A complete online guide for understanding who are the best forex brokers. The answers to every question, including how many forex traders make money, why some brokers have lower losing percentages than others, and what risks are involved.
For the first time in the history of trading, thanks to the new European regulations that came into effect on August 1, 2018, European brokers required to show what is the percentage of their clients that lose the money. This applies to all broker traded CFD’s (forex, stocks, commodities, etc.)
Best Forex Brokers Available Today
What is ESMA and how can understanding the new ESMA regulations mean a win or lose on the forex?
Anyone getting into forex trading has probably heard that 95% of participants lose money when trading. Given that brokers were able to hold tightly onto the real statistics, the 95% to 99% estimations were precisely that, just estimations.
Now, however, given the implementation of stricter regulations designed to protect retail investors by ESMA (European Securities & Market Authority), it is a legal requirement that a broker displays the winning (and losing) percentage of its clients.
ESMA is a financial safeguard of the European Union. Its purpose is to protect investors as well as consumers and those working within the trading market by ensuring a stable market with open information. They do so through carefully written rulebooks and supervision of various financial agencies and repositories. In short, the ESMA has made Forex a more “friendly” place without as many hidden agendas. Those interested in trading can do so with a more educated decision based on the mandatory data published by brokers and ESMA themselves.
To discover this ESMA required information, look for a statement similar to “75% of retail investor accounts lose money when trading CFDs with this provider” on any marketing material or advertisements from the broker.
To reduce the financial risk for retail traders, ESMA has introduced leverage limits for European brokers. Gone are the days when small clients could trade with 100x or 200x their deposited funds. According to the new ESMA intervention measures, leverage rates can only be offered between a margin of 2:1 and 30:1, depending on the specific instrument.
The new leverage limitations are as follows:
👉 30:1 for major currency pairs (such as EUR/USD)
👉 20:1 for non-major currency pairs (such as EUR/NZD), gold and major indices
👉 10:1 for commodities with the exception of gold and non-major equity indices
👉 5:1 for CFD stocks
👉 2:1 for cryptocurrency CFD
As you can see from the list, average volatility dictates how much leverage can be utilized. For this reason, cryptocurrencies, typically the most volatile asset, have the tightest leverage cap, while conventional forex pairs can use the maximum 30:1 margin when trading.
Ensuring you have the right broker from the start can make a world of difference when it comes crunch time – plus, it’s your money that you’re potentially losing, so it’s crucial it’s being put in the right hands.
What Percentage of Forex Traders Lose Money?
As of August 1, 2018, European brokers are required to publicly release the percentage of their clients that lose money on the foreign exchange (applies to all CFDs, such as forex, stocks, commodities, etc.) This is a first in the history of trading and offers us the ability to analyze and study the trends of Forex so we can make better trading decisions.
What is a Forex Broker?
Forex brokers are experts in facilitating exchanges on the foreign exchange market. Brokers make it easier for forex traders to trade currency pairs on the market by providing advice, guides, and a stage for implementing and recording each trade.
While the foreign exchange market is the largest trader market in the world, discovering which one is best for you can be a difficult task. It’s essential to do the proper research and find out which broker has your best interest in mind and can deliver you the best chance of winning a profit on the forex market because if you make the wrong decision, you could lose a lot of money.
Why do traders lose more money with some brokers and less with others?
The truth is, only a very low percentage of those trading on any market, including forex, will actually make a profit. It’s intended to work this way. Even if every single person knew exactly how to trade and did so properly based on the current situation, etc., the same approximate percent would still lose. And it could be for any reason, not simply bad luck.
First, the highest amount of traders become interested in a pair/spread at the last possible moment – when things are looking good. This is where the vast majority of the expected losses take place. Oftentimes, those few wins are done so with careful planning and strategizing with trends, etc. And, of course, which broker you choose to deal with can also have an impact.
The number of winning trades can vary widely among different companies. eToro for example has one of the lowest numbers of losing accounts at 75%. This means only 25% of traders depositing with eToro are actually making a profit trading forex. When you consider that eToro traders’ winning rate is roughly 3 times more than the worst-performing brokers, it demonstrates why choosing your trading platform carefully is so important.
There are several factors that may be contributing to eToro’s impressive figures.
First, unlike many brokers, they have pioneered the use of social trading. Users can interact with other users and even replicate their trading strategies using eToro’s pioneering use of the “copy” feature which allows beginners to learn from and mimic other successful traders on the platform. Given the disparity in winning percentage, it appears to be working.
At the other end of the table, the worst-performing Forex brokers could be down there for many reasons. Whether it be because they prey on inexperienced traders, have high costs, or don’t provide enough education or training tools, the stats don’t lie. If 89% of users are losing money trading with a particular company, then new forex traders need to be wary of that fact.
Thankfully, we have access to these stats and more due to the new regulations imposed by ESMA.
How To Choose Your Forex Broker
Before going too in-depth into the winning percentage and features a broker provides, there are factors you should establish first to ensure you’re putting your money in the right hands.
Find out which brokers are regulated by the Financial Conduct Authority (FCA). This is critical because it means that the broker will be held legally responsible for holding transparency and fairness to a certain standard.
It also proves to you far more that, when you invest your money that it will still be there a year down the road. Some brokers who aren’t regulated may not have any proof that they will still be running long-term or be able to guarantee the privacy and safety of your money and your personal information.
The best Forex Brokers are 100% apt at how the forex market works. They know how to make the most money and perform well while doing it – safely. And, they will have the lowest loss percentages. You’ll know these percentages, thankfully, due to the ESMA regulations.
Choosing the right forex broker is an important decision, so what exactly should you be looking for beyond the winning/losing percentage that we discussed earlier?
- First, you need to look for low fees. The cost of trading adds up in the long term and can eat into any profitable edge that you might have if you aren’t careful. There is good news here, as due to competition, most forex brokers offer competitive spreads with no commission.
- Next, it’s important to consider how many different currencies are offered by the forex broker. Professional traders will look for opportunities across a vast array of forex pairs. Having these options can help you be more selective, and therefore more effective in your trading.
- Taking a look at the customer service provided by a broker can also be important. The last thing you want is to deal with a forex broker who is uncommunicative and unable to answer questions about your investments. You can set yourself up for happier, smoother trades by establishing a good relationship with your broker and their team from the beginning.
- Another important consideration is what technology tools are available. While you don’t necessarily need hundreds of fancy indicators, at the very least, you need clear and readable charts backed by intelligent analytics.
- Finally, and perhaps most importantly, you need to find a company that makes it straightforward to deposit and withdraw money. There’s nothing worse than having long delays while waiting for your funds to arrive due to reasons such as the broker stalling on a withdrawal. Always read the fine print and find out the exact number of days, if any, in a waiting period.
There are so many factors to consider when choosing a broker. Doing your research beforehand will help you make the best possible decision when choosing which broker you deposit your money with. To make the process even easier, we’ve done a little researching ourselves.
Who Are The Best Brokers In 2021
If you consider all these factors, it will help you to make the best possible decision when choosing which broker you deposit with. To make the process even easier, we have researched this for you.
👉 Best Overall: eToro 👈
When you consider the hard numbers, it’s almost impossible not to put eToro at the top of the pile. The statistics don’t lie, and more traders are profitable at eToro than at any of the other brokers we checked out. Whether it’s thanks to its social platform or copy trade feature, eToro seems to be doing it right. With over 5 million users in a whopping 140 different countries around the world, this award-winning company has created a user-friendly platform that is simple to learn and understand the same as any broker out there.
75% of retail accounts lose money
After eToro it becomes more difficult to separate the different companies, as they are mostly alike. However, there are some key differences in the areas of technical tools and ease of use, which allow us to differentiate between them.
👉 Honorable Mention: Plus 500 👈
While Plus 500 does not boast an above-average amount of winning traders, their free, unlimited demo version still a good option for a beginner trader. Boasting a great array of forex pairs, and an easy to use platform, most importantly this is a well regulated and well known CFD broker. Plus 500’s UK subsidiary is regulated by the FCA in the United Kingdom, widely considered the gold standard for financial regulators in the world.
76.4% of retail accounts lose money
👉 Honorable Mention: Easy markets 👈
Easy markets excel in the area of trader education, with a vast array of resources available to anyone who deposits with them. This broker goes out of their way to make its platform simple to use. The main reason it makes our list is that it offers forex options, which are very difficult to find among retail brokers. This trading instrument can be used to control risk and manage losses better, and therefore can be a great option for anyone getting started in FX.
76% of retail accounts lose money
👉Best for US traders: Robinhood 👈
Among the many US brokers, Robinhood is a breath of fresh air. The San Francisco based company bases its ethos on saving its clients money, and providing services for anyone, no matter how much money they have to trade. While they don’t have forex, Robinhood offers commission free stock, cryptocurrency, ETF and options trading with no minimum account deposit. The platforms charts are clean and clear with no confusing frills. While some have complained about a lack of educational materials, this broker has made great strides in this area, adding notable research firm Morning Star’s stock reports to their premium “Gold” service (leveraged trading is also available). All of these factors make Robinhood a great choice, particularly for a young trader getting started due to their low fees and no capital requirements.
Make sure you try each broker’s demo platforms before you invest any money in the markets. Finding a well-regulated broker will save you a huge amount of stress and, most importantly, will mean your risk capital has the best chance of being looked after safely. As we can now see from the valuable data provided through ESMA, it pays to find the right broker.
We bet you have some questions. Reach out for a conversation with a member of our team here or check out the rest of our blog to keep your financially creative juices flowing.