One of the most important considerations in choosing the best Forex broker for you is the size of the spreads. For most traders, the spread charged in trading by their broker is going to be one of the main costs. Therefore, it is so important to find a low spread Forex broker.
Read on to view my shortlist of the best low spread Forex brokers below, followed by an explanation of how spreads are calculated, why they differ, and the differing approaches different types of brokers have towards their spread calculations.
Best Low Spread Brokers Comparison
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Regulators | CMA, CySEC, FCA, FSC Mauritius, FSCA | ASIC, CySEC, FSCA | ASIC, CySEC, FCA, SCB | FMA, FSA | ASIC, BVI, Central Bank of Ireland, FFAJ, FSCA, KNF, MiFID |
Year Established | 2011 | 2005 | 2009 | 2014 | 2006 |
Execution Type(s) | ECN/STP, Market Maker | ECN/STP | ECN/STP, Market Maker | ECN/STP, No Dealing Desk | Market Maker |
Minimum Deposit | |||||
Average Trading Cost EUR/USD | 0.1 pips | 1.1 pips | 1.0 pips | 1.3 pips | 0.9 pips |
Average Trading Cost GBP/USD | 0.2 pips | 1.4 pips | 1.2 pips | 2.0 pips | 1.5 pips |
Average Trading Cost Gold | $0.18 | $0.21 | $0.12 | $0.90 | $0.29 |
Trading Platform(s) | MetaTrader 4, MetaTrader 5, Proprietary platform | MetaTrader 4, MetaTrader 5, cTrader, Proprietary platform, Web-based | MetaTrader 4, MetaTrader 5, Trading View | MetaTrader 4, MetaTrader 5, Trading View | Other, MetaTrader 4, MetaTrader 5, Web-based+ |
Islamic Account | |||||
Negative Balance Protection | |||||
| Visit Website | Visit Website | Visit Website | Visit Website | Visit Website |
FXTM
In Summary Best all-around broker with high floating leverage and fast executionOur thoughts: Low spreads, lightning-quick execution, floating leverage, and consistently positive slippage.
Execution and spreads: FXTM offers accounts with spreads from 0 pips plus commission or from 1.5 pips with no commission. The commission rate is based on a floating structure, meaning that the more your equity and trading volume rise, the less commission you pay. According to their audited statistics published on their website, the majority of FXTM clients receive improved pricing through positive slippage.
Trading Platforms: MetaTrader 4/5, FXTM Trader
Special features: Independently audited monthly execution speed and slippage statistics published on their website. Their floating leverage system means leverage can reach as high as 1000:1.
Regulation: FXTM is regulated in the UK, Cyprus, and Mauritius. It stores client funds in segregated accounts separate from their operations.
Pros & Cons
- Excellent commission-based Forex pricing environment and transparency
- Upgraded MT4/MT5 trading platforms plus proprietary mobile trading app
- Quality market research and educational content for beginner traders
- A highly regulated broker with a tier-1 license
- No cryptocurrencies and limited choice of commodities
FP Markets
In Summary ECN trading with leverage up to 1:500Our thoughts: Direct Market Access & ECN broker with access to an exceptionally wide range of international markets, high leverage, and low minimum deposit.
Execution and spreads: FP Markets offers two account types: “Standard” with spreads starting at 1.0 pips and no commissions, and “Raw” with spreads starting at 0.0 pips and $3 commission per lot (each way). Both account types require a small minimum deposit of $100 AUD or equivalent, and both have 500:1 leverage.
Trading Platforms: MetaTrader 4/5.
Special features: A very low minimum deposit of $100 AUD or equivalent for Direct Market Access and high leverage. FP Markets also offers Sharia/Islamic accounts.
Regulation: FP Markets is regulated in Australia and Cyprus. It stores client funds in segregated accounts separate from their operations.
Pros & Cons
- Choice of trading platforms and auxiliary trading tools
- Very competitive cost structure and excellent asset selection
- Low minimum deposit requirement and leverage of up to 1:500
- Well-regulated and trustworthy
- Availability of Iress geographically restricted
Eightcap
In Summary Competitive pricing + excellent daily videosTrading fees are the most defining aspect of a trading environment, as they directly impact profitability and viable strategies. Eightcap features commission-free costs of 1.0 pips per 1.0 round lot or $10.00 on major currency pairs and 1.1 pips to 1.4 pips or $11.00 to $14.00 on minor currency pairs. While they fall outside the competitive range, they remain lower than many Forex brokers.
Eightcap delivers with its commission-based cost structure with minimum spreads of 0.0 pips for a commission of $7.00 per lot, placing it among the cheaper Forex brokers, where competitive swap rates add to the cost advantage.
Pros & Cons
- Low minimum deposit and high leverage of up to 1:500
- Competitive cost structure
- Excellent technology infrastructure and seasoned management team
- Daily research and quality educational content
- Limited leverage in some areas
BlackBull Markets
In Summary Best ECN trading environment, with scalping and hedgingBlackBull Markets was founded in 2014 in New Zealand. Like many antipodean Forex brokers, BlackBull Markets is an ECN broker, offering raw spreads and commissions. They are regulated in New Zealand by the Financial Services Providers Register (FSPR) and offer a maximum leverage on some Forex currency pairs as high as 500 to 1. In addition to their global headquarters in New Zealand, BlackBull Markets also has presences in the form of branch offices in New York and Malaysia. BlackBull Markets offers a relatively tight range of tradable assets: 27 Forex currency pairs and crosses, gold, silver, crude oil, natural gas, and 6 major equity indices. That should be sufficient for those traders with more focused strategies not requiring wide diversification.
Pros & Cons
- ECN/NDD execution model with deep liquidity
- Institution-grade pricing for retail traders via proprietary price aggregation
- ZuluTrade and Myfxbook for social trading
- Leverage of up to 1:500
- Limited deposit options
AvaTrade
In Summary Highly regulated, choice of fixed or floating spreadsAvaTrade is one of the largest Forex / CFD brokers and well-known for offering their clients a choice of fixed or floating spreads. They have a very high and strong level of regulation. AvaTrade is directly regulated in Ireland (and by extension, the European Union), Australia, Japan, South Africa, and the British Virgin Islands. Outside the European Union, Ava offers maximum leverage on Forex currency pairs as high as 400 to 1. AvaTrade offers trading in over 55 different Forex currency pairs, 17 commodities, 20 equity indices, 14 cryptocurrencies, plus 66 individual stocks and shares. 2 bonds and 6 ETFs are also on the menu.
Pros & Cons
- High-quality educational offering via SharpTrader
- Excellent choice of trading platforms catering to various trading needs
- Broad asset selection and cross-asset diversification opportunities
- Well-regulated and trusted broker with oversight from a central bank
- Trading costs competitive but nothing special
What are Spreads?
When you trade Forex or any other financial instrument – stocks, commodities, cryptocurrencies, indices – you will see two prices: the buy price and the sell price.
- A spread is the difference between the current buy price and the current sell price.
- The two most important terms you need to know are “bid” and “ask.” (The “ask” is sometimes known as “offer”).
How are Forex spreads calculated?
- The bid: This is the price you pay when you buy an asset at the current market price (in other words, the price at which your broker or counterparty sells to you).
- The ask (or offer): This is the price you get when you sell an asset at the current market price (the price at which your broker or counterparty buys from you).
- For example, say your broker quotes EUR/USD at 1.13000 / 1.13005:
- The bid is 1.13000
- The ask is 1.13005
- The spread is 0.5 pips (1.13005 – 1.13000).
How does the spread work when you’re trading?
Let’s say you buy EUR/USD when the price is 1.13000 / 1.13005 and your broker fills your buy order at 1.13005. If you want to sell immediately after buying and the price hasn’t changed, your broker will fill your sell order at 1.13000. That means you will be down 0.5 pips. From another perspective, the price must move up by 0.5 pips before you can break even on the trade.
So, the spread is the cost of doing business in the markets. It is how brokers and liquidity providers are compensated for filling orders for clients, although some brokers may charge commissions as well as spreads.
Overall, the tighter (smaller) the spread, the better. This means your trading costs are lower. That’s why traders seek the lowest spread Forex brokers, which are often raw spread Forex brokers. Raw spread brokers do not mark up their quoted spreads but offer the direct spreads from their liquidity providers, typically charging commission as the real trading fee.
Key takeaway: A spread is the difference between the bid and ask. It is your cost of trading, and it is how brokers and liquidity providers make their money. Everything else being equal, you want the lowest spread Forex broker.
What Determines Forex Spreads?
Liquidity – how much of the asset is available on the market for buying and selling right now - is the biggest determinant of Forex spreads.
- Liquidity affects the ability of market participants to get in and out of trade positions. This is extremely important for institutional funds who deal in large sizes.
- When liquidity is abundant, and market depth is rich, brokers will offer the most competitive prices, and you will see extremely tight bid-offer spreads.
- If market conditions are unfavorable, buyers and sellers will look for larger discounts / premiums to the ‘fair price,’ creating wider spreads.
Remember, Forex is an “over-the-counter” market and not traded through a centralized exchange. Each broker independently accesses liquidity for their clients. A broker with deeper and faster access to liquidity should be able to offer better, tighter spreads, or even raw spreads.
How do spreads change in Forex?
- The Forex pair. Some Forex pairs are more actively traded than others, and that will affect their spreads. USD pairs are the most liquid, and EUR/USD is usually the most liquid Forex pair, so it typically has the lowest spread in Forex. By comparison, GBP/JPY, for example, will usually have a considerably higher spread.
- Time of day. Although Forex is traded 24 hours a day, 5 days a week, there are times of the day which are more liquid than others. For example, the London / New York overlap, which starts when New York opens and includes the European afternoon, is the most liquid time of day and has the lowest average Forex spreads by time of day. It also sees the greatest price movement in major Forex currency pairs.
- Market announcements. Markets become thin before big major announcements, such as before the release of economic data, and spreads are consequently wider at these times.
Key takeaway: Liquidity determines Forex spreads. Different brokers, Forex pairs, and times of day typically bring different liquidity conditions.
Commissions in Forex
Depending on your broker and account type, the broker may only charge you a spread, or they may charge a spread and separate commission as well.
How do commissions work?
- A commission is a cash charge made by the broker each time you trade.
- Brokers calculate commissions on your trade size, for example, say $7 commission for every standard lot. Brokers usually split the commission quote in half: $3.50 for opening the position and $3.50 for closing the position. In this case, you will see the commission written as “$7 per round turn” or “$3.50 per side, per lot.”
Forex spreads vs. commissions – what’s best?
You might assume that not charging a commission at all is better, but that’s not necessarily the case if another broker that charges commissions also offer lower spreads to compensate.
When a broker charges a commission, that’s usually how it makes its money, rather than from the spread. Instead, the broker gives you the “raw” spread it receives directly from its liquidity providers. Depending on trading conditions, that spread can sometimes be as little as 0 pips.
So, which brokers or account types have only a spread? And which brokers have a commission? Which is better? To answer those questions, we must dive into two very different ways of executing trades: Direct Market Access versus Market Maker.
Key takeaway: Some brokers will only charge a spread, and some will charge a separate commission. Usually, the difference is whether the broker gives you Direct Market Access or acts as a Market Maker broker.
Direct Market Access (DMA) brokers
- Direct Market Access brokers pass clients’ orders straight to their liquidity providers without intervening through a dealing desk. For that reason, they are also called Straight Through Processing (STP) or Non-Dealing (NDD) brokers. An ECN broker is a type of Direct Market Access broker.
- The pricing you receive from a DMA broker will be directly from the broker’s liquidity providers. The broker will charge a separate commission (or sometimes increase the spread by a set amount) to cover their costs.
- Because Direct Market Access brokers never take the other side of their clients’ trades, there is almost no chance of price manipulation. The lack of brokers’ price manipulation is the biggest reason why many traders prefer Direct Market Access.
- Direct Market Access brokers have no restrictions on short-term trading, hedging, news trading, and so on. Traders also see every single tiny price movement (which Market Maker brokers often smooth out). For those reasons, short-term traders usually prefer Direct Market Access brokers.
What’s a Market Maker (or Dealing Desk) broker?
- Market Makers form a bridge between the interbank market and Forex traders. Hence, they “make a market.” They buy large positions from liquidity providers and sell them to their clients in smaller pieces. Essentially, they are taking the other side of the trade (although they may later hedge positions, to be partially neutral themselves.) A Market Maker carries out this process in their dealing desk department, and the execution of the orders occurs in-house.
- Because Market Makers set their own pricing and spreads, they can offer smoother price fluctuations and spreads.
- As trade execution happens within their internal dealing desk, their trade execution can be quicker than Direct Market Access brokers who have the extra step of passing on client trades to the liquidity providers. The additional execution time is usually of concern only to short-term traders.
- Market-Makers only charge a spread, and some traders find it easier to manage the cost when there isn’t a separate commission.
Key takeaway: Direct Market Access brokers will offer lower spreads than Market Makers, but they will often charge a separate commission as well to compensate for their services. You need to include commissions to compare the total overall cost of trading between brokers.
Are Low Spreads Worth It?
Spreads (and commissions) should be a primary factor in broker choice, but you should examine the complete offering made by a broker and not focus only on cost of trading. A broker provides you with an overall service, not just trade execution. Consider the items in the following list. Maybe some of them are worth paying a little extra in spreads to get a better all-round trading service?
- Regulation. Are you satisfied with the broker’s regulatory authority and reputation? Are client funds held in segregated accounts separate from the company’s operations?
- Trading platforms. Some brokers have put in a lot of work developing trading platforms and additional tools to enhance your trading experience.
- Reliable technology for execution. Execution should be fast, and a broker’s servers should be stable.
- Ease of depositing and withdrawing funds. Preferably, you want to pay as little costs as possible to transfer money in and out of your broker’s accounts, and the broker should make it easy for you to transfer money with multiple payment options.
The Bottom Line
The spread (plus any commission) in Forex is the total cost of trading: for you to trade the Forex market. It will always be one of the most important considerations anyone will face in choosing a Forex broker, and for most people will be the second most important factor in making that decision after the safety of deposit / regulation issue.
Some traders will be in more need than others of opening an account with the lowest spread Forex brokers, especially short-term traders who trade frequently. This is because their cost of trading will be dominated by spreads and any commissions charged, while longer-term traders who trade less may find that overnight swap rates are a bigger overall cost of doing business for them. Therefore, it is important to understand that the search for great spreads is not the only thing to be concerned about when finding the right Forex broker.
If you think of trading as a business, you want to have the lowest costs but still get trustworthy service that meets your needs. Higher up on this page you can find a shortlist of Forex brokers with low spreads worth considering.
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