Once you understand how we systematically review Forex brokers and how we mitigate potential conflict of interest, you will certainly appreciate our methodology as we hope to provide honest reviews based on live metrics and real experience instead of simply listing brokers that pay the most commission on referrals.
At ForexChurch, we do not take a broker's word at face value but verify each and every data point that we think you should consider.
In the following section, we will explain what are the key factors that we rate brokers and how it affects their overall ranking.
1. Regulatory Oversight
Regulatory oversight is one of the most important factors in picking a broker.
While ranking Forex brokers, we not only look at the rules and guidelines of the regulatory authority but also see the Corruption Ranking of the country itself on the Transparency International's rankings. The regulatory bodies of the countries with the lowest corruption get a 5-Star rating in our regulatory oversight category and the ranking degrades subsequently and accordingly.
2. Security of Client's Funds / Segregated accounts
You should always try to stick to brokers who will keep your funds in a segregated account.
If a regulator requires the broker under its jurisdiction to keep client funds in a segregated account, the broker receives a 5-Star rating from us. Next, if the broker voluntarily keeps client funds in a segregated account and it is audited by a third party, we assign a 4-Star rating. If no third-party audits are published, we assign a much lower rating. If client funds are not segregated, you guessed it, the broker gets a 1-Star rating from us.
3. Business Model of the Broker
How a broker collects and passes your orders to the interbank market makes a lot of difference.
All STP brokers receive a 5-Star rating and ECN brokers receive a 4.5 rating. We do our own due diligence to verify if the claims are correct. Market makers are also legitimate businesses, but they get 3-4 Star ratings based on how they handle client orders. Next, brokers that cannot prove they are passing the client orders to liquidity providers in the interbank market gets a 1 or 2-star rating.
4. Transaction Costs and Fees
Depending on what type of trader you are, pay close attention to the fee structure of the broker you are about to sign-up with.
The lowest fee brokers are not always the best brokers. After all, you get what you pay for. However, to keep things simple, we rank brokers based on how low their Spreads are compared to other brokers and assign a 5-Star rating as long as their Spreads are within 1-2 pips compared to industry mean. Our ratings go down as the Spreads charged by the brokers start to widen from the industry mean.
5. Ease of Deposit and Withdrawals
One of the key benefits of faster deposit and withdrawal is you do not need to keep large sums of money in your account.
If a broker offers instant funding options, they get a 5-Star rating from us. By instant, we mean you click Pay and it appears in your account within 5 minutes. If it takes longer, the ratings continue to go down.
However, we do not count deposits and withdrawals made through Bank Wire as there are intermediaries involved.
6. Trading Platforms
After regulatory oversight, the trading platform is perhaps the second most important factor.
While ranking trading platforms, we usually do not look at an individual broker's platform but rank the backend software used by the broker. For example, if a broker only offers MetaTrader 4 & 5, it would get the same ranking, like all other brokers offering the same platform. If the broker offers additional tools and software that help traders analyze the market in a meaningful way, their ratings would go up.
To get a 5-star rating from us, a Forex broker must offer a stable software platform, both offline and online versions.
7. Order Execution
How fast your broker fills your orders will make or break your success as a Forex broker.
We place LIVE trades under different market conditions with all the brokers we are reviewing and measure how long it takes for an order to be accepted and placed, as well as any resultant slippage that may occur. We pay special attention to market orders during major News releases that lead to volatile markets like the non-farm payroll report (NFP) for example.
8. Customer Support
The customer support department of your broker is your point of contact.
When we rank customer service of a broker, we look for qualitative data points. Sure, it can be a bit more subjective, but we believe when it comes to human interaction, empathy and emotional intelligence of the support staff are more important than sheer efficiency.
We ask various technical questions and come up with fictitious scenarios to see how helpful the customer support agents were. We also rank brokers by the response time and quality of response.
9. Leverage and Margin
Leverage is one of the most attractive features offered by Forex brokers.
As long as a broker offers a minimum 100:1 leverage, it gets a 4-Star rating. Since US Forex Brokers cannot offer it, they automatically get a lower rating in our book. However, if a broker can legally offer 500:1 or more leverage, they get a 5-star rating.
10. Initial Deposit Amount
If you are a new Forex trader, you would ideally want to invest a small sum to get your foot in the door.
If a Forex broker has a $0 minimum deposit requirement, it conveys the message that you can start trading by investing as low a figure as you want! These brokers have the confidence to treat customers with low deposits and that's why they earn 5-star ratings. The higher the initial deposit, the lower their rating would be on ForexChurch.
11. Type of Assets Offered
If you want to diversify your Forex trading portfolio and look for trading opportunities with a wide range of minor and exotic currency pairs, then, you should pay close attention to the offered assets.
As long as a Forex broker offers the Major and Minor Forex pairs, they earn a 3-Star rating. Their rating goes up or down in relation to the number of Forex pairs and other assets they offer for trading.
12. Public Opinion
You should crosscheck broker reviews with multiple sites or sticks to trusting the opinion of reviews from reputed review sites like ForexChurch.
We read customer opinions on reputed sites like the Better Business Bureau (BBB), Trust Pilot, Yelp, and forum posts on Forex Factory to see the experience of other traders with the broker. This rating category is subjective, and we accept that there is no way to objectively rank brokers based on public opinion. Hence, we don't assign 1-Star or 5-Star ratings to any particular broker in this category and it always pivots between 2 to 4 based on the credibility and the amount of good or bad reviews we came across.
How We Come Up with the Ranking of a Forex Broker
After assigning a 1 to a 5-star rating for each of the 12 factors, we assign a weighting to each factor based on its importance to Forex traders. For example, while public opinion about a Forex broker matters, it should not have equal weight in your decision-making process to consider that particular company compared to order execution or regulatory oversight. You can check how much weight we assign to which category in the following table:
| Factors | Assigned Weight in Percentage |
|---|---|
| Regulatory Oversight | 15% |
| Security of Client's Funds / Segregated accounts | 10% |
| Business Model of the Broker | 5% |
| Transaction Costs and Fees | 15% |
| Ease of Deposit and Withdrawals | 5% |
| Trading Platform | 10% |
| Order Execution | 5% |
| Customer Support | 10% |
| Leverage and Margin | 5% |
| Initial Deposit Amount | 5% |
| Type of Assets Offered | 10% |
| Public Opinion | 5% |
| Total | 100% |
Based on the weighting of each category, we calculate the average rating of a Forex broker. In the example below, we have outlined how we assign ratings and calculate the final score for each broker.
| Factors | Assigned Weight in Percentage | Rating | Weighted Rating |
|---|---|---|---|
| Regulatory Oversight | 15% | 5.0 | 5x0.15 = 0.75 |
| Security of Client's Funds / Segregated accounts | 10% | 2.0 | 2x0.10 = 0.02 |
| Business Model of the Broker | 5% | 4.0 | 4x.05 = 0.2 |
| Transaction Costs and Fees | 15% | 3.0 | 3x0.15 = 0.45 |
| Ease of Deposit and Withdrawals | 5% | 5.0 | 5x0.05 = 0.25 |
| Trading Platform | 10% | 5.0 | 5x0.10 = 0.5 |
| Order Execution | 5% | 4.0 | 4x0.05 = 0.2 |
| Customer Support | 10% | 5.0 | 5x0.10 = 0.5 |
| Leverage and Margin | 5% | 3.0 | 3x0.05 = 0.15 |
| Initial Deposit Amount | 5% | 5.0 | 5x0.05 = 0.25 |
| Type of Assets Offered | 10% | 4.0 | 4x0.10 = 0.4 |
| Public Opinion | 5% | 5.0 | 5x0.05 = 0.25 |
| Total | 100% | 4.14 | 3.92 |
Once we have our weighted average rating for a Forex broker, we can easily rank it by comparing the rating with other brokers that we have reviewed and listed. As you can see, if we simply averaged every factor's rating, the broker would have ended up receiving 4.14 rating. However, with our weighted formula, it received only a 3.92 rating.
