If you want to find the best forex brokers for trading news, you should look for them among the brokers with the lowest slippage, however, it’s not the only factor and you need to consider other conditions including the size of spreads and commissions in general.
Sometimes you get a lower slippage in a broker compared to another broker but the cost of trade (spread + commission) is still lower in the second broker, therefore, we need to see the whole picture, not just the low slippage subject.
We’ll get to that part but first, let’s see the reason behind receiving high or low slippage.
Low slippage comes from high liquidity. In other words, the more liquid broker the less and lowest slippage.
You can notice forex brokers with lower liquidity and as a result higher slippage on two specific occasions.
First, when there are lots of players, buyers and sellers, in the market but the balance of trading is tilted towards one side, either bears or bulls.
You’ll see that mostly on the most important or volatile news events when the price moves very fast because there are lots of orders simultaneously in one direction, so either you’re lucky or put your orders sooner than others, therefore, you get your favorite price or you’re late and receive slippage from your broker.
Second, when there aren’t enough buyers and sellers in the market so when you request a price, you won’t find that — for example, you ask 1.1215 but the nearest seller is willing to sell higher at 1.1217.
You can see such a condition for example at the end of the New York session and the beginning of the Sydney session.
The worst-case scenario is when there’s a volatile news event when the market doesn’t have liquidity. These kinds of news events are not among the regular ones such as NFP, FOMC, CPI, and etc.
There are more like an unscheduled event such as the one that happened recently, UK general election results (December 13, 2019), which happened at the end of the New York session that has the lowest volume of trading and of course the least liquid time of trading.
That resulted in abnormal slippage and widening spreads, something like 10 to 20 and in some forex brokers up to 50 to 60 times bigger than even the most important news mentioned above.
This extremely low liquid market is when we should avoid trading especially trading the news because we can get huge slippage and widening spreads.
If you trade on news events, you are kind of scalper so spending too much on spreads and commission is a killer to your strategy.
Anyway, in this study, we picked 20 forex brokers from 100+ brokers and tested them on some volatile news to see how their cost of trades change in such situations.
You can see the list of them along with a comparison table at the bottom of this article but before that, let’s see how we conducted the study.
For finding our brokers we use a third-party website called myfxbook. There are more than 10000 accounts from the clients of 100+ brokers so not only do we have a reliable range of data but also the data is unbiased and it’s not from the brokers’ websites.
First, we sorted out the brokers based on the best spreads and commission on EUR/USD. Then we picked the well-regulated ones.
The definition of well-regulated here means the brokers have to be regulated by top tier regulatory bodies and the minimum regulators are tier-2 ones such as SySEC. For knowing the importance level of brokers you can read this part.
We examined each broker for one month to acquire reliable data for the brokers’ spreads + Commission — more information here.
We also checked the reputation of the forex brokers throughout the net to see if there are critical situations or unsolved problems regarding any probable wrongdoings and eliminate some of them with shady activities.
After the above process and finding 20 brokers, we watched their performance on some of the most volatile news events such as CPI, FOMC, EBC, and Retail Sales to see how their spreads change on these occasions.
Since there’s no reliable source to obtain the slippage of the brokers, we use the widening spread factor, which has the closest relation to the slippage, as a gauge for that.
Finally, we chose two categories for the top 10 forex brokers for trading the news based on two different factors.
1-The percentage change of their spreads + commission which is the percentage change between average spreads + commission and maximum spreads + commission on EUR/USD when the news events come out to find the maximum widening spreads you get on those occasions.
For Example, the average spread + commission for EUR/USD in a broker is 0.8.
When an important news event comes out, the spread becomes widened and the maximum spread + commission that you get on this occasion is 1.8.
For finding the percentage change here we use this formula:
((max spread + commission on the news - average spread + commission) / average spread + commission ) * 100
And for our example it is:
((1.8 - 0.8) / 0.8) * 100 = 125%
So we have 125% change or widening spread and probably slippage at the worst (because it’s the maximum we get)
2- The MAX average spreads + commission of all news which is an average of the maximum spreads and commission of the 4 examined news events in total to find out an estimation of the maximum cost of trading on the volatile news events.
We use spread + commission in our calculation, rather than just spread, for the percentage change because brokers have different commission structures. Some have a lower commission but higher spreads to even things up and others are the opposite with a higher commission but lower spreads, so you don’t obtain correct results if you just use spread.
What we can infer from the results of the first category is that the less deviation from the average and consequently the lower percentage we see in a broker the more confident you can be about the spreads + commissions you receive from that broker on the news events so you can calculate and manage your risk better before entering a trade.
On the other hand, what we can expect from the brokers in the second category is better cost of trades in general but with wider fluctuations in spreads, so recognizing our risks or SLs (stop loss) is harder.
Now let’s see what we’ve found out and see the results.
Brokers with Low Slippage on FOMC News
The Federal Open Market Committee or FOMC is a committee in the US Federal Reserve that determines some monetary policy for the US economy such as interest rate.
It’s one of the most volatile news and a good metric to assess the liquidity of a broker or the favorable condition that the broker provides for its clients who trade the news.
We had measured the brokers’ average spreads + commission on EUR/USD so we watched the maximum spreads + commission of the brokers on the FOMC release to find the maximum percentage change which can give us an approximate estimation of the broker’s slippage on that news.
What it tells us is that the larger the difference between average spread and maximum spread on FOMC in a broker the higher percentage change and consequently the higher slippage — as we explained in the previous section (first category).
We also sort out the best brokers for trading FOMC based on the lowest spreads + commission you get (category 2 )
Since there are three brokers with the same max spread + commission, the number of the brokers is 12 in this category.
Brokers with Low Slippage on CPI News
Consumer Price Index (CPI) is an indicator of inflation that shows how much the consumer goods in the US are increased in a month.
It’s one of the news events that has a strong impact on the volatility of the US dollar and causes slippage and widening spread.
First, we compared the brokers based on the deviation of spreads + commission on CPI from the average of them (first category).
And second the cost of trades. These are the brokers that give you the lowest spreads + commission when the CPI is released (second category).
Brokers with Low Slippage on ECB News
European Central Bank (ECB) is another important news that affects currency pairs specifically the EUR ones. In the ECB meeting, EU monetary decisions such as interest rate are made so it can have a substantial impact on euro pairs.
The brokers that are picked according to the lowest slippage are:
And these are the brokers with the lowest spread and commission when trading this news:
Brokers with Low Slippage on Retail Sales News
The US retail sales which is released by the US Census Bureau is an important indicator demonstrating the amounts of goods sold throughout the United States.
It’s released for month over month (MoM) and year over year (YoY) and is one of the most volatile news events that can move the market quickly and generates slippage and widening spreads.
Just like the previous news events, we categorized the brokers based on two factors that can be useful indices when picking a broker for trading the news.
In the first category, there are brokers with the lowest percentage change from their average spread + commission which is a slippage indicator for us.
And we have the second category with the brokers that have the lowest maximum spreads + commission when retail sales news comes out.
Top 10 Low Slippage Forex Brokers for Trading the News
After we examined the forex brokers based on four important news events and found the top 10 for each of them, now it was time to find our final result which was the top 10 forex brokers for trading the news in total.
As you can see some brokers are in the top 10 for trading in one news event but they‘re replaced with others in other news events so we need to average the results of 4 news in order to find a review of the brokers’ performance on the news events in general.
Again, we did that for our two categories. The first category is the difference between an average of 4 news events’ max spread + commission and average spread + commission.
For example, the results for the 4 news events in a broker are:
Maximum spread + commission on EUR/USD for different news events: CPI: 1.6 pips, FOMC: 2 pips, ECB: 2.6 pips, Retail Sales: 1.8 pips.
Average spread + commission of the broker for EUR/USD: 1.18 pips
Average of 4 news events’ max spread + commission: (1.6 + 2 + 2.6 + 1.8)/4= 2 pips
Max slippage as percent= ((2 – 1.18) / 1.18)*100=~ 69%
We calculated the results for all the brokers for this category.
According to the study, these are the top 10 forex brokers with the lowest slippage for trading the news:
- FX Pro
- Go Markets
And the second category that includes the brokers with the lowest spreads + commission on the news events in general — an average of the maximum spreads and commission of the 4 important news events.
Compare Top 20 Forex Brokers for Trading News
On the following comparison table, you can sort out the brokers, by clicking on each headline, based on the percentage change of widening spread for each news event as well as a final result which is the average of all 4 news events.
This will tell you how wide the spreads of the brokers might become on those volatile occasions and of course what percentage of deviation you might see on the news events in general.
You can also adjust the table according to the maximum spreads + commission you might get on each news events in particular and on the news in general.
Information in General info includes scores on the regulation, execution speed, and spreads + commission of the brokers based on the study we’ve done. You can find more about the study here.
Average S+C is the average spread + commission of the brokers on EUR/USD. For more information about the process of acquiring them you can check this.
MAX CPI, FOMC, EBC, and RS (retail sales) are the maximum spreads + commission of the brokers for EUR/USD when those news events come out.
MAX Slippage for all the above news is the maximum change of spreads + commission you see on those occasions in relation to the brokers’ average spread + commission of EUR/USD
If you want to see the best brokers for trading the news in general, you can sort out the tables based on the last two headings: MAX all news and Max all news slippage (scroll right to see them)
|Brokers||general info||Average S+C||MAX CPI||MAX CPI Slippage||MAX ECB||MAX ECB Slippage||MAX FOMC||MAX FOMC Slippage||MAX RS||MAX RS Slippage||MAX all news||Max all news Slippage|
The Bottom Line
There are several factors for choosing a broker in general but some of them stand out when it comes to picking the best broker for trading the news such as low slippage, fast execution, and of course the spreads and commission of the broker in general.
I tried to cover slippage and max spreads + commission to some extent and you can find other aspects of the brokers such as execution scores on the information section of the above table.
If you only trade on the news events, you can choose from the brokers with lower percentage changes in their spreads. They have high liquidity so you get less slippage.
On the other hand, if you trade in different situations of the market, not just on news events, you should find a balance between low slippage and spreads + commission in general and pick the one that serves you well to some degree on all the occasions.
Slippage is when you receive a different price than you’ve requested. For example, you buy EUR/USD at 1.1171 but your position is executed at 1.1175 (negative slippage) or at 1.1170 (positive slippage).
The best times are either the market has low liquidity such as when the New York session ends or it’s highly volatile like when important news events are released. See the performance of brokers on some volatile news here.
You can use limit orders (buy and sell limits). That way your orders are filled either at the exact price you request or better which means positive slippage.
Low slippage, fast execution, and of course low spread and commission.