the profits to be gotten through 100:1 leverage are great advertising, the reality is that one unexpected spike and a newbie would lose a bunch of money in a margin call.

2

There are many good brokers available in the market and many spammers too. Personally I have been associated with FXCM since 2001 and have never faced any problem. But everyone has their own personal choice and I recommend you to make your own. But the question is how to find out which broker is a good broker and would provide you with a timely and reliable service?

Online google check? Not really. There is so much competition between brokerage firms that they keep writing rubbish about each other on blogs and websites.

Best thing is to is check with regulator's website.

For US: NFA is a regulator for all forex firms. Information about any regulated forex firm could be found here. http://www.nfa.futures.org/basicnet/welcome.aspx

For UK: Its FSA. Information on all regulated Uk based firm could be found here. http://www.fsa.gov.uk/register/firmSearchForm.do

Remember in many countries its not compulsory for a forex firm to be regulated but being regulated ensure that the govt. has a watch on the operations of the firm.

Also most of the firms out there provide accounts for large as well as small traders so there is nothing much to look for even if you are a small trader.

Do keep in mind that if you are a US Citizen you are restricted by the US Govt. to trade only with a broker within US. You are not allowed to trade with any brokerage firm that is based outside the country.

Forex Trading involves a significant amount of risk make sure you study the markets well and get yourself educated properly before risking your money. While I have made a lot of money trading forex I have seen a lot of people loosing everything. Please understand the risk and please make sure you only trade with the money which you can afford to loose.

  • Thanks for the advice on choosing a good broker; it seems rational! Regarding US/non-US brokerages, I believe one is able to trade using non-US brokerage outside of US regulations if one is a dual citizen and resident in a non-US country. – Noldorin Feb 28 '13 at 15:04
  • Actually if you are staying in the US either citizen or resident or you are a US citizen staying outside US the rule says you can only trade with a US based broker. But what most of the brokers do is that if you are a dual citizen they would use your ID and address proof of your non US country. Hence they dont show it on paper that you are residing in the US. – Bhavin Feb 28 '13 at 15:08
  • Yeah, in other ways you can get around it quite easily. ;) – Noldorin Feb 28 '13 at 15:47
  • Unless you are caught stealing you are not a thief. But if suppose IRS finds out which if there is any big transaction involved they will they would charge you for tax evasion and might even give it a name "Money Laundering". – Bhavin Feb 28 '13 at 15:58
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    Haha okay. This is sure worth a check. – Bhavin Feb 28 '13 at 16:17

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