Determining which legit forex trading companies to invest with can be a very tedious task as a result of the numerous overwhelming options available. With numerous brokers claiming to be the best, people go to brokers review websites to see broker rankings and read reviews hoping they will find a suitable broker. But the choice becomes harder the more they read.
If you really want to invest in the forex market and you are looking for a reputable broker, we are sure you’ve already seen our detailed broker review page, and you’ve presumably read a lot of both negative and positive reviews about many of them.
If you check the forex forums where people discuss brokers, you will discover that people’s views range from “My broker is outstanding! I am trading with the company for years and didn’t encounter a single problem” to “All forex brokers are scams you’ll never get your money back!”.
The fact is that some of the self-proclaimed forex brokers out there are nothing more than shady companies or otherwise involved in dishonest or fraudulent practices that pretend to be serious brokers even without any license, once you deposit your money with these people, you’ll likely never get your money back. They make a horrible name for the forex industry, and after someone gets his savings stolen by such SCAM BROKERS, it is very likely he/she will make wide-ranging allegations that will wreck the reputation of the whole industry, even the legitimate forex brokers.
Which forex brokers are legitimate?
Technically speaking, a legitimate broker is one that has a license to provide trading services to its clients. Such broker must have gotten the license from a government institution that regulates companies in the financial market. Most brokers obtain their license in their home country and then register with the regulatory authorities in other countries where they have significant operations. A broker who is licensed in several countries will have a broader client base and will be able to give better conditions to its clientele at lower costs.
As for the unlicensed brokers, we do not claim all of them are involved in dishonest or fraudulent practices but recommend to take additional precautions and do additional research before dealing with brokers which don’t have license to operate in particular jurisdictions. While there can be some reliable brokers without a license, it must be understood that unlicensed forex brokers most likely will operate on market-maker based model and as such operate against the client.
Since this article is based on finding the best forex brokers for big accounts, it is essential to note that not all brokers are suited for people ready to invest more and trade big, and many of the regulated and licensed companies do not have sufficient functionality for traders willing to invest big capitals. Some brokers are not well equipped to handle high-volume traders and therefore make casual traders their priorities, and if you want to trade big, working with even the best forex brokers for small accounts may cause a lot of problems and awkward situations.
What is considered a large forex account?
There is no specific description for a “large account” but we would state that any account with 10,000 dollars or more should be deemed large because it allows the owner to place huge trades with the use of leverage. While several people in the industry will maintain that large accounts are those with millions or at least hundreds of thousands of dollars, the best deduction is that anybody who is serious about investing in forex should behave like a big investor even if he intends to invest just ten thousand. If you fund your trading account with more than ten thousand dollars, most brokers will classify you as a VIP client, so you will be able to take advantage of the best trading conditions if you surpass this amount.
When it comes to forex trading, what many people disregard is what happens with the trades they execute. Who is the counterparty here? Who takes the opposite stance of the trade? Just as in any other financial market, to execute a trade in the forex market you need a counterparty. In order to gain money, someone has to lose it. To purchase a currency someone has to sell it. So let’s see what really happens when you open a trade.
If your broker is a market maker, you will trade against your broker. Trades you place will never be executed anywhere except on the platform offered by your broker, which will stand as your liquidity provider. You purchase from your broker; you sell to your broker.
Imagine your broker as the foreign exchange shop you see in an airport where you exchange currencies. You exchange one currency for another at the prices chosen by them. They have a spread between the buy and sell price to guarantee they make a profit.
If you make a profit on any trade, your broker will credit your account with money, and if you lose, money will be deducted from your account. But the money you gain from a favorable trade come directly from your broker, while the money you lose is income for your broker. This often leads to a conflict of interest between trader and market maker brokers.
Just like bookmakers, market makers give you the possibility to bet against them on the growth of currency pairs. The truth is that a lot of forex traders end up losing their funds so that the market makers will profit out of them. The spread is also to the market maker’s benefit and gives it an edge on the trader, so after everything, the market maker will make the profit. It works for the market makers as it works for bookmakers when they accept betting on sporting competitions. While the bookies will suffer loses in some situations and some bettors are making money out of their hobby, in the long run, the business is very profitable.
Remember what we said earlier in this article that not all legitimate brokers are suited for big investors?
If a market maker is confronted with a trader that wins big on a regular basis, it will have to hedge the risks by using a liquidity provider to cover the trades. The dealing desk, however, will have problems in replicating the trades immediately, especially if the trader is scalping or during news trading. This may make the broker resort to “tricks” like poor execution, slippage, requotes, platform malfunctioning as well as stop-loss hunting. While legitimate market makers will not employ such corrupt tactics, they may still be bound not to allow scalping or to limit your activity during news time. Overall, the broker wants to make money, and if it is losing money with a customer, it must do something to reverse that.
Because of the way they work, market makers will usually promote themselves in a way that draws novice traders and is not attractive to professionals. Casual traders are the most profitable for market makers as they have a minimal rate of profitability. At the same time, if you’re a professional trader you should have no worries when dealing with licensed and regulated market maker brokers as they are effectively bound by regulatory constraints and will not resort to dishonest practices to disrupt trader’s experience.
Why ECN/STP is good for big deposits ?
Electronic Communication Network (ECN) is an electronic system that connects liquidity providers to brokers and traders in an exchange-like environment. A forex broker that processes all orders electronically directly to its liquidity providers without a dealing desk is called an ECN broker. The broker’s platform is linked directly to the liquidity providers (usually big banks like JP Morgan, City or Barclays) and the trades are executed against the liquidity provider giving the best quote. A good ECN broker uses multiple liquidity providers to have lower spreads for its clients since the platform will link the trader with the best quote possible on the platform. Such brokers are also known as Straight-Through Processing (STP) brokers since they process the trade straight to a third party rather than being market makers. They are also called “No Dealing Desk” brokers.
When using an STP broker, your ultimate counterparty will be one of the broker’s liquidity providers, which is a third party. This implies the broker will not make money from your losses, and it is therefore not having a conflict of interest with you.
By giving you direct access to the liquidity providers to which the broker is connected to, you trade directly against the liquidity providers offering the best quotes on behalf of the broker. If you make a profitable trade, the broker gets money from the liquidity providers, and when you make a loser trade, the liquidity providers get money from the broker. This implies that you win from the liquidity providers, and you lose to the liquidity providers, not to your broker.
So how does an STP broker make its money if it lets you trade directly against its liquidity providers? There are two ways the broker can achieve that:
1) The broker can add a “markup” to the spread shown on the platform. Let’s assume the broker adds a one pip markup. 2 pips will be shown on the platform if the liquidity provider has a spread of 1 pip. If the market moves 100 pips in your favor after you make a trade, you will win the value of 98 pips (100 minus the two pips spread) and your broker will earn one pip, which is the markup. The liquidity provider will lose 99 pips (100 minus its one pip spread).
On the other hand, when the market moves 100 pips against you, you will lose 102 pips, and your broker will still win one pip. The liquidity provider will gain 101 pips.
2) The broker may decide to let you trade directly on the liquidity providers’ spreads, and charge a commission for your trading. For instance, a broker can charge $10 for a trade lot which is equal to 1 pip on the EUR/USD pair. In such case, the broker makes its profit out of the commissions for letting you trade directly against the liquidity providers at very low spreads without any markup.
In both cases, the broker is not your ultimate counterparty, and it is not to any extent benefitting from your loss An ECN broker will invariably prefer for its traders to win, as it will guarantee you trade more volume and for a more extended period. The broker will be happy to have a winning trader, as it makes money only from the volumes you trade, effectively charging commissions on each trade you take. Since s STP broker offers a DMA (Direct Market Access) and profits from the traded volumes, not from your loses, it will always want you to win. This is why you are advised to create an account such broker if you plan to deposit large sums of money and trade high volumes.
How to find a reliable broker for big investment?
It is crucial to be aware that market makers constitute the majority of the propositions available on the market. As we have already mentioned in this article, it is absolutely OK to work with licensed and legitimate broker working on such basis but we would still advice to give priority to ECN/STP offerings when it comes to depositing amounts of 50,000$ and above. While the ECN type is profitable for the broker on both losing and winning traders, it also has additional costs and brings in less money from losing traders. The broker must run a robust network with high-speed internet connections and maintain a good rapport with various liquidity providers to be part of a genuine ECN with fast execution and low spreads. Also, the broker’s commission or markup is only a fraction of the total spread because the liquidity provider has its own spreads. If a trader loses all his money by paying spreads, a market maker be the beneficiary party. An STP broker, on the other hand, will win only a fraction of it, while the liquidity providers will win the remaining.
Putting the above into consideration, why most brokers choose to operate only as market makers and often hedge the trades of highly profitable traders is unsurprising. Also, the reason why micro and mini accounts are always provided in a market-making environment where the broker is your final counterparty is the costs connected with direct market access.
Luckily, the best brokerage companies are aware that there is also a very profitable market for people who trade very high volumes and can generate outstanding profits in an ECN/STP environment. Such traders are also pretty risky to trade against, so the ECN model is in the broker’s edge because it is risk-free. This is why many brokers are providing traders that decide to create the standard or VIP accounts with direct market access.
The DMA accounts will always have fractional pips (2.7 pips spread for instance) and will never use fixed spreads. Real market situations where liquidity providers compete to provide better spreads will always lead to variable spreads that will be lower when there is little volatility and will surge in time of high volatility like during news. The size of a single lot for the EUR/USD currency pair will always be 100,000.
In the following section, we will list some brokers which have great offering for large accounts
The best forex brokers for large accounts
In this section, we will present three broker accounts which are very reliable options for high rollers. We are trading with all of them, and are pleased with their service since we haven’t encountered any issues so far. It is worth to compare them all and choose for yourself which broker is a better option for you.
1) IC Markets True ECN Account
An Australian broker regulated by the ASIC (Australian Securities and Investment Commission), International Capital Markets Pty Ltd is probably one of the best ECN brokers in the world and the perfect broker for big traders who want real market access that comes with very low spreads.
IC Markets, being an Australian financial services company is a very safe broker able to manage substantial accounts. It gives real direct market access thanks to a myriad of Tier1 liquidity providers such as Nomura, BNP Paribas, HSBC, Goldman Sachs, JP Morgan, Citibank, UBS, RBS, and Commerzbank.
Here are some of the benefits of the IC Markets True ECN accounts:
- Pick between cTrader and Metatrader 4 trading platforms
- Very low spreads beginning from the interbank spread of 0.0 pips. This is because IC Markets charges a minimal commission for trading instead of adding ‘markup’ to the spreads the liquidity providers provide.
- Excellent execution and every trading tactic is allowed. You can use MQL4 robots and Scalping Expert Advisors if you want. IC Markets has no problem with scalping since all trades are processed directly to the liquidity providers.
Overall, IC Markets is a top-tier brokerage company based in a very reputable jurisdiction.
2) Hot Forex VIP Account
HF Markets (SV) Ltd, Hot Forex is another top-tier brokerage company that provides very beneficial ECN/STP accounts for big investors. The company is registered in St. Vincent and The Grenadines.
We recommend the VIP account for large investors even though Hot Forex offers many account types to cater to all type of investors. The VIP account is directly linked to their network of liquidity providers and lets you trade on the interbank market. It is worth noting that this company operates a different business for customers residing in the European Union under the company named HF Markets (Europe) Ltd licensed by Cysec. The European version of HotForex works only as a market maker and does not offer ECN accounts, but is a very trustworthy and reputable company and we see absolutely no reasons to abstain from opening a large account with European division of the company.
Here are what non-EU residents should expect from the Hot Forex VIP account:
- The minimum amount of deposit for the VIP account is 10,000 USD.
- HotForex provides real interbank spreads that can go as low as 0.2 pips (The company doesn’t add any markup to the spread as it charges a commission instead.)
- Forex pairs incur an $8 commission for one lot traded. This is equal to a 0.8 pips spread markup, so overall, the cost of trading is still pretty low.
- Leverage as high as 1:300 that can be set lower when the account size is above 400,000 dollars.
- Maximum trade size of 80 lots ($ 8 million) and concurrent open positions as high as 400.
- VIP support, personal account manager, and three free consultations with the company’s Chief Market Analyst, Janne Muta (appointment must be scheduled in advance)
The VIP account offers many other advantages, but you can find them on HotForex’s website: HOTFOREX.COM
3) XM Standard Account or Zero Account
The Standard Account offered by XM is one of the accounts we recommend most for traders who wish to make big deposits. This account provides all the perks needed by a big trader. Trading Point Holdings Ltd who goes with the trading name XM, is the leading financial services firm in Cyprus. Even though XM is not an ECN broker, it is still Europe’s best broker, and it is licensed by all the major European regulatory bodies such as FCA in the UK, Consob in Italy, CNMV in Spain, BaFin in Germany, and ACP in France. XM had over 500,000 customers worldwide in January 2016, making it one of the world’s largest forex brokers.
While some traders may find it surprising that we recommend a Market Maker and also a Cyprus-based broker for large accounts, the truth is that after trying many companies we have had very fortunate experience with XM. One thing that makes this company different from other Cyprus-based brokers is that it is based in Cyprus not because the regulation was softer or because it was cheaper. The reason why XM is based in Cyprus is that the people behind this company are Cypriots. Mr. Constantinos Cleanthous, the founder, and CEO of the company as well as the management are Cypriots, so it was just a reasonable decision to establish the company in their country.
If you never opened an account with XM, it is advisable you open one and give it a try because it is very likely you stick with them for most of your trading. XM is the broker that any trader must try.
XM offers three types of account; the Micro account for beginners, and two accounts for experienced traders: The Standard Account (with higher spreads but without commission) and the Zero Account (with very low spreads but with commission). It is difficult to say which one has lower costs, as both accounts are very competitive.
The XM Accounts stand out for various reasons. Here are some of the advantages for big investors:
- Client funds are secure as XM is working with one of the biggest banks in the United Kingdom Barclays Plc, an investment grade banking.
- Trade size of up to 50 Lots, which is equal to about 5 million USD per trade and simultaneously allowing a maximum open trades of 200. This implies you can trade large sums of money. An EUR/USD trade with the volume of 50 lots will yield a 500 USD value for just one pip.
- Tiered leverage: As high as 1:888 for accounts with a capital of 20,000 or less, 1:200 for accounts ranging from 20,000 to 100,000 and 1:100 for accounts above 100,000 USD.
- Low spreads of about one pip and no commissions for the Standard Account type, and very low spreads that can go as low as 0 for the Zero Account which charges a minimal commission.
- Good execution with no rejection of orders and requotes. XM asserts that it takes less than 1 second for it to execute 99.35% of all orders.
- Since you are trading directly against liquidity providers and not against your broker, all trading tactics are allowed. XM allows automated trading through EAs, as well as scalping.
- Free Virtual Private Server (VPS) for high net active customers. XM’s VPS is situated just 1.5 km from their data center in London and uses a high-speed internet connection. This will let your EAs take advantage of the fastest possible execution without having to bother about the speed of the internet connection. For high-frequency traders who use EAs, this is the best possible feature as they can trade in the best conditions possible round the clock without having to keep their computer powered.
There are lots of other reasons why XM is one of the best forex brokers, but you should check their website for more information regarding their trading requirements: XM.COM
Trading forex with a large account needs a qualified broker that connects you right with top-tier liquidity providers or in case of broker being the market maker it should have all the required licenses or in the process of receiving one. Any of the brokers discussed above meet this criterion and it is up to you to determine the one that you prefer most. We will continue expanding this list with more brokers as there are so many brokers in the world which provide great opportunity and trading functionality for those willing to invest big.