Brokers With Lowest Margin Rates

Brokers with lowest margin rates are highly sought after by traders with a large risk appetite and designs to make serious money from their investment accounts. Such brokers are also popular amongst cost-conscious retail investors, especially during periods of market volatility.

This guide delves into the world of low margin rate brokers, explaining the underlying concepts behind margin trading, and detailing the benefits for traders that open accounts with brokers offering the lowest margin rates.

Brokers With Lowest Margin Rates

These 5 brokers offer the lowest margin rates 2024:

Note, the rate listed below is the annualized mark-up/admin fee charged by brokers before the central bank underlying rate is applied. It is also worth bearing in mind that margin rates vary depending on the margin model used by brokers, the size of your account balance, and the product traded.

  1. Interactive Brokers - 1.55 - 2.59%
  2. ForexChief - 0.1%
  3. XM - 0.2%
  4. IQ Option - 0.2%
  5. FxPro - 0.5%

#1 - Interactive Brokers

Why We Chose Interactive Brokers

Interactive Brokers (IBKR) is a premier brokerage, providing access to 150 markets in 33 countries, along with a suite of comprehensive investment services. With over 40 years of experience, this Nasdaq-listed firm adheres to stringent regulations by the SEC, FCA, CIRO, and SFC, amongst others, and is one of the most trusted brokers for trading around the globe.

"Interactive Brokers is one of the best brokers for advanced day traders, providing powerful charting platforms, real-time data, and customizable layouts, notably through the new IBKR Desktop application. Its superb pricing and advanced order options also make it highly attractive for day traders, while its diverse range of equities is still among the best in the industry."

- DayTrading Review Team
  • Instruments: Stocks, Options, Futures, Forex, Funds, Bonds, ETFs, Mutual Funds, CFDs, Cryptocurrencies
  • Regulator: FCA, SEC, FINRA, CFTC, CBI, CIRO, SFC, MAS, MNB, FINMA
  • Platforms: Trader Workstation (TWS), IBKR Desktop, GlobalTrader, Mobile, Client Portal, AlgoTrader, OmniTrader, eSignal, TradingCentral
  • Minimum Deposit: $0
  • Minimum Trade: $100
  • Leverage: 1:50
  • Margin Rate: 1.55 - 2.59%

#2 - ForexChief

Why We Chose ForexChief

ForexChief is a foreign exchange and CFD broker, established in 2014. The company is based offshore and registered with the VFSC and FMA. Users can choose between a wide selection of accounts and base currencies, making ForexChief accessible to global traders. The brand also stands out for its no deposit bonus and fee rebates for high-volume traders.

"ForexChief continues to prove popular with investors looking to trade highly leveraged CFDs on the popular MetaTrader platforms. The broker's rebate scheme and investment accounts will particularly appeal to seasoned traders. However, the lack of top-tier regulatory oversight is a major drawback."

- DayTrading Review Team
  • Instruments: CFDs, Forex, Metals, Commodities, Stocks, Indices
  • Regulator: VFSC
  • Platforms: MT4, MT5
  • Minimum Deposit: $10
  • Minimum Trade: 0.01 Lots
  • Leverage: 1:1000
  • Margin Rate: 0.1%

#3 - XM

Why We Chose XM

XM is a globally recognized forex and CFD broker with 10+ million clients in 190+ countries. Since 2009, this trusted broker has been known for its low fees on 1000+ instruments. XM is regulated by multiple financial bodies, including the ASIC and CySEC.

"XM is one of the best forex and CFD brokers we have tested. The flexible account types will suit a variety of short-term trading styles while the $5 minimum deposit and smooth sign-up process make it easy to start trading."

- DayTrading Review Team
  • Instruments: Forex, Stock CFDs, Turbo Stocks, Indices, Commodities, Precious Metals, Energies, Shares, Crypto, Futures
  • Regulator: ASIC, CySEC, DFSA, FSC, FSCA
  • Platforms: MT4, MT5
  • Minimum Deposit: $5
  • Minimum Trade: 0.01 Lots
  • Margin Rate: 0.2%

#4 - IQ Option

Why We Chose IQ Option

IQ Option is a trusted broker with multi-asset trading on its user-friendly proprietary platform. The broker provides trading on forex, stocks, cryptos, indices, commodities and ETFs with competitive fees and a good suite of extra features and educational content. You can also open an account with just $10.

"IQ Option is a good broker for beginners with a slick platform and low minimum investment. New users can also open an account in three easy steps."

- DayTrading Review Team
  • Instruments: CFD, Forex, Crypto, Stocks, Digital Options
  • Platforms: Own
  • Minimum Deposit: $10
  • Minimum Trade: 0.001 Lots
  • Leverage: 1:500
  • Margin Rate: 0.2%

#5 - FxPro

Why We Chose FxPro

Founded in 2006, FxPro is an established forex, CFD and spread betting broker offering 2100+ assets to over 2 million clients worldwide. The broker is regulated in 4 jurisdictions and offers reliable 24/5 customer support, earning it a high trust and safety score. FxPro has also picked up more than 100 industry accolades for its competitive trading conditions, including fast execution and deep liquidity.

"FxPro is best for experienced traders looking for wide market access, premium research tools and advanced charting platforms. The competitive fees and fast execution will serve serious short-term traders, whilst the BnkPro investment service will appeal to those looking for long-term e-money solutions."

- DayTrading Review Team
  • Instruments: CFDs, Forex, Stocks, Indices, Commodities, Futures
  • Regulator: FCA, CySEC, FSCA, SCB, FSC
  • Platforms: FxPro Platform, MT4, MT5, cTrader, AutoChartist, TradingCentral, DupliTrade
  • Minimum Deposit: $100
  • Minimum Trade: 0.01 Lots
  • Leverage: 1:30 (Retail), 1:500 (Pro), 1:1000 (Via Prime Ash Capital Limited)
  • Margin Rate: 0.5%

What Is A Margin Trading Account?

A margin account is a powerful tool for investors that allows trades or investments to be made that are worth more capital than what is being put down.

Margin refers to the fraction of the full trading amount that the investor provides to open a position; a margin rate is a form of commission charged on the trade, often provided as a percentage. This is why margin traders look for brokers with the lowest margin rates. Most brokers will require a minimum invested account balance to access margin.

In traditional markets, the borrowed funds used to open a position are usually provided by an investment broker. However, in cryptocurrency trading, funds may be fronted by other traders who earn interest based on market demand for margin funds. In other cases, the cryptocurrency exchange itself may provide margin account funds to its customers.

More information on margin trading can be found here.

Margin Rate

With trading on margin being much like taking out a bank loan, traders must also pay a fee, or interest, on the loan. These are referred to as margin rates, and they vary between brokers and accounts.

Margin rates are often a few percent and are charged on the leveraged capital, not the margin fronted by the trader. Brokers with lowest margin rates offer particularly competitive account conditions.

Much like loan interest, the best scenario for an investor is the lowest broker margin rate, as this minimises the cost of the overall trade.

Depending on the margin account rate that the broker offers, you may also have to pay periodic interest payments in the same way you would pay interest on a bank loan.

Most brokerages will also offer their best margin rates for those traders with higher levels of investment capital in their accounts.

It is important to fully understand the fee structure of a broker’s margin investing options to optimise the use of margin and maximise profits.

Margin Example

Now let’s look at an example that shows the benefits of brokers with lowest margin rates. If a trader were to invest $25,000 cash into an unleveraged account for a period that produces a 10% yield, they would walk away with a profit of $2,500 and a new total capital of $27,500.

However, if they were to invest $25,000 and also take on a margin debt of $25,000, the total investment capital would be $50,000. For the same account yield of 10% and the same timeframe, an initial return of $5,000 would be produced. However, the margin cost must be determined from the margin rate and deducted from this value. For example, if the margin rate is 5%, then $1,250 (5% of $25,000) must be paid back to the broker, resulting in a net profit of $3,750 and a new capital of $28,750.

Consider now the same investment but with a lower margin rate of 1%. In this case, the margin cost would be $250 (1% of $25,000) and the net return would equal $4,750. Clearly then, maximum profit exposure is created by the broker with the lowest margin rate, as they take the least from the trade’s returns. In the example above, the 1% margin rate afforded the trader an extra $1,000 profit.

Margin Trading Online Calculator

Risks

While using margin trading accounts may seem a no-brainer, especially through online brokers with the lowest margin rates, it is deceptively dangerous. Consider again the above example, only this time the investment backfires and the portfolio yield is -10%. In an unleveraged scenario, the investor would lose $2,500 and walk away with $22,500. In the leveraged case with a 5% margin rate, the investor not only loses the $2,500 from their own investment and pays the same $1,250 margin cost, but they must also front the losses on the margin debt (another $2,500), totalling a net $6,250 loss.

Additionally, traders must be careful about using margin for small trades, as the returns from the investment need to be larger than the margin cost. If not, the margin cost would have to be paid by the trade profit and some of the investment capital, resulting in a net loss for the investor despite the trade being profitable at face value.

Pros Of Brokers With Lowest Margin Rates

The benefits of using brokerages with the lowest margin rates are:

Cons Of Brokers With Lowest Margin Rates

Opting for brokers with lowest margin rates can also be disadvantageous:

Final Word On Brokers With Lowest Margin Rates

Margin trading is an opportunity for investors to magnify their gains, though it can add complexities and risks not otherwise required. Thorough research should be carried out into the brokers offering the lowest margin rates, which should be combined with other considerations before selecting a broker to open an account with. If margin trading is for you, brokers offering low rates will facilitate larger profits for the same risk exposure.

FAQs

What Does It Mean To Trade On Margin?

Trading on margin entails borrowing money from a broker to carry out trades. Traders deposit cash that serves as collateral for the loan, then pay ongoing interest on the borrowed money. This loan allows investors to buy a larger quantity of securities which automatically serve as collateral for the loan.

What Are The Benefits Of Brokers With Lowest Margin Rates?

Margin accounts becomes advantageous when your rate of return is higher than the interest on the loan. Brokers offering the lowest margin rates will eat into your profits less.

Which Broker Has The Best Margin Rates?

Most traditional brokers have margin rates of around 8%. Interactive Brokers and M1 Finance offer competitive margin rates of around two or three percent, depending on the base currency and investment capital size.

Which Forex Brokers Have The Cheapest Margin Rates?

Interactive Brokers has an entire platform dedicated to forex trading that supports 23 different currencies. Its margin rates range from 0.5% on large loans for premium account holders to 9% for lite members.

Can You Negotiate Margin Account Rates?

Margin rates are not always fixed at those published on the broker websites. Given a large amount of capital often involved, brokers can sometimes be negotiated with the get better margin rates. If you are with an existing broker and want a lower margin rate, it may be worth contacting them first.