Low Spread Forex Brokers

Start your forex trading journey right with these regulated low-cost forex brokers. Read on.

In forex, the lower the spread, the easier it will be for you to profit.

In this article, find out which regulated forex brokers offer the lowest spread and commission in the United States.

6 Low Spread Forex Brokers

Brokers offer different types of pricing. The most common is the spread-only account, which only charges you the spread one time per trade.

On the other hand, some brokers offer ultra-tight spreads + low commissions. Read on to know your options.

Interactive Brokers for High-Net-Worth Individuals (HNWI)

Interactive Brokers (IBKR) is the only forex broker in the US with a spread that is very similar or sometimes lower than the industry average. It offers over 100 currency pairs.

It charges commission on top of the spread for transparency, but it's very small at 0.08 to 0.20 basis points or 0.0008% to 0.0020% of trade size.^[2] The minimum per order is $2 for Tier I. To give you an idea, a USD 50,000 for EUR trade will cost you a $2 minimum commission.

You can trade forex as currency conversion or leveraged forex at Interactive Brokers. IBKR US clients can execute spot forex, but there is an additional requirement for leveraged forex.

For you to trade leveraged forex, you must be an Eligible Contract Participant, or ECP. An ECP is an individual or organization with assets of over USD 10 MM (or USD 5 MM if trades are hedging).^[3]

OANDA for Beginners

OANDA offers competitive average spreads and only has a minimum deposit of $0, so it's very accessible for forex beginners.

It's a platform that specializes in FX and is a popular choice among retail forex traders, so it's a great place to start trading forex.

The spread for its major pairs is pretty decent compared to other US forex brokers for beginners. However, you might see higher costs for minor pairs. It currently offers 68 currency pairs.^[5]

OANDA offers two pricing models: spread-only or Elite Trader. Spread-only means the commission is automatically added to the raw spread, so you pay one time per trade.

Elite Trader is the premium account and requires a minimum of $10 million trading volume. As a benefit, you get cash rebates, a dedicated relationship manager, and VIP extras.^[6]

FOREX.com for Accessible Raw Spreads

Forex.com is one of the few brokers that lets retail traders access a spread + commission pricing model. It supports over 80 currency pairs.^[8]

It has two types of accounts: standard accounts and RAW pricing accounts. The RAW pricing account is the one with the spread + commission pricing model.

The table above represents the FOREX.com spread for a spread-only account, but the spreads in RAW pricing accounts can go as low as 0.0 pips for major pairs.

However, the commission for the RAW pricing account is $5 per side for every $100,000 traded. A round-trip trade will cost you $10.

It also has an Active Trader program for those with a minimum $10,000 balance or $50M monthly trading volume.^[9] This program offers perks such as cash rebates, wire transfer reimbursement, and a dedicated relationship manager.

Schwab (thinkorswim) for Best Support

Schwab's thinkorswim (TOS) is not specialized in forex, but they have decent spreads. Plus, it has one of the best and most reliable customer support since it is an established financial firm.

Its spread is sometimes even lower than OANDA and Forex.com, as shown in this price snapshot during the US session on April 4, 2024. In these 7 major pairs, no pair went over 2 pips during a normal US session.

TOS offering lower spreads compared to its competitors was also a topic shared online in communities between forex traders.

However, the charting in TOS is not really ideal for forex trading since it's more focused on stocks.

tastyfx for Low Minimum Spreads

The average spread in tastyfx is almost the same as other competitors. However, it has the lowest minimum spread, starting at 0.8 for pairs like EUR/USD and USD/JPY. It has over 80 forex pairs.^[11]

tastyfx does not charge any commission, as the broker's fees are already included in the spread. There is no raw spread + commission account type.

However, it does offer a premium client service for traders with a monthly volume of $50 million.^[12] You can get up to 15% in cash rebates, newsletters with high-level forex analysis, and reimbursement on certain fees.

Trading.com for Simple Trading

Trading.com only offers 1 type of forex account, which is the T1. This account type has low average spreads, no commissions, and a minimum deposit of $50.^[14]

While you would see a low spread for major pairs like EUR/USD, some may cost a little more, like the NZD/USD. Nonetheless, you can see its real-time spread here if you want to look for certain pairs.

Its trading platform is accessible via the web; no download is required. Its interface is easy to use, with a 24/5 customer support team ready to assist you.

What Is a Spread and How Is It Calculated?

The spread works similarly with markup. It's a type of fee that you pay every time you buy or sell a currency.

To get the spread in forex, you need to subtract the ask from the bid of the quoted price. Here are two examples:

Currency Pair: EUR/USD

Bid Price: 1.08674
Ask Price: 1.08687
Spread: 0.00013 (1.3 pips)

For most pairs, 1 pip is equal to 0.0001. But for the pairs of Japanese Yen, it's 0.01 for 1 pip. So don't get confused when calculating the spread of major pairs like USD/JPY.

Currency Pair: USD/JPY

Bid Price: 151.647
Ask Price: 151.659
Spread: 0.012 (1.2 pips)

This spread is now the cost of every trade. So when you open a new EUR/USD trade, for example, you're already at a loss with 1.3 pips and need just as much to break even.

What Are Low-Spread Forex Brokers?

The low-spread forex brokers in this list are basically US-regulated forex brokers that offer low fees per trade. By default, forex brokers offer spread-only accounts with no added commission. However, traders can also opt for a zero-spread (with commission) account for greater fee transparency.

Having a low spread is crucial to make sure that you are earning more than what you're paying in fees per trade. Once you place a buy or sell trade, you're automatically at a loss because of the spread. Therefore, you want to limit that guaranteed loss as much as possible through low-spread forex brokers.

Many factors affect spread, including the market time, economic events, and the type of currency. Based on experience, the times when the spread is the highest are:

• during the first few minutes after the market opens daily
  
• when you trade currencies that are considered exotic (e.g., THB or SGD)
  
• during the release of high-impact economic news like the Consumer Price Index (CPI)

Which Spread Is Right for Forex?

The right spread in forex is the spread that will help you maximize your profits based on your chosen trading strategy in the forex market. In trading, there's no one-size-fits-all strategy and spread; it all depends on your trading style, trading platform, psychology, and financial capacity.

Swing and position traders just need a decent rate for spread. It doesn't have to be too low, but it shouldn't be too expensive either. This is because these traders execute trades with large take-profit and stop-loss levels, so the cost of the spread can be easily recovered.

However, day traders or scalpers need the lowest spread possible. These types of traders execute multiple quick trades within the day, and they usually exit once a trade profits even with just a small price move. For them to remain profitable in the long run, they need the most competitive pricing.

Is Low Spread Good for Forex?

Yes, having a low spread is good for forex. You're at a loss when you open a new forex trade because of the spread. The lower the spread, the better the break-even price.

However, a low spread is not necessarily a deal-breaker for some trading strategies. Scalpers and day traders would need a low spread as much as possible. However, swing traders will not typically mind this as they capture big movements over a long period of time.

How to Choose the Best Low Spread Forex Broker

Here are some factors that you can consider to select the best low spread forex broker for you:

• Cost
  Compare the spread of each broker to the industry standard, as seen in this article. Also, some brokers let you view the real-time spreads on their websites. However, for others, you'd need to access the platform first.

• Type of Account
  All the forex brokers in this list offer spread-only accounts by default. If you want zero-spread accounts, you'd need to go with brokers that offer them, such as Oanda's Core Pricing or FOREX.com's RAW Pricing.

• Regulation
  All brokers on the list are properly regulated in the US. If you are considering a broker outside of this list, make sure that they are properly regulated in the US. They should be registered as a Retail Foreign Exchange Dealer with the Commodity Futures Trading Commission (CFTC) and be a member of the National Futures Association (NFA).

• Ease of Application
  Some brokers have a strict application process for forex trading, while others don't. For example, some brokers require that you have solid investing or trading experience and enough financial capacity.

• Platform Features
  Do you need specific tools in your trading platform? Low spreads are important, but they shouldn't compromise the features you need when you trade. There should be a balance between the spread and forex broker's functionality.

• Execution Speed
  Another important factor is the execution speed of each broker. During highly volatile moments, execution is crucial, especially if you often place market orders.

Methodology

We only included forex brokers regulated in the United States to protect your money from scams. While some offshore platforms accept US clients, they pose risks and could be shut down by the SEC.

Certain forex pairs naturally have higher spreads than others. Therefore, we've included the industry average to give you more information for decision-making.

The spread data was gathered from the average spreads published by each platform on their respective websites.

Since Schwab and IBKR do not publish their average spreads, we captured a snapshot of their spreads during a normal, non-high volume, news-free period within the US session.

Bottom Line

Interactive Brokers has the most transparent and lowest spread but requires significant trading volume.

New forex traders might find platforms like OANDA, Forex.com, tastyfx, and Trading.com helpful more.

Nonetheless, spread is just one factor in being a profitable forex trader. You need to master a trading edge and your risk management to further increase your chances of profitability.

References