The United States has some of the most strict laws and regulations governing the online forex trading. This has made it difficult for most international brokerage houses not just to maintain operations in the country but even offer forex services to American citizens. Brokers seeking to establish operational bases in the country must first be vetted by the National Futures Association (NFA) and the Commodities and Futures Trading Commission (CFTC).
The level of emphasis given to the regulation of foreign exchange brokers in the country is evidenced by the fact that the U.S was the first nation to set a cap on the amount of leverage advanced to traders, setting its maximum at 1:50. The upside to this strictness and complicated rules of engagement is that they have birthed what you might consider the most transparent forex brokerage houses in the world today. And this list reviews what we consider top 5 forex market operators in the country.
How NFA and CFTC regulations make U.S forex market unique
Compared to the rest of the world, United States based forex brokers are held under a higher code of conduct that calls for more ethical market practices. At the very least, they must be a member of CFTC and regulated by NFA. Other regulatory guidelines that set these brokers apart include:
✅The forex broker must maintain a minimum $20 million operating balance that is bound to increase in proportion to the number of traders registering with the broker.
✅Maintain segregated accounts for the broker and client funds as an assurance that they can’t use client funds to offset the brokerage house expenses. The broker should then provide weekly financial statements to NFA in this regard.
✅Brokers must prepare and submit financial statements and audit reports regularly to the NFA
✅NFA guidelines demand that brokers make withdrawals available as soon as possible and desist from withholding these funds for unwarranted reasons
✅CFTC prohibits CFDs trading for forex brokers, imposes maximum leverage at 1:50, calls for the enforcement of First In First Out (FIFO) rules and discourages hedging.
Most international brokers consider these regulations toxic and inhibitive of their operations and, therefore, choose to stay away. We are, however, of the opinion that they provide the United States forex traders with what most other traders across the world consider a luxury – transparency. Our list of the top five forex brokers in the United States only features companies that guarantee this transparency and commit to respecting the different NFA and CFTC guidelines on such factors as data privacy and the level of risk their clients are exposed to.
Criteria used to come up with the list
When coming up with the list of the best brokers 2019 in the United States, we extended our vetting base and looked far beyond adherence to regulations and CFTC membership. We focused on everything else that relates to how you interact with your broker as well as the appeal of their different features like order execution speeds and how they impact your returns on investment. These include:
- Number of professional technical indicators integrated into the system
- Order execution speeds
- Reliability of their customer support team
- Spreads, commissions, lot sizes, and number of currency pairs
- Charting platforms layout and ease of use
- Initial deposit and minimum operating balance
- Research and news
- Forex education and training
Best 5 Forex brokers in the United States
Forex.com is an American based forex brokerage firm that has since extended operations to the rest of the world. The Gain Capital trading company subsidiary that was founded in 1999 is a registered CFTC member that is regulated by NFA. It tops the list of United States forex brokers not just because of its regulation and dedication to the protection of customer data but also because of the revered reputation of reliability that it has built in the two decades that it has been in operation.
Charges and trading accounts
Forex.Com clients have access to over 80 currency pairs, inclusive of all the major currencies with flexible leverage that maxes out at 50:1. The broker further promises some of the fastest order execution speeds and minimal slippages. Additionally, the firm allows for the creation of different forex trading accounts with the minimum deposit for the standard account set at $50. We also liked the fact that Forex.com doesn’t charge commissions and that their variable spreads for the most popular currency pairs such as EUR/USD start from 1.2 pips.
Forex.com and its parent company Gain Capital have positioned themselves at the market leaders and are consistently expanding their operations through purchase and acquisition. In 2017, for instance, Forex.com acquired FXCM’s United States client base, further consolidating their influence over the American Forex market.
Pros and cons
- Dedicated customer support team with an average connection time of <1 minute
- System integrated with news streaming sites and delivered in the form of an economic calendar
- Market direct accounts give traders direct access to real-time spreads and trade prices
- A solid risk management system that includes a trailing stop loss order feature
- Extensive educational and training materials for both novice and veteran traders
- One might consider its platforms rigid given the few customizable options they present traders
- Sluggish website chat option
OANDA, a long time money markets broker, peered into the forex trading world in 2001 after launching their FXTrade platform, making it a pioneer in forex brokerage. It makes it to our list of top US forex brokers because of its emphasis on technology and integrating it into forex trade as evidenced in the fact that it was the first foreign exchange brokerage to embrace full automation. The Michael Stumm and Richard Olsen project has gone on to center itself as a currency exchange powerhouse, processing millions of transactions daily with conservative estimates reporting that the broker’s servers process about 20% of all daily spot forex trades.
Versatility and charges
OANDA doesn’t discriminate between different classes of forex traders and only maintains one type of trading account, Standard Account. This has no minimum initial deposit, operating balance, or even a minimum lot size. We also believe they have some of friendliest charges. For instance, they don’t charge any trading commissions and spreads are heavily discounted with those of the major currencies, case in point the EURUSD pair, starting from 1.1 pips. The leverage here is also capped at 1:50.
Platform and reliability
OANDA maintains a global presence and its United States operations are regulated by NFA and CFTC as well as the Futures Commissions Merchants (FCM). The broker’s clients can access its services through its highly customizable MT4 and FXTrader Platforms. FXTrade is a web trader feature that gives clients access to their accounts from any part of the world.
Pros and cons
- Highly competitive pricing model
- The no minimum deposit and lot size make it friendliest to beginners
- The first withdrawal is free regardless of the payment processor
- Fast and straightforward account opening process
- The mobile app charting is quite poor, is rigid and does not allow for alert creation
- Little emphasis on news, research, and education
3. IG (US)
IG – United States is yet another pioneer in the field of forex trading whose reliability and continued adaptation to the dynamic trading environment has seen it become one of the most reputable brands. Some of the reasons why we consider IG-US one of the best brokers in the country include its fast account creation and verification processes as well as its competitive spreads. The fact that the brokerage house also owns North American Derivations Exchange (NADEX), though operated separately, compounds our faith in the broker’s commitment to progressive trading.
Platform and reliability
IG has diversified their system, making it accessible to its different clients on such platforms as MT4, MT5, WebTrader, Desktop, and Smartphone app. The forex broker U.S operations are regulated by both the CFTC and NFA.
Accounts and charges
You can open up either a Mini or standard trading account with IG –US and gain access to over 80 tradeable currency pairs. Spreads for major currencies here start from 0.8 pips and average between 0.9 and 1.3 pips with no commissions for both trading accounts. Leverage is capped at 1:50. Unlike OANDA, however, you will need an initial minimum deposit of $250 to activate the live account and start trading.
Pros and cons
- Regulated by virtually every major trading jurisdiction across the world
- Highly customizable and easy to use trading platforms
- Advanced charting features and tools such as the alert system for specific indicators and sentiment readings
- Avails news features from reputable sources and economic calendars
- Forex Direct not available to U.S clients
- The web trader platform is largely blank and with no preset layouts making it impossible to interact with for novice traders
4. TD Ameritrade
TD Ameritrade makes it to our list as one of the few NFA and CFTC regulated brokerages that offer forex trading services to the United States residents, exclusively. The fact that it is a publicly traded company that has had active involvement in the world of finance for close to seven decades makes it one of the most reputable and highly reliable financial service providers in the country. We also liked their relatively competitive pricing model and access to over 80 currency pairs.
Accounts and charges
The process of opening and funding an Ameritrade Forex account is quite straightforward. Plus you don’t even need a minimum initial deposit or operating balance to activate live trading accounts. The forex broker also maintains one of the most versatile pricing models that allow for both pure spreads charges and a combination of spreads and commission.
For instance, if you opted to use the pure spread charging system, you will have to settle with EURUSD spreads that start from 0.9 pips. The combination of spread and commisions model, on the other hand, imposes $2.00 charge per traded lot and with the spread for the EURUSD pair starting from 0.3 pips.
Platform and tools
TD Ameritrade is only available on the MT4 platform and neither does it maintain a web trading platform. Instead, the forex broker has come up with a proprietary trading platform, ThinkorSwim, which they complement with the desktop and mobile apps. The ThinkorSwim platform has all the features and tools of the MT4 or MT5 platforms. This includes integration with professional analytics tools and support for expert advisers.
Pros and cons
- Innovative desktop charting that can be synced with the mobile app
- Offers one of the best trading platforms in the industry
- Huge access to premium analytical tools
- The unique pricing flexible pricing model gives trades a choice to determine the charges for their trades
- Runs regular offers and promotions: currently offering $600 and commission free trading to new traders
- Mastering their complex ThinkorSwim trading platform may take time for beginner trades
- Their trades are executed through FOREX.com’s Gain Capital Limited and this increases the possibility of double charge and incidences of system lag
Visit TD Ameritrade
PaxForex has one of the most elaborate types of trading accounts catering for the different types of traders. These include the cent, mini, standard, Fix Spread, and VIP trading accounts. But this isn’t the only reason, PaxForex, one of the most progressive forex brokerage houses, is making it to our list of best forex brokers. We also like its progressive commission free mode of operation as well as its considerably low lot sizes.
Trading accounts and charges
PaxForex forex broker’s spreads start from 0.4 pips for the standard trading account with a minimum deposit set at $2000. The Mini and Cent accounts operate on variable spreads that start from 1.4 pips and 2.4 pips for the major currencies with a prerequisite minimum deposit set at $100 and $10 respectively.
The VIP account spreads, on the other hand, start from 0.4 pips with a minimum deposit of $10,000. The upside to this is that the broker maintains a transparent pricing model with no additional fees or commissions with U.S citizens having access to maximum leverage of 50:1. Additionally, the broker does not impose unnecessary deposit and withdrawal fees for international transfers.
Platform and tools
PaxForex’s versatility extends to its accessibility by making it possible for its clients to interact with the broker and their accounts on the all-popular MT4 platform. The platform is packed with countless premium analytical tools and additional features that make it highly customizable.
Pros and cons
- Fast and affordable payment processing
- Supports trading account integration with expert advisors
- Dedicated customer service team available 24/7
- Access to news and economic calendars
- No proprietary, mobile, desktop or WebTrader platform
Over the past few years, some of the most prominent forex brokerage firms in the world have pulled out of the United States market citing the prohibitive regulation and trading restrictions imposed by NFA and CFTC. They started by relocating offices but still maintained their client bases but most, such as FXCM, has since disbanded their U.S operation by closing client accounts or transferring them to other brokers.
Note that while prohibitive regulations with regards to leverage and CFDs trading were meant to safeguard the trader’s interests from dishonest brokers, some of these have only served to disadvantage the traders. For instance, the prohibition of leveraging and margin trading make forex trading highly unprofitable for traders with minimal capital and a preserve of individuals with significant disposable incomes.
Some trading rules imposed by these agencies such as FIFO and no hedging also limit a forex trader’s flexibility and even exposes them to unwarranted risks. For instance, The FIFO rule states that a trader must close all open trades in the order in which they were opened. This implies that you cannot hold long term trading positions and scalp at the same time. The no-hedging rule, on the other hand, makes it illegal to safeguard your trades against unexpected drawdowns thus exposing you to huge losses should markets defy your analyses.
How can I open a trading account with a U.S forex broker?
Opening a trading account with any broker in the United States is relatively straightforward as most will not request for personal information apart from name and email when opening a demo account. When taking your account live, however, they will require that you furnish them with government-issued identification documents such as the driving license and S.S.N number.
Do U.S forex brokers allow CFD trading?
No. Contracts for Difference (CFD) trading, margin trading, and issuance of leverages beyond the 50:1 level are all prohibited in the United States to brokers with an active presence in the country as well as international brokerage houses that accept U.S clients.
When was leveraging and CFD trading banned in America?
In 2010, the enforcement of Dodd-Frank Finance Act that caps leverage at 1:50 and bans CFDs and margin trading started. CFTC and NFA have been charged with the responsibility of ensuring compliance by the different brokerage firms.
Is there a possibility of high leverage and CFD trading ever being allowed in the U.S?
The clamor for a ban on CFDs and margin trading came about after the 2008 financial crisis. Given that some sectors of the economy haven’t quite fully recovered from the crisis a decade after its occurrence and the many cases of financial scams being reported across the country, the general opinion edges towards sealing more loopholes in the finance industry. Such sentiments dim the chance of CFDs trading and ‘exaggerated’ leverage making it back to the U.S forex markets.
What is an expert advisor?
An expert advisor is trading software coded specifically for the MetaTrader platform. It is designed to analyze markets and use the information gathered to determine the buying and selling points that guarantee most returns automatically.
What are the NFA and CFTC policies regarding expert advisors?
Both NFA and CFTC welcome the idea of automated forex trading. They, however, delineate themselves from the responsibility of vetting expert advisors making it your responsibility as a trader to first confirm the reliability of the AutoTrader before integrating them into your real account.