I had a question from a follower today about two #FOREX brokers that I have had experience with over the years. The following is just my personal opinion/experience and thoughts, zero compensation have changed hands for the following blog post. (However if you wish to get my affiliate code from FXCM they do offer you and me a very small bonus depending on how much you deposit).

 

FXCM Vs Oanda                                              

These two brokers run a very different business models

Depending on your style of trading, you may choose either one based on the following.

Oanda is a Market Maker who makes their profit on the spread. (Their average EURUSD spread is around 1.3 pips) I.e. they are the buyers and seller at the top of the price stack. You buy from them and sell back to them.

FXCM on the other hand is a STP or strait through processing, who makes their profit on commissions charged on each trade. STP effectively means it goes straight through to their liquidity providers; they have recently changed their model to take a fixed mark up on the spread and a commission. (Average spread inc commission is around 0.7 on EURUSD).

This commission model was previously only open to private level clients and represents a significant saving on trading cost if you are a frequent trader and the ability to claim commission against your tax as it is transparently disclosed, ie you know what you paid.

 

OANDA

• They offer a stack of trading instruments on top of the FOREX pairs including US Treasuries, Metals, Sugar, Corn, Copper, Soybeans, Wheat and Major Indices.
• They allow you to trade the amount of units that you want, not being forced to trade in lots, minilots or microlots, this can be super important for risk management in smaller accounts.
• They offer MT4 and fxTrade, which is not a bad platform. However fxTrade's grids sometimes a bit of a mess hard to see at a glance all the details of the trade.
• As they offer MT4 you can monitor and have open as many charts as you want.
• They have recently upgrade a server (OANDA – GMT+2 Live.) to offer daily candles with NY session close, which is a big problem at least for me.
• Oanda from experience is not good during Major new events, platform seems to freeze even though charts are updating and spreads can really blow out on news.
• Don't try the NFP with Oanda.
• They did “forgive” traders who blew their accounts up in the recent Swiss nation bank fiasco (where the price fell 2000 pips then froze the markets for up to four hours) whether that is because they made a killing on the other side of the trade we will never know because they are not publicly traded, which presents a problem from a transparency point of view from my perspective.
• They are run by a board of directors http://www.oanda.com/corp/story/corporate-governance?srccont=rightnav  and regulated in many key countries http://www.oanda.com/corp/story/regulatory?srccont=rightnav 

 

FXCM

• FXCM offers all the tradable currency pairs (including some wild pairs HUF, Rouble and Yuan) plus and range of Metal and stock, future indices CFD’s
• They offer NY session close for daily bars.
• They offer MT4, NinjaTrader, Mirror trader and Tradestation II (standalone and web biased)
• They offer a mobile app (which is horrible and aimed at degenerates) and a tablet version (which used to work on mobile and be amazing for monitoring positions).
• Trading Station II is a good platform, quite intuitive, but it can suffer from data drag when trading on the 1min chart with more than one currency pair and can be subject to freezes.
• It is a great tool for chart analysis, Please note that I use Price Action so I don't need too many and complex indicators, support, resistance, but if I did they have a custom indicator website called codebase www.fxcodebase.com that you can request indicator be built, while these are mostly free, developers can be hired to code a strategy or indicator.
• There are plenty of other plug in companies that work with fxcm data and platforms such as http://www.seertrading.com/
• You can't trade the exact amounts of units that you want. The smaller piece of units is a microlot (1000 units).
• By default you can only monitor a maximum of 18 pairs at one time
• Price Freezes for about 2-3 min at the end of the New York Session as the match is completed.
• They have a good team of analysts that run webinars for traders.
• They are publicly traded, which means they can get access to the capital markets if they need it (as they did recently during the Swiss national bank fiasco) http://www.bloomberg.com/news/articles/2015-01-16/fxcm-gets-300-million-bailout-from-leucadia-after-swiss-shock-i5025dkx
• They are regulated http://www.fxcm.com/legal/forex-regulation/
• They have custodial accounts for traders with $150k plus to deposit.
• You are now fully liable for losses incurred with fxcm, they recently their negative balance policy, FXCM now offers customers protection for the first $50K of losses over a 24-hour period. Clients will be responsible for losses above that amount, no matter the market conditions.

To sum it up I prefer fxcm for capital security, low transparent cost and platform TSII  

Remember it comes to forex brokers or ANY brokers, there's no such thing as good and bad guys. They're all different shades of grey. Take the new brokerage firm Robinhood, they tout commission free trading, which is great but they sell their order on to HFT routs and make more from routing fees than they would trading commission anyway, so you see in finance there is no free lunch, you win on somethings and lose on others.