Best Stock Trading Forex Brokers for 2024

Who are Stock Forex Brokers?

These are forex brokers that offer Contracts for Difference (CFDs) on stocks of companies from around the world. Most stock forex brokers offer stocks that are listed on US exchanges with additions from other major stock indices from around the world, especially from the UK, Germany and Japan. You may ask: what is the difference between the stocks listed on the platforms of stock forex brokers and stocks that are listed on the platforms of conventional stock brokers? Here are some of them:

• What is traded as stocks on the platforms of stocks forex brokers are actually contracts that mirror the price movements of the underlying stock assets.
• No stocks are exchanged or owned by the trader when trading the shares listed on the platforms of stock forex brokers. In conventional stock exchanges, trades involve actual transfer of stocks from one trader to another.
• In terms of the dealing parties, trading stock CFDs involves the trader and the broker/dealer, with the dealer acting as the counterparty to the trader's positions. In conventional stock exchanges, the brokers do not usually act as counterparties. Rather, they serve to bring together the buyers and sellers of stocks.
• Stock CFDs are always traded using leverage, whereas conventional stocks are usually traded using cash only.

Contract Specifications for Trading Stocks on Forex Broker Platforms

Stock CFDs are offered by forex brokers all over the world. Therefore, you will see brokers in the UK, EU, Australia and offshore locations offering these assets. The only forex brokers who do not offer stocks as a result of regulatory restrictions are US forex brokers. CFD trading on the retail end of the market is prohibited by the CFTC, so you will not see stocks CFDs being offered for trading. The location of the forex broker will determine the contract specifications for the listed stocks.

A) Leverage

One major specification that will be affected is the leverage. In 2018, the European Securities and Markets Authority (ESMA) reduced the leverage limit for trading of all assets on UK and EU forex brokerages, and stocks CFDs were hit with a severe leverage restriction. Presently, CFDs on stocks can be traded with a maximum leverage of 1:5, which translates to a margin requirement of 20%. What this means is that if a trader buys 100 units of a stock CFD and this trade costs $2,000 to execute, the trader is expected to come up with a margin of $400 as collateral for the trade. However, some of the offshore brokers listed on our website offer various leverage amounts for stocks CFDs. If the trade example mentioned above was to be executed on one of these offshore platforms with a leverage of 1:100 (i.e. 1% margin), then the trader would only need $20 to execute a trade that costs $2000 to execute.

B) Spreads

When it comes to spreads, there are differences from one stock forex broker to another. Spreads on stocks CFDs, especially those of the big stocks, are usually higher than you would get in major currencies. Therefore, traders need to be aware of the cost implications of trading certain CFDs on stocks. Many traders trade stocks on an intraday basis. When day trading stocks CFDS, minute reductions in the spreads on these assets can translate into significant cost savings in the long run.

C) Exchanges Covered

On most stock forex broker platforms, the stock CFD assets usually featured are pooled from the US exchanges (Dow Jones, Nasdaq100 and S&P500). However, stocks from exchanges in Japan, China, UK and EuroStoxx may also be featured. As a rule, you would like to choose platforms that feature stocks that you are familiar with.

D) Trading Hours

Stock markets are not 24-hour markets. They are only open for a few hours a day, and these hours are the only times you can trade stock CFDs. The market hours for each national exchange are different and you need to consult the contract specifications page of your preferred broker to know what the trading times for your preferred stock CFDs are.

E) Minimum Tick Size and Lot Size

The minimum tick size will indicate by how many points the stock will move when there is a change in price by a single tick. It is also important to know the monetary value of a single tick move. Obviously, the contracts traded as stock CFDs are very different from what obtains in the forex market. In forex, a Standard Lot trade will cost $100,000 to setup and is expressed as a trade volume of 1.0. In stocks, a Standard Lot is equivalent to 100 units of a stock, which is actually the value of a full stock CFD contract. However, due to the wide variation in the pricing of the various listed stocks, the monetary cost of a full contract will differ from stock to stock. For instance, the cost of setting up 1 contract for Tesla will be different from the cost of setting up 1 contract for Alcoa. The only way you can get accustomed to these variations is when you practice trading stocks CFDs on demo accounts.

F) Rollover Fee

If you intend to hold a position on a stock CFD beyond the same trading day, you will incur a fee known as the rollover fee or the swap fee. Traders who hold Islamic accounts are exempted from paying this fee. Again, it must be pointed out that the rollover fee differs from one stock CFD to another. You would do well to get this information from any of the brokers in our list.

G) The Platforms

If you scan through the stock forex brokers on our list, you will realize that nearly all of them feature the MetaTrader 4 or MetaTrader 5 platforms. A few of the brokers also offer proprietary platforms. You need to study these platforms to understand how to make certain stock CFD assets available or unavailable for trading. There are also certain nuances to get a good grasp of; some of these include how orders are placed, how to set durations for pending orders (Good till Cancelled or Good till Day), or how trade sizes are displayed (lot sizes or number of units).

A number of stock forex brokers on our list also offer proprietary platforms which are different from the MT4. If you decide to work with some of these brokers, you should study these proprietary platforms to see how you can get the best out of their stock CFD trading features.