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Forex Broker Ratings -Formula 5.0

Forex Ratings -The New Forex Rating Formula 5.0

“Ensuring the safety of trading funds by paying low transaction cost for receiving state-of-the-art technology”Introducing the Forex Rating Formula v.5.0 -the most advanced Rating Formula ever built

The Rating Formula Series is a concept of the financial analyst George M. Protonotarios and aims to revolutionize the ratings of all Brokerage Firms.

 

Content -The Problem with Online Ratings

Based on internet statistics, more than half (50%) of all user reviews/ratings are fake. This is happening as online corporations have a huge commercial incentive to hire outsiders in order to produce favorable reviews for them and unfavorable reviews for their competitors. Evidence comes from the fact that most of these user reviews/ratings receive extreme values (i.e. 10/10 or 0/10). The Rating Formula series comes as an alternative solution for this problem. The Rating Formula provides a stable, honest, and objective framework in order to rate any brokerage firm.

The Rating Formula consists a 4-factor rating model based on the four (4) major aspects of Trading: Safety, Competition, Trading Options, and Technology.

The Ultimate Mission for any Trader:

“Ensuring the safety of trading funds by paying low transaction cost for receiving state-of-the-art technology”

 

THE RATING FORMULA 5.0 EXPLAINED

There are four (4) rating factors incorporated in the Rating Formula. Each of these four factors includes sub-factors and adjustments, as explained later. The maximum score is always a 100% rating.

The Forex Rating Formula 5.0 in actionThese are the four (4) factors and their weight:

(A) Safety of Funds (Weight 28%)

(B) Cost of Trading (Weight 28%)

(C) Variety of Trading Options (Weight 28%)

(D) Technological Efficiency (Weight 16%)


 

 

THE 4-FACTOR RATING MODEL

This is a detailed analysis of the four (4) rating factors forming the new Rating Formula 5.0.

 

FACTOR-A: Safety of Funds, Weight 28.0%

In our modern world, financial firms tend to accept more risk than they can really afford to handle. This is happening as the management bonuses (management fees, stock options etc.) depend on the Earnings Performance and not on the Incorporated Risk. Historically speaking, financial companies tend to accept high levels of risk in order to generate high profits. Evidence comes from the financial crisis of 2007-2008.

Ensuring the safety of your funds when trading online is extremely important. Therefore, the rating Factor-(A) includes several mechanisms that can evaluate with accuracy the ability of a brokerage company to protect and to ensure its client funds. The maximum weight of Factor-A is 28.0%.

What is new on Rating Formula 5.0?

  • The Funds Safety weighs 28.0% (previously 26.0%)
  • There is an additional rating factor: ‘Client Compensation in Case of Insolvency’ which weighs 5.0%
  • Some of the rating scores has been reformed (regulator’s scores, etc.)

 

Here are all the rating sub-factors and their weight on the Factor-A.

A.  FUNDS SAFETY

MAX WEIGHT

28.0%

A.1  Regulation

Regulators:

  • FCA (UK) = 10.0%
  • FINMA (Swiss) = 10.0%
  • NFA (US) = 10.0%
  • CFTC (US) = 10.0%
  • BAFIN (GE) = 8.0%
  • ASIC (AU) = 8.0%
  • FSC (NZ) = 6.0%
  • CYSEC (Cyprus) = 6.0%
  • HCMC (GR) = 3.0%
  • FSB (SA) = 3.0%
  • FSC (BVI) = 1.0%
  • IFSC (Belize) = 1.0%

Addition:

  • Controlled by MiFID (EU) = +0.5% rating

10.0%

A.2 Client Compensation in Case of Insolvency

  • Covering 50,000 USD or more = 5.0%
  • Covering 20,000 USD or more = 4.0%
  • Covering 10,000 USD or more = 3.0%

5.0%

A.3  Headquarters

  • UK, USA, Germany, France, Canada, Switzerland = 5.0% rating
  • Australia, New Zealand  = 4.0% rating
  • Ireland, Spain, Italy, Cyprus = 3.0% rating
  • Greece, Malta, South Africa = 2.0% rating
  • Offshore Countries = 0%

5.0%

A.4  Years of Operation

  • 10+ Years of Operation = 5.0% rating
  • 5-10 Years of Operation = 4.0% rating
  • 2-5 Years of Operation = 2.0% rating
  • 0-2 Years of Operation = 0%

5.0%

A.5  Client Bank Account Segregation

  • Client bank account segregation =  2.5% rating
  • No client bank account segregation = 0.0%

2.5%

A.6  Web Ratings (Used for differentiating rating results)

  • ForexPeaceArmy Score = 0.50% rating

0.5%

A.7 (+)  ADJUSTMENTS 

  (+)

A.7.1 Company Size Factor

  • More than 1 million Trading Accounts = +1.0% rating
  • 500,000+ Trading Accounts = +0.5% rating
  • 250,000+ Trading Accounts = +0.25% rating

+1.00%

 

FACTOR-A EXPLANATION:

Here is an analysis of every subfactor:

A.1 Regulation, (Weight 10.00%)

-Calculation MethodAccumulation

Reliable regulation by a trusty government authority reduces the risk of any broker to misbehave. Regulators can impose high penalties, and even take back the license of any broker if necessary. Regulation is an important issue for all trading styles.

The Rating Formulas incorporate any new regulatory conditions. This is an example.

Example: During the past 12 months, CySEC (the Cypriot regulatory authority) withdraw the license of some Forex brokers that were misbehaving. In addition, CySEC imposed restrictions to some forms of Credit Bonuses in order to protect Forex traders. Based on these two facts, the weight of CySEC regulation receives more points in Rating Formula 5.0.

A.2 Client Compensation in Case of Insolvency, (Weight 5.00%)

-Calculation Method: Selection

Even the most sophisticated brokers expose to some forms of risks (business risk, liquidity risk, market risk, and systemic risk). Therefore, the ability of a broker to compensate its clients in case of insolvency is very important regarding the safety of trading funds. Here are some facts regarding compensation:

  • FCA (UK) -The compensation scheme (FSCS) in case of default covers up to 50,000 GBP
  • ICF (Cyprus) -The Investor Compensation Fund (ICF) covers up to 20,000 EUR
  • BaFIN (Germany) – The compensation scheme covers up to 20,000 EUR for investment and up to 100,000 EUR for cash deposits
  • FINMA (Swiss) - Since 2008, all foreign exchange dealers domiciled in Switzerland have been obliged to hold a banking license and that means that up to 100,000 CHF are fully covered
  • HCMC (Greece) = The investor compensation scheme covers up to 30,000 EUR
  • MFSA (Malta) –The investor compensation scheme covers up to 20,000 EUR
  • CBI (Ireland) –The investor compensation scheme covers up to 20,000 EUR
  • ASIC (Australia) - There is no coverage in case of bankruptcy
  • FSC (BVI) - There is no coverage in case of bankruptcy

A.3 Headquarters Base, (Weight 5.0%)

-Calculation Method: Selection

The country of headquarters determines the reliability of any corporate balance sheet. The Rating Formula rates favorably countries implementing strict policies regarding corporate entities, and especially as concerns the financial sector. Brokers domiciled in offshore countries will not receive any rating points.

A.4 Years of Operation, (Weight 5.0%) 

-Calculation Method: Selection

The long existence of a corporation in an industry highlights a successful business model and the proven ability to manage business risk over time. Based on empirical evidence, most of the fake financial firms operate in the market for less than 2 years. Brokers operate for less than 2 years will not receive any rating points. Brokers operate for more than 10 years will receive all rating points.

A.5 Segregated Client Bank Accounts, (Weight 2.50%) 

-Calculation Method: Selection

Bank account segregation is a process when customer’s funds held separate from the funds of a brokerage firm. The existence of client bank account segregation enforces the transparency of the accounting process and adds value in terms of funds safety.

A.6 Web Ratings, (Weight 0.50%)

-Calculation Method: Accumulation

Adding an external rating score works as a tool of differentiating the overall results of the Rating Formulas. The Rating Formula 5.0 incorporates ratings of the trustable ForexPeaceArmy:

  • ForexPeaceArmy.com

A.7 Adjustments

Adjustments are included in order to highlight the special capabilities of some brokers. Factor-A includes a single adjustment.

Note: The maximum weight of Factor-A remains always 28.0%.

A.7.1 Broker’s Size, (Weight +1.00%)

 -Calculation Method: Adjustment

Large companies tend to fall harder than smaller ones. Forex brokers maintaining a large client base get an additional rating of up to 1.0%.

  • Handling more than 1 million Trading Accounts = +1.0% rating
  • 500,000+ Trading Accounts = +0.5% rating
  • 250,000+ Trading Accounts = +0.25% rating 

 


 

FACTOR-B: Trading Cost, Weight 28.0%

The transaction cost when trading Forex, CFDs, Futures, and other Derivatives is an extremely important aspect for every trader. The Rating Formula focuses on the spread charged when trading EURUSD, GBPUSD, and USDJPY, but includes also trade commissions, overnight rates, funding fees, and inactive fees.

What is new on Rating Formula 5.0?

  • EURUSD rating weight is diminished to 7.0% from 8.0%, as the EURUSD volume share in the Forex market shrinks
  • The Rating Formula 5.0 rates a new factor ‘Overnight (Rollover) rates’
  • ‘Inactive Fees’ weight is reduced to 1.0%

B.  TRANSACTION COST

MAX WEIGHT

28.0%

B.1  EURUSD Spread

  • <0.3 pip = 7.0% rating
  • <0.4 pip = 6.5% rating
  • <0.5 pip = 6.0% rating
  • <0.6 pip = 5.5% rating
  • <0.7 pip = 5.0% rating
  • <0.8 pip = 4.5% rating
  • <1.0 pip = 4.0% rating
  • <1.25 pip = 3.5% rating
  • <1.50 pip = 3.0% rating
  • <1.75 pip = 2.5% rating
  • <2.00 pip = 2.0% rating
  • <2.25 pip = 1.5% rating
  • <2.50 pip = 1.0% rating
  • <2.75 pip = 0.5% rating

(+) Smart Filter: Check Below

7.0%

B.2  GBPUSD Spread

  • <0.85 pip = 4.5% rating
  • <1.00 pip = 4.0% rating
  • <1.25 pip = 3.5% rating
  • <1.50 pip = 3.0% rating
  • <1.75 pip = 2.5% rating
  • <2.00 pip = 2.0% rating
  • <2.25 pip = 1.5% rating
  • <2.50 pip = 1.0% rating
  • <3.00 pip = 0.5% rating

4.5%

B.3  USDJPY Spread

  • <0.85 pip = 4.5% rating
  • <1.00 pip = 4.0% rating
  • <1.25 pip = 3.5% rating
  • <1.50 pip = 3.0% rating
  • <1.75 pip = 2.5% rating
  • <2.00 pip = 2.0% rating
  • <2.25 pip = 1.5% rating
  • <2.50 pip = 1.0% rating
  • <3.00 pip = 0.5% rating

4.5%

B.4  Trading Commissions Charged (per round traded lot)

  • No Commissions = 7.0% rating
  • Commissions < $1.0 / lot = 6% rating
  • Commissions < $1.5 / lot = 5% rating
  • Commissions < $2.0 / lot = 4% rating
  • Commissions < $3.0 / lot = 3% rating
  • Commissions < $4.0 / lot = 2.0% rating
  • Commissions < $5.0 / lot = 1% rating
  • Commissions < $6.0 / lot = 0.5% rating
  • Higher Commissions = 0% rating

(+) Smart Filter: Check Below

7.0%

B.5 Overnight (Rollover) Rates

Based on the total overnight cost of a round EURUSD trade (worth 1 lot on each side):

  • Cost < $1.5 = 2.00% rating
  • Cost < $2.0 = 1.75% rating
  • Cost < $2.5 = 1.50% rating
  • Cost < $3.0 = 1.25% rating
  • Cost < $3.5 = 1.00% rating
  • Cost < $4.0 = 0.75% rating
  • Cost < $4.5 = 0.50% rating
  • Cost < $5.0 = 0.25% rating

2.0%

B.6 Withdrawal Commissions

  • No Funding Fees = 2% rating
  • One free withdrawal Per Month = 1% rating
  • No free withdrawal = 0%

2.0%

B.7  Maintenance / Inactive Fees

  • No Maintenance / Inactive Fees = 1% rating
  • Maintenance / Inactive Fees = 0%

1.0%

B.8 (+)  ADJUSTMENTS

  (+)

B.8.1  Execution Model

  • ECN / DMA Execution = +2.0 % rating
  • STP Execution = +1.5 % rating
  • Dealing Desk Execution = +0.0% rating

+2.00%

FACTOR-B EXPLANATION:

 B.1, B.2, B.3 Spread Charged on three Pairs: EURUSD, GPBUSD, and USDJPY (Weight 16.00%) 

-Calculation Method: Selection

EURUSD, GPBUSD, and USDJPY are the most traded pairs in the Forex market. Almost all Forex traders trade often at least one of them. If a Forex Broker charges expensive spreads on these three (3) pairs it is almost certain that it will charge expensive spreads on every other Forex pair.

(+) Smart Filter:

If the trading spread on EURUSD exceeds 4.0 pips then automatically the B.4 rating (which involves trade commission) receives zero (0) value. This is happening as a very high spread eliminates the advantage of not paying trading commissions.

B.4 Trading Commissions / Full traded lot, (Weight 7.00%) 

-Calculation Method: Selection

Forex Brokers charging low trading commissions achieve better rating scores. Note that the trading commissions are calculated on a full (round) traded lot basis.

(+) Smart Filter:

If the trading commissions exceed $25/full traded lot then B.1, B.2, and B.3 ratings receive zero (0) values. This is happening as extremely high trading commissions eliminate the advantage of paying tight or even zero spreads.

B.5 Overnight (Rollover) Charges (Weight 2.00%) 

Forex brokers charge an overnight (or swap or rollover) fee when a position is maintained open overnight. A forex swap reflects the interest rate differential between the two currencies involved in a Forex pair. According to whether the trade position is long, or short, the swap rate may be positive or negative.

The Rating Formula 5.0 includes a new factor ‘Overnight (Rollover) rates’.

Two virtual overnight trades are used:

(↑) $100,000 overnight long position on EURUSD

(↓) $100,000 overnight short position on EURUSD

Each broker’s rating score depends on the total cost (in USD) of maintaining these two positions overnight. The overnight cost of both positions combined will be always negative and therefore we can use the absolute value of the sum (||).

■ Absolute Value of the total overnight cost, where

■ Total overnight cost (in USD) = {overnight cost of a Long Position worth 1 lot + overnight cost of a Short Position worth 1 lot}

The overnight rates are very important for all swing and carry-traders.

B.6 Funding Fees / Commissions, (Weight 2.00%) 

-Calculation Method: Selection

Funding fees and commissions reduce the availability of trading funds. The Rating Formula rates unfavorably any commissions or fees charged on deposits or withdrawals (not including fees charged by third parties).

B.7 Maintenance / Inactive Fees, (Weight 1.00%)

-Calculation Method: Selection

Some Forex brokers may charge fees for inactive accounts. Usually, this is happening after 90 days of no trading activity. This means extra cost for traders. The Rating Formula 5.0 rates unfavorably brokers charging such fees.

B.8 Adjustments

Note: The maximum weight of Factor-B remains always 28.0%.

B.8.1 Execution Model, (Weight +2.00%) 

-Calculation Method: Adjustment

The execution model of every broker is crucial as it affects the cost and the speed of order execution. An ECN/STP broker (NDD) offers in general better trading conditions than a Dealing-Desk (DD) firm.

 


 

FACTOR-C: Trading Options, Weight 28.0%

The availability and the variety of trading options add value to every trading style. Factor-C includes every aspect needed by the average Forex trader.

What is new on Rating Formula 5.0?

  • The Factor C weighs 28.0% (previously 26.0%)
  • ‘Futures / CFDs on Futures’ is added as a rating factor (important as Futures and CFDs on Futures do not include overnight cost)
  • ‘Capital Leverage’ rating is reduced to 1% (as the use of high leverage adds very high risk)
  • ‘Minimum Stop-Order Levels’ is added as a rating factor (extremely important for intraday traders)
  • ‘Trading Promotions’ rating is diminished to 5% (previously 6%)
  • In addition, the credit bonus receives now 50% of all rating points while the cash bonus receives 100% of all rating points
  • Credit Bonus that can’t be used as margin on negative account balance receives 0% rating (because this type of bonus will add more risk without any actual benefit)

C.  TRADING OPTIONS AVAILABLE

MAX WEIGHT

28.0%

C.1  Forex Index

  • 45+ Forex Pairs = 8.0% rating
  • 40+ Forex Pairs = 7.0% rating
  • 35+ Forex Pairs = 6.0% rating
  • 30+ Forex Pairs = 5.0% rating
  • 25+ Forex Pairs = 4.0% rating
  • 20+ Forex Pairs = 3.0% rating
  • 15+ Forex Pairs = 2.0% rating
  • 10+ Forex Pairs = 1.0% rating
  • Less than 10 Pairs = 0%

8.0%

C.2CFD Assets

  • CFD Trading on MT4 = 2.5% rating
  • CFD Trading on WebTrader = 1.5% rating
  • No CFDs = 0.0%

2.5%

C.3 Futures Contracts (swap-free)

Futures Contracts or CFDs on Futures:

  • Yes = 1.5 % rating
  • No = 0.0%

1.5%

C.4 Demo/Practice Account

  • Yes = 2.0% rating
  • No = 0.0%

2.0%

C.5  Capital Leverage

  • Leverage > 100:1 = 1.0% rating
  • Leverage > 75:1 =0.75% rating
  • Leverage > 50:1 = 0.5% rating

1.0%

C.6  Promotions

{C.6.1 + C.6.2 | max = 5.0%}

5.0%

C.6.1 Welcome Bonus (%)

  • Welcome Bonus >50% = 5% rating
  • Welcome Bonus >40% = 4% rating
  • Welcome Bonus >30% = 3% rating
  • Welcome Bonus >20% = 2% rating
  • Welcome Bonus >10% = 1% rating

Notes:

(i) Cash (withdrawable) bonus receives 100% of the total rating points

(ii) Credit bonus receives 50% of the total rating points

(ii) Credit Bonus that can’t be used as margin on negative account balance receives 0% rating

Added above 

C.6.2  Trading Rebate (%)

Trading rebates as a percentage of the total trading cost (spreads + commissions):

  • Trading Rebate >30% Cost = 5% rating
  • Trading Rebate >25% Cost = 4% rating
  • Trading Rebate >20% Cost = 3% rating
  • Trading Rebate >15% Cost = 2% rating
  • Trading Rebate >10% Cost = 1% rating
  • Trading Rebate >5% Cost = 0.5% rating

 Added above 

C.7  Minimum Account Deposit

  • Min Account < $100 = 2.00% rating
  • Min Account < $250 = 1.50% rating
  • Min Account < $500 = 1.00% rating
  • Min Account < $1,000 = 0.50% rating

2.0%

C.8  Deposit Methods

  • For every available deposit method = 0.5%

max rating = 5 methods

2.5%

C.9  Withdrawal Methods

  • For every available withdrawal method = 0.5%

max rating = 5 methods

2.5%

C.10 Minimum Stop-Order Levels (in pips)

Minimum stop-order distance requirement:

  • 2 pips or less = 1% rating
  • 3 pips or less = 0.5% rating
  • 4 pips or less = 0.25% rating

1.0%

C.11 (+)  ADJUSTMENTS 

  (+)

C.11.1 Asset Index with more than 100 Forex Pairs

  • More than 100 Forex Pairs = +1.0% rating
  • No = 0%

+1.00%

C.11.2 Interest on Unused Funds

  • Interest on Funds = +0.50% rating
  • No = 0.0%

+0.50%

C.11.3  Contests / Championships

  • Available Contests = +0.25% rating
  • No = 0%

+0.25%

FACTOR-C EXPLANATION:

C.1 Number of Currency Pairs, (Weight 8.00%) 

-Calculation Method: Selection

The greater the number of currencies contained in an asset index the higher the potential for Forex traders to exploit trade opportunities.

C.2 CFD Trading, (Weight 2.50%) 

-Calculation Method: Selection

The availability of CFD trading may cover extended trading needs. The Rating Formula 5.0 rates favorably CFD trading on MT4 than CFD trading on a simple web-trader.

C.3 Futures Contracts or CFDs on Futures, (Weight 1.50%) 

-Calculation Method: Selection

The availability of Futures or CFDs on Futures is very useful for all traders. Note that these types of trading instruments do not involve any overnight cost and that makes them ideal for swing traders.

-Futures Contracts or CFDs on Futures

C.4 Demo / Practice Account, (Weight 2.00%) 

-Calculation Method: Selection

The existence of a Demo / Practice Account can help traders to get familiar with a Forex broker before risking their funds and before devoting their precious time. It is useful for all traders no matter their level of experience.

C.5 Capital Leverage, (Weight 1.00%) 

-Calculation Method: Selection

The use of Capital Leverage adds flexibility to trading strategies. On the other hand, Capital Leverage adds more risk and more transaction cost. Therefore, the rating weight of Capital Leverage is limited to 1.0%.

C.6 Promotions (Welcome Bonus / Rebates), (Weight 5.00%) 

-Calculation Method: Selection

The C.6 rating accumulates C.6.1 and C.6.2 by maintaining a 5% maximum weight.

C.6.1 Welcome Bonus

A high welcome bonus/rebate adds more funds for traders. Note that the version 5.0 of the Rating Formula treats differently a Credit Bonus and a Cash Bonus.

-Cash Bonuses receive 100% of the rating points

-Credit Bonuses receive 50% of the rating points

Explanation: Traders can use a Credit Bonus only as margin. On the other hand, traders can withdraw a Cash Bonus. Therefore, a Cash Bonus is a better option for traders.

NOTE: If a broker offers a credit bonus that can’t be used as margin on negative account balance, then the rating score is zero (=0%)

C.6.2 Trading Rebates

A rebate plan is a cash-back process based on volume activity. Traders receive a cashback for every position they open and close.

The Rating Formula 5.0 calculates the cashback value of a trading rebate as a percentage of the total trading cost (spreads + commissions).

C.7 Minimum Deposit, (Weight 2.00%) 

-Calculation Method: Selection

The lower the minimum deposit requirement the easier for a trader to test the real trading conditions of a Forex broker.

C.8 Number of Deposit Methods, (Weight 2.50%) 

-Calculation Method: Accumulation

Traders who are able to fund their new account via their custom fund method can save precious time. The more fund methods are available, the better for traders.

C.9 Number of Withdrawal Methods, (Weight 2.50%) 

-Calculation Method: Accumulation

Most Forex brokers allow traders to withdraw their funds using the same method as when they deposited funds. Nevertheless, some brokers offer less withdrawal than deposit methods. This explains why C.9 forms a separate rating factor.

C.10 Minimum Stop-Order Levels (Weight 1.00%)

The minimum stop-order distance requirement is very important for many Forex trading styles, including scalpers, intraday-traders, and news-traders. Forex brokers allowing tight stop-order levels receive better ratings.

C.11 Adjustments

Note: The maximum weight of Factor-C remains always 28.0%.

C.11.1 Providing 100+ Currency pairs (Weight +1.00%)

-Calculation Method: Adjustment

Forex brokers offering more than 100 Forex pairs achieve better ratings.

C.11.2 Interest on Deposited Funds, (Weight +0.50%)

-Calculation Method: Adjustment

Forex brokers offering interest on unused funds achieve better ratings.

C.11.3 Trading Contests / Championships, (Weight +0.25%)

-Calculation Method: Adjustment

A trading contest can prove a free educational tool for beginners. On the other hand, advanced and professional traders can even make some money by trading in a contest, without risk. Forex brokers offering free contest achieve better ratings.

 


          

FACTOR-D: Technological Efficiency, Weight 16.0%

The use of cutting-edge technology is a key aspect when trading online. Efficient technology makes trading faster and more reliable.

What is new on Rating Formula 5.0?

  • The weight of Factor-C is limited to 16.0%
  • ‘Trading Platforms Availability’ is limited to 3.0%
  • ‘Trading-on-Charts’ is added
  • ‘Slippage on Order Execution’ is limited to 1.0% rating (as it gets difficult to calculate slippage with accuracy)
  • Mobile rating focuses more on iOs and Android apps
  • ‘Free VPS’ is added as a rating adjustment

D.  TECHNOLOGY

MAX WEIGHT

16.0%

D.1  Trading Platforms Availability

  • For every Trading Platform = 1.0% rating

max = Three (3) platforms

3.0%

D2. Trading-on-Charts

  • Trading-on-Charts = 1% rating
  • No = 0%

1.0%

D.3  Slippage on Order Execution

Slippage on Order Execution (in pips):

  • < 1.00 pip = 1.00% rating
  • < 1.25 pip = 0.75% rating
  • < 1.50 pip = 0.50% rating
  • < 1.75 pip = 0.25% rating

1.0%

D.4  Automated Trading (EAs)

  • Automated Trading is Allowed = 2.0% rating
  • No = 0%

2.0%

D.5  MT4 Platform

  • MT4 is Provided = 2.0% rating
  • No = 0%

2.0%

D.6  Mobile Traders Availability

  • iOs app = 1.0% rating
  • Android app = 1.0% rating
  • Windows Mobile = 0.5% rating

Max score is 2.0%

2.0%

D.7  Scalping / Hedging Allowance

  • Yes to both = 1.0% rating
  • Only Hedging or Scalping = 0.5% rating
  • No to both = 0%

1.0%

D.8  Customer Support

  • 24/7 Customer support = 1.0% rating
  • 24/6 Customer support = 0.5% rating
  • 24/5 Customer support = 0%
  • email support = 1.0% rating
  • Phone support = 1.0% rating
  • Live Chat = 1.0% rating
  • Forum support = 1.0% rating
  • Skype support = 1.0% rating
  • Call-Back = 0.5% rating

Max score is 4.0%

4.0%

D.9 (+)  ADJUSTMENTS 

 (+)

D.9.1  PAMM / MAM Accounts

  • PAMM/MAM accounts = +0.5% rating
  • No = 0%

+0.5%

D.9.2 Free VPS

  • Free VPS service = +0.5%
  • No = 0%

+0.5%

D.9.3  Availability of API Trading

  • API trading = +0.5% rating
  • No API = 0%

+0.5%

FACTOR-D EXPLANATION:

D.1 Number of Trading Platforms, (3.00%)

-Calculation Method: Accumulation

A wide variety of trading platforms provides Forex traders with more options.

D.2 Trading-on-Charts, (1.00%)

-Calculation Method: Selection

The convenience of trading from a chart can prove very useful for all Forex traders. Trading-on-charts involves the placement of pending orders, stop levels, and take-profit levels.

D.3 Slippage on Order Execution, (Weight 1.00%) 

-Calculation Method: Selection

High slippage on order execution means more cost for Forex Traders, especially as concerns scalpers and news-traders.

D.4 Automated Trading, (Weight 2.00%) 

-Calculation Method: Selection

Automated trading and Expert Advisors (EAs) is a common practice for Forex Traders nowadays. All Forex brokers should allow it.

D.5 MetaTrader Availability, (Weight 2.00%)

-Calculation Method: Selection

MetaTrader-4 is the undisputed Forex industry’s standard. Most Forex traders are familiar with MetaTrader. In addition, many technical analysis tools (indicators, EAs, etc.) are designed exclusively for the MT4 platform.

D.6 Mobile Trading, (Weight 2.00%) 

-Calculation Method: Accumulation

Mobile trading is the future of trading. Forex brokers should provide specialized apps for all popular mobile platforms, and especially as concerns iOs and Android.

D.7 Scalping and Hedging, (Weight 1.00%)

-Calculation Method: Selection

Allowing Scalping and Hedging provides more flexibility. All Forex brokers should allow them.

D.8 Customer Service, (Weight 4.00%)

-Calculation Method: Accumulation

Online trading requires the existence of a reliable and a fast customer service. The Rating Formula rates the availability of customer service (24/7, 24/6, or 24/5) but also the variety of customer support methods (email, phone, live chat, skype, and forum).

D.9 Adjustments

Note: The maximum weight of Factor-D remains always 16.0%.

D.9.1 PAMM / MAM Accounts, (Weight 0.50%)

-Calculation Method: Adjustment

MAM (Multi-Account Manager) and PAMM (Percentage Allocation Management Module) are account types allowing fund managers to control multiple trade accounts from their own single account.

PAMM / MAMM accounts have become very popular nowadays. Therefore, the Rating Formula 5.0 rates brokers offering these account types favorably.

D.9.2 Free VPS, (Weight 0.50%)

-Calculation Method: Adjustment

A VPS (Virtual Private Server) is a service provided by Forex Brokers that allows traders to run their EAs (expert advisors) on a dedicated server that works 24/7 without interruptions, and without the need of the trader’s own computer.

If that service is free, then the Forex Broker achieves an additional (+0.5%) rating.

D.9.3 API Trading, (Weight 0.50%)

-Calculation Method: Adjustment

API (Application Programming Interface) refers to a software program that works as a bridge connecting two different trading frameworks. The API interface links easily traders using a trading platform with the liquidity providers of the broader currency market. A trading API indicates a Forex broker focusing more on state-of-the-art trading technology.


 

BROKER RATINGS BASED ON RATING FORMULA 5.0

 

Table: The first ratings using the Forex RatingFormula 5.0 (All rating pages are published on ForexExperts.net)

 Broker Overall Rating 1. Safety 2. Competition 3. Options 4. Technology Full Rating Page Websites
DUKASCOPY BANK 81.6% 99.5% 78.6% 65.2% 84.4% » Dukascopy Bank Rating Analysis » Dukascopy Bank
IC MARKETS 80.6% 70.9% 79.5% 80.4% 100.0% » ICMarkets Rating Analysis » IC Markets Website
HOTFOREX 79.4% 66.5% 71.4% 88.4% 100.0% » HotForex Rating Analysis » HotForex Website
XM 78.1% 74.4% 62.5% 90.2% 90.6% » XM Rating Analysis » XM Website
IRONFX 77.7% 73.8% 59.8% 86.6% 100.0% » IronFx Rating Analysis » IronFx Website
DUKASCOPY EUROPE 75.6% 67.4% 78.6% 75.9% 84.4% » Dukascopy EU Rating Analysis » Dukascopy Europe
AAAFX 72.5% 58.3% 61.4% 82.1% 100.0% » AAAFX Rating Analysis » AAAFX (US Traders)
ETX CAPITAL 72.2% 98.9% 42.9% 73.2% 75.0% » ETX Rating Analysis » ETX Website
HYMARKETS 72.1% 99.4% 42.9% 70.5% 78.1% » HYMarkets Rating Analysis » HYCM Website
FXGLOBE 70.9% 73.1% 52.5% 75.0% 92.2% » FxGlobe Rating Analysis » FxGlobe Website
FXCC 68.3% 84.9% 44.6% 57.1% 100.0% » FXCC Rating Analysis » FXCC Website
FBS 65.8% 27.0% 62.5% 88.4% 100.0% » FBS Rating Analysis » FBS Website
TALLINEX 64.9% 31.9% 69.6% 80.4% 87.5% » Tallinex Rating Analysis » Tallinex (US Traders)
GALLANT (GCMFX) 63.3% 27.9% 62.5% 78.6% 100.0% » GCMFX Rating Analysis » GCMFX Website
INSTAFOREX 62.7% 28.3% 38.4% 100.0% 100.0% » InstaForex Rating Analysis » InstaForex Website
eTORO 61.7% 79.3% 32.1% 73.2% 62.5% » eToro Rating Analysis » eToro Website

 


 

Six (6) Additional Categories of Rating Scores Produced by the Rating Formula 5.0

By adjusting some of the rating weights, the Formula 5.0 can focus on the special needs of certain categories of traders. Note that the Factor-A which measures the ‘Safety of Funds’ remains common and weights 28.0% for all trading styles. The credibility of a brokerage firm is equally important for all trading styles and all levels of trading experience.

The Forex Rating Formula 5.0 can produce a great number of additional rating scores. These alternative rating scores include: 

(i) Based on different trading styles:

  • Intraday-Traders

The focus is on execution model, spreads, commissions, slippage, stop-order distance, platforms, scalping, trading-on-charts, API, EAs, etc.

  • Swing Traders

The focus is on the Forex asset index, spreads, commissions, overnight rates, platforms, etc.

  • Carry-Traders

The focus is mainly on overnight rates, but also on the asset index, inactive fees, etc.

(ii) Based on the different levels of trading experience:

  • Forex Broker Ratings for Beginners

The focus is on the general trading conditions, practice account, minimum deposit requirements, deposit methods, welcome bonus, etc.

  • Forex Broker Ratings for Advanced Traders

The focus is on the broker’s execution model, spreads, commissions, Forex asset index, CFDs, overnight rates, rebates, platforms, etc.

  • Forex Broker Ratings for Professional Traders

The focus is on the execution model, spreads, commissions, stop-order distance, overnight rates, trading-on-charts, rebates, platforms, etc.


 

Final Thoughts

As the years pass, the series of Rating Formulas improves and becomes more sophisticated. The Rating Formula 5.0 incorporates more mechanisms and more advanced rating scores than ever.

In addition, the ability to focus on different trading styles makes the rating results more accurate and more specialized on different trading needs. The benefit for world traders is obvious.

As fake news, fake reviews, and fake information increase on the internet, the need for honest and objective rating frameworks will only grow stronger. The wider use of robotic internet systems, such as web-bots, will make the situation even worst.

Not far from today, search engines will use similar rating systems to evaluate online corporations, and based on their score, to sort them respectively in their search results.

 

 Forex Rating Brokers Formula 5.0

Concept and implementation by George M. Protonotarios, Financial Analyst –MSc in “International Banking & Finance”

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