Best Forex Brokers 2016

Forex trading, which involves exchanging one currency for another on the foreign exchange market, isn't for the faint of heart or the inexperienced. No investment is without risk, but forex tips the risk meter further with its rapid trading pace and high leverage, which means investors can quickly lose more than their initial investments. Of course, that means you can also profit at the same speed, which — combined with liquidity — is what attracts investors to currency trading.

When selecting your forex broker, you should consider trading platforms and tools, the number of currency pairs offered, leverage maximums, customer service and, of course, costs. But comparing costs is tricky in forex trading: While some brokers charge a commission, many advertise no commissions, earning money in the bid-ask spread — the difference between the price a broker or dealer is paying for the currency (the bid) and the price at which a broker or dealer is selling a currency (the ask). Brokers essentially roll their fees into that spread, widening it and pocketing the excess.

That's just one reason why the search for the best forex broker is a complex one. Another is that there are a variety of brokers out there, many of them unregulated or only regulated in countries outside of the U.S. For our list of best currency trading brokers, we considered only those that are regulated by the National Futures Association and the Commodity Futures Trading Commission.

If you're aware of the risks here and still prepared to dive in, here are NerdWallet's top picks for the best brokers for forex trading ^[1]. One suggestion: All of these brokers offer free demo accounts so you can test the market with virtual dollars. Dip a toe in with some play money before you dive in with your own cash.

Best brokers for forex trading overall

These brokers combine reasonable costs with strong trading platforms and a large selection of currency pairs.

Commission: Spread markup.
Maximum leverage: 50:1.
Account minimum: $0.
Currency pairs 90+.
Minimum trade lot: None.

See our TD Ameritrade review ^[2].
Commission: Both commission ($1 minimum; $0.10/1,000 units per side) and spread markup, depending on currency.
Maximum leverage: 50:1.
Account minimum: $2,000.
Currency pairs: 100+.
Minimum trade lot: 1,000 for commission pairs; 10,000 for spread markup pairs.

The best currency traders combine value with selection and high-quality tools, and Oanda and TD Ameritrade hit all those notes. TD Ameritrade needs no introduction, as the broker frequently tops our lists and is an all-around winner no matter what investment product you're trading. The company is likely the best pick if you'd like to trade multiple products within an all-purpose account (say, stocks, options and forex), though the fact that it charges a commission (with a $1 minimum) on some currency pairs can lead to higher costs for low-volume traders.

If you'd rather pay via a spread markup, Oanda consistently had the lowest spreads in our analysis, which compared forex brokers' live spreads on the seven major currency pairs over the course of a week. The company also has no minimum investment requirement and no minimum trade lot (most brokers require trades of 1,000 units — a micro lot — or more).

Best brokers for beginner currency traders

These brokers stand out for their educational resources and trader support.

Commission: Spread markup.
Maximum leverage: 50:1.
Account minimum: $250.
Currency pairs: 52.
Minimum trade lot: 1,000.

Commission: Both commission ($0.04 to $0.06/1,000 units per side) and spread markup, depending on account.
Maximum leverage: 50:1.
Account minimum: $50 to $25,000, depending on account.
Currency pairs: 39.
Minimum trade lot: 1,000.

If you're just jumping into the forex market, you want a broker that can provide educational resources and customer support to get you started. Both Forex.com and FXCM have broad customer support, along with a wealth of videos, webinars and guides to help you learn the basics. Most forex brokers offer 24-hour trader support five days a week, Sunday at 5 p.m. Eastern time through Friday at 5 p.m. Eastern. But Forex.com adds Saturday hours (9 a.m. to 5 p.m. Eastern), and FXCM has 24/7 client phone support in addition to its standard trading desk hours.

FXCM offers three account types, all of which have favorable pricing and a 1,000 trade lot minimum. Beginners will be best suited to the mini account, which has just a $50 deposit minimum. Traders with mini accounts pay through spread markups, which were very competitive in our comparisons. FXCM's standard account has a $5,000 minimum and charges commissions with no spread markup. The commission is $0.04 per 1,000 units per side for EUR/USD, GBP/USD, USD/JPY, USD/CHF, AUD/USD, EUR/JPY, GBP/JPY and $0.06 per 1,000 for other pairs, with no minimum commission. For those who qualify, the company's $25,000 minimum active trader account offers commission discounts of up to 55%.

Costs may be slightly higher at Forex.com, which exclusively uses spread markups that came out wider than the competition in some of our tests. The company also charges accounts with 90 days of no trading activity or open positions a $15 monthly data fee; customers can opt to temporarily disable the account to avoid that fee.

One note here: Forex.com is owned by Gain Capital, which also holds TradeKing Forex accounts. These forex brokers operate separately but are very similar, so users who are already familiar with TradeKing ^[3] may prefer TradeKing Forex. (Forex.com edged out TradeKing Forex in our analysis with its longer trader support hours and much more extensive educational resources; those offerings are slim from TradeKing.)

Best forex trading platforms and tools

The brokers below offer a choice of high-quality trade platforms and advanced tools.

See our TD Ameritrade review ^[4].
Commission: Both commission ($1 minimum; $0.10/1,000 units per side) and spread markup, depending on currency.
Maximum leverage: 50:1.
Account minimum: $2,000.
Currency pairs: 100+.
Minimum trade lot: 1,000 for commission pairs; 10,000 for spread markup pairs.

Commission: Both commission ($0.04 to $0.06/1,000 units per side) and spread markup, depending on account.
Maximum leverage: 50:1.
Account minimum: $50 to $25,000, depending on account.
Currency pairs: 39.
Minimum trade lot: 1,000.

TD Ameritrade is hard to beat with its much-loved thinkorswim ^[5] trading platform, which allows users to trade not just currency, but also a range of other investment products. The platform is professional-level, with advanced technical analysis capabilities and the ability to create custom forex pairs, and TD Ameritrade has an equally robust mobile app, Mobile Trader ^[6]. Thinkorswim also offers up $200,000 of play money for practice with its paperMoney feature. One drawback: The platform doesn't offer automated trading, and it's advanced enough that new traders can easily get overwhelmed.

But FXCM also deserves a spot here, especially for currency traders who want automated trading. Most forex brokers — including the ones on this list, outside of TD Ameritrade — give account holders access to MetaTrader 4, a common trading software. But FXCM offers MetaTrader 4 alongside its own proprietary platform, Trading Station. The customizable platform offers automated trading and pre-loaded strategies, along with FXCM Apps, a collection of downloadable technical indicators, automated strategies and other apps to customize the platform further. FXCM also offers NinjaTrader, another popular trading software. All three platforms can be tested with a $50,000 demo account.

Best brokers for low-cost forex trading

In our analysis, these brokers offered the most value.

Commission: Spread markup.
Maximum leverage: 50:1.
Account minimum: $0.
Currency pairs 90+.
Minimum trade lot: None.

Commission: $0.80 per 10,000 units, round turn.
Maximum leverage: 50:1.
Account minimum: $5,000.
Currency pairs: 35.
Minimum trade lot: 5,000, but $0.80 minimum commission.

The costs associated with forex trading can be hard to suss out, as we noted earlier. Low-volume traders can often save money with a broker that marks up its spreads but charges no commissions, as long as those markups are competitive. Oanda publishes both live and historical spreads on its website, and came out the clear winner in our analysis for the lowest spreads on major pairs. The company also charges no inactivity fees.

High volume traders may benefit from a commission-only broker, like TD Ameritrade, one of our best overall picks. ATC Brokers' flat commission pricing does TD Ameritrade one better here, though: The company prices its commission round turn (in other words, for both sides, when you buy and sell) and charges $0.80 per 10,000 units. One caveat: Though the broker allows trades as small as 5,000 units, that $0.80 is a minimum commission. Still, it's very low — as low as FXCM's charge on majors in its standard account, and ATC Brokers' commission applies to all pairs.

Arielle O'Shea is a staff writer at NerdWallet, a personal finance website. Email: aoshea@nerdwallet.com ^[7]. Twitter: @arioshea ^[8].