How Do We Evaluate Online Brokers?

In the dynamic realm of forex, our aim is to assist traders in selecting a reliable online forex broker. We do this by providing data-driven, impartial ratings of forex brokers and detailed guidance on the forex market.

Our proprietary testing methods and algorithms are consistently refined. We also verify and audit data for our reviews, trading guides, and articles to ensure our users receive the most current and accurate information. As the forex industry evolves, so do we. Our objectives and charter as a Certified B Corporation are entirely reliant on the trust you place in us and the credibility we’ve earned from traders and the industry.

Broker Assessments and Testing Methodologies

Broker evaluations are based on collected quantitative data, qualitative observations, and accurate conclusions drawn by professional researchers.

The evaluation process for the trader test begins with a comprehensive examination and assessment of the broker’s offerings. We delve into every aspect of the broker’s offerings that their customers might find appealing. This includes a thorough review of all websites operated by the broker, all content available across various media, and a rigorous trader personality test of the broker’s unique tools or software.

Once we’ve completed testing the broker’s products, services, and assets (and collected and validated thousands of data points), our experienced researchers and writers begin formulating opinion scores. These scores are used for aspects of broker reviews that cannot be quantified, such as the complexity of a new mobile trading platform designed for novice traders.

After completing our quantitative and qualitative assessment of a broker’s product offerings, we turn our attention to the broker’s regulatory status. This investigation helps us determine whether the broker can be trusted to safeguard your funds.

Testing Devices

Each trader test we conduct utilizes up-to-date hardware and the latest operating systems. We employ Windows 11 desktop computers and MacBook Pro laptops with macOS 12.5 for mobile trading. Additionally, we use Android OS 12-powered Samsung Galaxy S9+ and Galaxy S20 Ultra handsets for mobile testing.

802.11n wireless WiFi connections are utilized for all mobile device testing, with 4G connections used when WiFi is not available. The latest Google Chrome browser is used to test every website and web-based platform.

Trust Score

Determining whether you can trust a broker with your money is one of the most challenging yet crucial decisions you must make. Our team aids traders in making informed, intuitive decisions based on the level of trust between broker and trader. This simple concept led to the creation of our tool, the Trust Score.

We have collected comprehensive information on numerous brokers from various jurisdictions, countries, and regulatory frameworks. From our extensive research, we have categorized regulatory agencies into five groups (Tier 1, Tier 2, Tier 3, Tier 4, and Tier 5), with Tier 1 representing the strictest regulatory environment and Tier 5 representing regulatory jurisdictions that offer minimal protection for traders.

Our proprietary algorithm combines the information we have gathered on brokers with our in-depth examination of foreign regulators to create a unique Trust Score for each broker. A broker’s Trust Score can range from 1 to 99, with higher numbers indicating a better score.

Scoring Methodologies

Each broker’s forex trading assessment begins with a Yes/No evaluation based on over 100 distinct factors that contribute to our final evaluations and rankings.

Each “Yes” response linked to one of our variables earns points, while “No” responses receive no points. The number of points awarded for each “Yes” response varies based on the importance of the characteristic, as not all variables are graded equally. Some aspects are deemed more crucial than others.

The final “Yes/No” score, also known as the broker’s variable score, is calculated by dividing the total points earned from “Yes” responses by the total possible points that can be awarded.

Opinion Scoring

Opinion scores for each category are developed and assigned by our team of experienced researchers and writers. Opinion scores range from 1 to 10, with 1 being the lowest score (very poor) and 10 being the highest score (very good). Half points are used to allow for more nuanced scoring, such as “9.5”.

Our editorial team uses opinion scoring to illustrate significant differences that cannot be captured by a “Yes/No” response. Our broker evaluations reflect our efforts to incorporate a range of observations into our scoring systems, including both quantitative and qualitative analyses.

Final Scoring

The broker’s Variable Score and Opinion Score are individually weighted and combined to produce a Final Score, which is the ultimate percentage score for one of our scoring categories. Each category is weighted differently based on its complexity. This Final Score is then assigned a star rating.

Commissions & Fees Scoring

The scoring for our Commissions & Fees category is unique due to its inherent complexity. Initially, various trade placement possibilities are assessed, using the average spread published or observed for the EUR/USD pair as an example. Brokers are then assigned points based on how their typical spreads compare to others.

Subsequently, multiple scenarios are evaluated monthly for different investor types, considering any additional account fees and any active trader or VIP rates. The goal is to determine a comprehensive net cost per deal. Finally, a score for Commissions and Fees is derived from a thorough review of the collected data.

Testing Categories

A forex broker is assessed through a series of tests that involve over 110 distinct features and products. Our eight primary categories include: Commissions and Fees, Trust Score, Platforms and Tools, Offering of Investments, Research, Education, Mobile Trading, and Overall.

Customer Service

We have collaborated with various companies and organizations over the past decade, conducting customer experience research via phone testing from diverse locations throughout the US.

Each broker is assessed by these agents using one of ten unique scenario templates. To ensure impartiality and gather the highest quality data, each agent utilizes a single template for every online broker test.

Each trader test is evaluated based on three distinct categories:

  1. Time to engage in conversation.
  2. The ability of each broker test representative to competently and thoroughly address each inquiry.
  3. The overall Net Promoter Score for the support experience. The score for each test comprises three elements: response times (15%), representative evaluations (35%), and net promoter scores (50%).

The results of the interactive brokers test are computed, and their totals are used to determine a customer service rating. This final score is then used to generate a star rating.

Commissions & Fees

Initially, various stock trading, option trading, and margin rate situations are assessed. This includes the cost of placing a 500 share market order, the cost of placing a two-legged one-contract options spread, or the margin rate for a balance of $50,000. Brokers are assigned points based on their cost-effectiveness compared to their peers.

Next, several monthly pricing scenarios for different types of investors are evaluated. For example, the monthly cost to execute ten stock trades (500 shares each) and five option trades (10 contracts each), indicative of an active trader, or the monthly cost to execute one stock trade (500 shares each), reflecting a casual investor. Brokers are assigned points based on their cost-effectiveness compared to their peers.

The final step in the interactive brokers test involves tallying each forex trading test point to determine the final scenario score. The quality of Order Execution is then evaluated separately, using an Opinion methodology for scoring.

The scenario score and the Order Execution score are individually weighted and combined to determine the final percentage score for the category. While there is no single metric to assess order execution quality, the importance of execution quality remains significant, especially as brokers who do not charge for trades depend on payment for order flow (PFOF) as a revenue source.

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