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Trading forex is risky. Besides the general volatility of the market, scams and fraud are prevalent in the industry. Although the returns can be very attractive for successful trades, generally, there is no guarantee of profit and losses can surpass deposits.
There is a growing number of Canadians residents interested in tapping into the winnings of the $18.5 billion (USD) forex market in the country. However, the burning question is: who is the best broker they should start their currency trading journey with.
This article provides a list of the top 3 reputable brokers that are legally permitted to offer forex trading services in the country. However, before it delves into that, it emphasizes the importance of doing business with a broker who is locally regulated in Canada.
- 1 What Are The Advantages Of Using A Regulated Broker?
- 2 3 Best Forex Brokers in Canada
- 3 Pros
- 4 Cons
- 5 Pros
- 6 Cons
- 7 How to Minimize Loss and Boost Investment Returns in Forex Trading
- 8 How to Verify If a Broker Is Regulated By the IIROC
- 9 Conclusion
- 10 FAQs
What Are The Advantages Of Using A Regulated Broker?
The first step for any investor seeking to succeed and protect their funds in the market is to find a reputable broker to trade with. In Canada, the Investment Industry Regulatory Organization of Canada (IIROC) is responsible for regulating and supervising the activities of investment dealers in the country.
Brokers with this license are subjected to frequent reviews, audits, and evaluations. Any organization who goes against the rules are fined or would have their license revoked. If the broker goes bankrupt, clients can claim up to $1,000,000 of their trading funds through the Canadian Investor Protection Fund (CIPF).
For inexperienced/risk-averse Canadian forex traders, choosing a broker authorized by the IIROC is a wise way to avoid disreputable traders with poor practices. Next criteria in the search for the best broker is for a trader to consider what feature(s) are most important to them. For most brokers, the four most pressing factors besides brand trust include: fast and user-friendly platform; fair, competitive commissions; great research and educational resources, responsive customer service.
The customer support and trading software of all three FX brokers revealed in this article are in line with the best in the industry. However, in terms of overall low-pricing fee, research and educational content, social trading tools, they outrank their peers in the country (as well as each other).
Lastly, in some categories like low-commissions and research materials, we discovered brokers with better offers than the ones in the study. These ones did not make the list because they were not local regulated in Canada. That is, they did not have the IIROC regulation.
3 Best Forex Brokers in Canada
1. AvaTrade – Best Broker for Copy Trading
AvaTrade was founded in 2006 by two financial experts and web-commerce professionals, Negev Shekel Nosatzki Emanuel Kronitz. The platform not only offers forex but a wide variety of tradable assets. Canadian clients can trade in all the six major currency pairs (GBP/USD, USD/CAD, AUD/USD, USD/CHF, EUR/USD, USD/JPY) offered by the brokerage.
Currently, the firm has nine regulations across six continents – Australia, Japan, Canada, UAE, South Africa, The EU, and the British Virgin Islands. The four global tier-1 financial agencies – the IIROC in Canada, ASIC in Australia, FSCA in South Africa, the Central Bank of Ireland, and the FSA and FFAJ in Japan – makes it a safe and low-risk investor for Canadian forex traders.
The upside of these regulations is that it ensures the broker keeps clients’ funds in a segregated account. Therefore, if the company should become insolvent or go bankrupt, European-based customers can claim up to $1 million of their funds from the Investor Compensation fund.
While AvaTrade really stands out in many core areas, the broker leads the pack in having one of the best social trading tools. For instance, users will find on the website the ZuluTrade and DupliTrade copy trading software. With any of these two tools, a trader can easily duplicate the strategy of successful traders into their own portfolio in real-time. These apps are beneficial especially to inexperienced traders or people who do not have the time for active trading and prefer to generate passive income.
In terms of offering low-cost fees and commission for retail traders, AvaTrade lags behind those of industry leaders like Tickmill and Interactive Brokers. However, for its professional account holders in the European Union, the broker provides very generous discounts in commission cost. For educational materials and guide, traders will find a robust archive of training resources on all the three AvaTrade platforms – web, mobile, and desktop.
What makes this broker even more customer-friendly is the wide range of payment options. Users can fund their account or withdraw their money through bank wire transfer, credit/debit cards, or e-Wallets like PayPal, Neteller, and Skrill.
- User-friendly platform: AvaTrade offers a variety of trading platforms, including its own proprietary platform, AvaTradeGO, which is user-friendly and easy to navigate for both beginners and experienced traders.
- Wide range of tradable instruments: AvaTrade provides access to a large number of trading instruments, including Forex, commodities, indices, stocks, cryptocurrencies, and ETFs, allowing Canadian traders to diversify their investment portfolios.
- Copy trading capabilities: AvaTrade is an excellent choice for copy trading, as it supports social trading platforms like ZuluTrade and DupliTrade. This feature allows novice traders to learn from and copy the trades of experienced, successful traders, which can help them build a profitable trading strategy.
- Strong regulatory framework: AvaTrade is regulated by multiple international authorities, including the Central Bank of Ireland, Australian Securities and Investments Commission (ASIC), and the Financial Sector Conduct Authority (FSCA) in South Africa. While not directly regulated in Canada, the broker’s adherence to these international standards can provide Canadian traders with a sense of security.
- Comprehensive educational resources: AvaTrade offers extensive educational resources, including video tutorials, eBooks, and webinars, to help traders enhance their trading knowledge and skills.
- Competitive spreads and fees: AvaTrade is known for its competitive spreads and low trading fees, which can contribute to increased profitability for Canadian traders.
- No direct Canadian regulation: Although AvaTrade is regulated by multiple international authorities, it is not directly regulated by the Investment Industry Regulatory Organization of Canada (IIROC) or any Canadian provincial regulatory body. This may be a concern for some Canadian traders who prefer to work with brokers that have local oversight.
- Limited customer support options: AvaTrade’s customer support is available through phone, email, and live chat, but they do not offer 24/7 support. This can be inconvenient for Canadian traders who need assistance outside the broker’s regular support hours.
In conclusion, AvaTrade is a compelling choice for Canadian traders seeking a user-friendly platform with a wide range of tradable instruments and advanced features like copy trading. While it is not directly regulated in Canada, the broker’s strong international regulatory framework and commitment to competitive spreads and fees provide a sense of security for traders. However, Canadian traders should be aware of the lack of local oversight and limited customer support options when considering AvaTrade as their preferred Forex broker. Despite these drawbacks, the extensive educational resources and diverse trading opportunities make AvaTrade a strong contender for Canadian traders looking to enter the Forex market.
2. Interactive Brokers – Broker with the Tightest Spread & Overall Low Commission
In the past decade, it has become common for many brokers to advertise zero or extremely low spreads. However, the reality is that while a broker could truly offer zero or very minimal spreads, they may have higher-than-average spreads and commissions. For investors with small capital, this could make trading with the broker rather expensive and cut deeply into trading profits – a situation which the trader was trying to avoid.
For this research, we look beyond FX brokers offering zero spreads and instead consider those who have the best average spreads majority of the time. To this regard, Interactive Brokers emerge as the one with the most competitive spread for retail traders in Canada. Although, Tickmill (0.51 pips) and Roboforex (0.4 pips) have extremely low average spreads for EUR/USD standard account, unfortunately, there is a downside. The two brokers do not have the IIROC license which would allow them to operate legally in Canada and accept residents in the country.
Interactive Brokers charges on average 0.6 spread on EUR/USD standard account. Customers can deposit as many times as possible without paying any fee. On the contrary, users can only withdraw for free once a month. Subsequent withdrawals within the same month will attract a commission – an amount which will be determined by the payment system and the base currency of the user’s account.
Formerly, accounts that had less than $2,000 or generated less than $20 in commissions were charged a monthly inactivity fee of $20. Similarly, if a customer had higher than $2,000 in their account but traded less often, they would be charged a fee of $10 for that month. Presently, those rules have been eliminated which further cements the broker’s position as a genuine low-cost stock and FX platform.
Like AvaTrade, Interactive Brokers provide various options for traders to deposit and withdraw funds. However, the rule is a customer can only withdraw profit from a transaction using the same payment method they use to provide capital for that transaction.
In terms of regulation, the broker is heavily regulated by the Investment Industry Regulatory Organization of Canada (IIROC) and the Canadian Investor Protection Fund (CIPF). It further has 3 other top-tier licenses – the UK Financial Regulatory Authority (FCA), the US Securities and Exchange Commission (SEC), and The Australian Securities and Investments Commission (ASIC). The strict supervision of these regulatory agencies ensures the broker operations follow ethical financial rules. The IIROC license, in particular, ensure customers are compensated up to $1, 000,000 of their funds should the broker become insolvent.
- Tight spreads and low commissions: Interactive Brokers is renowned for its tight spreads and overall low commissions, making it an attractive option for Canadian traders who are looking for cost-effective trading solutions.
- Wide range of trading instruments: Interactive Brokers offers access to a vast array of trading instruments, including Forex, stocks, options, futures, and more, allowing Canadian traders to diversify their investment portfolios.
- Advanced trading platforms: Interactive Brokers provides powerful and customizable trading platforms, including Trader Workstation (TWS) and the user-friendly IBKR Mobile app, which cater to the needs of both beginners and experienced traders.
- Direct market access: Interactive Brokers offers direct market access (DMA), enabling traders to interact directly with liquidity providers and access better prices, faster execution, and increased transparency.
- Strong regulatory framework: Interactive Brokers is regulated by the Investment Industry Regulatory Organization of Canada (IIROC), providing Canadian traders with confidence in the broker’s adherence to local regulatory standards.
- Comprehensive research and analysis tools: Interactive Brokers offers a wide range of research and analysis tools to help traders make informed decisions, including market data, news, charting, and customizable alerts.
- Complex fee structure: Interactive Brokers’ fee structure can be complex, particularly for traders who are new to the platform. Understanding the various charges, such as inactivity fees and data fees, may require additional time and effort.
- Steeper learning curve: Interactive Brokers’ advanced trading platforms, particularly Trader Workstation (TWS), can be overwhelming for beginners due to their complexity and extensive features. New traders may require more time to become proficient with the platform.
In conclusion, Interactive Brokers stands out as a top choice for Canadian traders seeking tight spreads, low commissions, and access to a wide range of trading instruments. With its strong regulatory framework under IIROC and advanced trading platforms, the broker caters to both beginners and experienced traders. However, potential clients should be prepared for the complex fee structure and steeper learning curve associated with Interactive Brokers’ platform. Despite these challenges, the broker’s direct market access, research and analysis tools, and comprehensive offerings make it a strong contender for Canadian traders in the Forex market.
3. CMC Markets – Great for Beginners
CMC Markets was established in 1989 by Peter Cruddas and headquartered in its country of origin, the United Kingdom. The company is one of the leading retail foreign exchange and CFD brokerages on the international scene. It has the IIROC license which permits it to legally offer FX trading services to Canadian residents. The broker further has four other tier-1 regulations – ASIC (Australia), MAS (Singapore), FCA (UK), and FMA (New Zealand) which makes it a safe broker for investors.
Every one of the brokers on this list have varying features which makes them beginner-friendly. AvaTrade, for example, produces excellent in-house research and educational content in both article and video format. Notwithstanding, CMC Markets tops the list as it has some of the best currency trading tutorials among its peers. While AvaTrade research tools is definitely impressive, it cannot compete with what CMC Markets has to offer. The broker has more than a hundred articles that cover a broad range of topics for new and professional traders. There is also a diverse selection of training and research video content on their YouTube channel and website. The information provided spans everything from the basics to the latest technical analysis strategy and tools in the forex market.
Unlike AvaTrade which is creating less video-based training resources to users, CMC continues to produce superb video content (through its web-based Opto-CMC channel) for clients. CMC Markets has an excellent pricing for retail traders (average spread of 0.7 pips for EUR/USD). This spread may not beat those of Interactive Brokers, but it is remarkably tighter than those of other leading brokers.
CMC has a demo account for those who want get a feel of how the platform works. The company quotes over 158 currency pairs and they are available in the reverse. For instance, USD/CAD is available as CAD/USD. The leverage starts from 30:1 or 0.3% and caps at 52:1 for major forex pairs.
The broker supports the MetaTrader 4 software but does not have the MT5 option which has better security (2-step log-in) and more sophisticated tools. Customers can pay or withdraw from their account via any of the following means – credit/debit card, bank transfer, and PayPal. The minimum initial deposit is $0 and deposits are free except when funding an account through a credit or debit card. In that case, a transaction fee of 2% will be deducted from the user’s account.
Slightly similar scenario applies to withdrawals. Withdrawals are free when done through e-Wallets (Skrill, Neteller) and credit/debit cards like Visa and Maestro. However, withdrawals through international bank transfers attracts a fee of 15 EUR.
- User-friendly platform: CMC Markets offers a proprietary trading platform called Next Generation, which is intuitive and user-friendly, making it an excellent choice for beginners in the Forex market.
- Wide range of trading instruments: Canadian traders can access a vast array of trading instruments through CMC Markets, including Forex, stocks, indices, commodities, cryptocurrencies, and more, allowing for a diversified investment portfolio.
- Comprehensive educational resources: CMC Markets provides extensive educational materials, such as webinars, video tutorials, and market analysis, to help beginners develop their trading skills and knowledge.
- Competitive spreads and fees: CMC Markets is known for offering competitive spreads and low fees, which can contribute to increased profitability for Canadian traders.
- Strong regulatory framework: Although CMC Markets is not directly regulated by the Investment Industry Regulatory Organization of Canada (IIROC), it is regulated by top-tier authorities such as the UK’s Financial Conduct Authority (FCA) and the Australian Securities and Investments Commission (ASIC). This strong regulatory framework provides Canadian traders with confidence in the broker’s adherence to international standards.
- Advanced charting and analysis tools: CMC Markets offers advanced charting features and analysis tools, allowing traders to perform in-depth technical analysis and make more informed trading decisions.
- No direct Canadian regulation: CMC Markets is not directly regulated by IIROC or any Canadian provincial regulatory body, which may be a concern for some Canadian traders who prefer brokers with local oversight.
- Inactivity fee: CMC Markets charges an inactivity fee for accounts with no trading activity for an extended period (usually 12 months). This may be a drawback for traders who do not plan on trading frequently.
In conclusion, CMC Markets stands out as an excellent option for Canadian traders, especially beginners, due to its user-friendly platform, wide range of trading instruments, and comprehensive educational resources. While the broker is not directly regulated in Canada, its strong international regulatory framework offers a sense of security for traders. However, potential clients should consider the lack of local oversight and inactivity fees before committing to this broker. Overall, CMC Markets’ competitive spreads, advanced charting tools, and diverse trading opportunities make it a strong contender for Canadian traders looking to enter the Forex market.
How to Minimize Loss and Boost Investment Returns in Forex Trading
1. Use a Regulated Broker
The forex industry is more vulnerable to frauds and has less regulations due to its global and decentralized nature. This is one of the reasons why trading in currencies was ruled illegal or partially restricted in many countries in the past. Although the past few decades saw different governments making FX transactions legal within their jurisdiction, however, there are rules companies offering this service must follow. These rules are put in place to prevent money laundering as well as protect the investments of traders in the country.
So, the best decision any savvy Canadian forex investor can take to ensure the safety of their funds is to use a top-tier regulated broker. For additional protection, it is even better to use a company authorized by the country’s “home” regulator – the IIROC. As mentioned in previous sections, the IIROC has solid protection in place to ensure its broker members follow ethical trading rules and keep Canadian customers funds in segregated accounts.
2. Practice with a Demo Account
A demo account is essentially a practice account which allows new clients to test their trading skills, the platform’s tools using virtual funds. The importance of using this account before opening a live account cannot be overstated. When a trader is not yet familiar with a platform, there is increased risk of them clicking the wrong button or making multiple mistakes when entering orders.
As an example, instead of closing a losing position, a novice trader could easily add to that transaction. This is why even seasoned professionals will most times always use the demo account to acquaint themselves with the mechanics of how a new platform works.
3. Use Low Levels of Leverage
The possibility of making potentially great profits in a transaction can make it tempting to want to use high leverage in forex. However, considering the volatility and unpredictability of the market, it is best for a trader to use reasonable leverage appropriate to their comfort level. For instance, a leverage of 50:1 could significantly amplify the returns on a small investment.
On the downside, if the market experience an adverse move as little as 2%, it is sufficient to completely wipe out all the trader’s margin or equity. So, a safer risk management strategy would be to employ small leverages. The profit per trade may be small, but they could add up over time. On the other hand, if there is a downturn, a small leverage results in smaller losses and ensure the trader has at least enough to trade another day.
How to Verify If a Broker Is Regulated By the IIROC
In this internet era, it is quite easy verifying all the regulations a broker may claim to have. First off, look for the broker’s registration or license number. This is usually disclosed on the bottom of the broker’s homepage or their Company information page. Next is to go the regulator’s website to confirm the number and the regulatory status. For the IIROC, all brokers regulated by the agency are clearly listed on their company’s website under their respective categories – e.g. Retail, Discount Brokers, Institutional, Proprietary Trading, Corporate Finance and more.
Anyone planning on investing in forex in Canada need to consider several elements. For one, it is safer to open a trading account with a broker that is registered with the Investment Industry Regulatory Organization of Canada. The IIROC protects the interests of investors. They also require all brokers doing business on the Canadian stock exchanges to conform to certain strict rules and regulations.
For active traders or people who intend to follow this path, choosing a broker with lower transaction fees may be the best choice. Cost of transaction tends to add up considerably especially when the transaction volume is significant. In addition, the cheaper commissions they give to retail traders ensure bigger profits for customers over time However, there are disadvantages to using discount brokerages. The platforms offer lesser quality (or no) in-depth educational courses, research, proprietary trading tools, live trading room and personal consultations.
If market research is a top priority, looking for platforms with good research resources might prove invaluable. For all investors, any shortlisted platform should ideally have a reliable, easy-to-use trading software and an above-average customer service.
Using a regulated broker offers several advantages, including adherence to strict rules and regulations, protection of investor funds, and assurance of ethical trading practices. In Canada, the Investment Industry Regulatory Organization of Canada (IIROC) regulates forex brokers. A broker regulated by the IIROC is subject to frequent reviews, audits, and evaluations. Clients of these brokers can also claim up to $1,000,000 of their trading funds through the Canadian Investor Protection Fund (CIPF) in case the broker goes bankrupt.
To verify if a forex broker is regulated by the IIROC, first, find the broker’s registration or license number, usually located at the bottom of their homepage or on their company information page. Then, visit the IIROC website and search for the broker using the license number or the broker’s name to confirm their regulatory status.
When choosing the best forex broker in Canada, consider the following factors: regulatory status (preferably IIROC-regulated), fast and user-friendly trading platform, competitive commissions, quality research and educational resources, and responsive customer service.
To minimize loss and boost investment returns in forex trading, consider the following strategies:
a. Use a regulated broker.
b. Practice with a demo account to familiarize yourself with the trading platform and improve your skills.
c. Employ reasonable leverage appropriate to your risk tolerance, as high leverage can lead to significant losses.
Using discount brokerages may offer lower transaction fees, which can be advantageous for active traders. However, these platforms often provide lesser quality (or no) in-depth educational courses, research, proprietary trading tools, live trading rooms, and personal consultations. As a result, traders may need to seek these resources elsewhere if they prioritize such features.
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