Unbiased Oanda Forex Broker Review

 

Overall Conclusion:

Oanda's spotless regulatory record, combined with high client profitability make Oanda among our most highly recommended forex brokers. Oanda scores fairly well on the key criteria for a forex broker, and includes some features that are uncommon or nonexistant among other forex brokers.

Unlike most other review sites, Forex Scam Alerts does not receive any financial compensation from Oanda.

Visit Oanda's website

 

Brief Background:

Oanda has been around since the start of the world wide web. It was founded in 1995 and has been providing forex trading services since 2001. It operates in many countries around the world. OAnda ofers online forex brokerage services for spot forex, as well as commodity CFDs, index & bond CFDs, and precious metals. This review was conducted on the Oanda service offering in the United States, but there are many aspects of its service offering which would be common across countries.

 

 Regulatory Considerations:

Regulated in the USA by the CFTC and NFARegulated in the UK by the Financial Conduct Authority (FCA) Regulated in Australia by ASICRegulated in Japan by the JFSARegulated in Singapore by the Monetary Authority of Singapore

Oanda has a spotless regulatory record. Oanda is one of the only forex brokers operating in the USA that has never been fined by the CFTC or NFA. Oanda is an NFA member under NFA ID 0325821. Oanda companies are also regulated by the following bodies: 

  • Financial Conduct Authority (FCA) in the United Kingdom under number 542574
  • Australian Securities & Investments Commission (ASIC) with AFSL license number 412981
  • Financial Futures Association of Japan (FFAJ) with subscription number 1571
  • Monetary Authority of Singapore (MAS) with CMS Licence No: CMS100122-4

 

 Counterparty Risk: 

Oanda maintains significant net capital reserves, well in excess of the regulatory requirements. When last checked for Nov 2014, Oanda had net capital reserves 200% higher than the regulations require. In the aftermath of the Swiss Franc shock in January 2015, Oanda reported that they were able to use their capital strength to absorb losses and even forgive the negative account balances of their clients that were affected by the event, where permitted by regulations.

 

 Broker Type:

Oanda uses the market maker business model. In theory this is detrimental to the client because it puts Oanda in a greater conflict of interest vs other business models like straight through processing. However, Oanda is required to report the profitability of its clients, and Oanda clients consistently score near the top of the list for profitability compared to other US forex brokers. As such, we cannot take fault with Oanda’s approach.

Note also that Oanda’s market maker model results in very fast order execution and high execution reliability. 

 

 Spreads:

Oanda spreads are all-in with no additional commissions charged. The spreads float based on market conditions, and can widen briefly during news events or at the end of trading sessions.

Oanda spreads score in the middle of the pack compared to the other forex brokers we have seen. For traders who scalp the 1 minute charts, this may not be good enough and a broker with tighter spreads would be more desirable. However, for traders who trade the 4 hour or daily charts, these spreads are likely adequate and other factors are more appropriate for choosing a broker.

Oanda is to be commended for publishing their historical spreads in the name of transparency, which most other brokers will not do. The following are some samples of their historical spreads:

Oanda Historical Forex Spreads EURUSD Nov 2014

Oanda Historical Forex Spreads USDJPY Nov 2014

 

 Accounts and Funding:

US clients of Oanda can open accounts and fund them via wire transfer, Paypal and checks. Oanda also used to allow funding by credit card, but this has subsequently been prohibited by the NFA. There are no deposit limits for qualified accounts. While Oanda will not charge a fee for incoming wire transfers, a customary charge may be made by the trader’s bank. Be aware that PayPal deposits are charged a 2.5% service fee by PayPal for deposits, so this option should only be used for the smallest deposits. There are no deposit fees for checks, but this method requires long processing times. It is regrettable that Oanda does not offer the low cost ACH funding option.

Withdrawal options are the same as deposit options. Customary services fees are charged by Oanda for outgoing wire transfers, but one free PayPal or check withdrawal is allowed per month.

Of great significance is that Oanda offers permanent free demo accounts. This is almost unheard of in the retail forex industry. It is of particular importance to new traders who need a lot of practice time before they can establish consistent profitability.

Of additional benefit for new traders is that accounts can be opened with as little as $1, and the minimum trade size is only $1. This allows the new trader to ramp up their trading slowly as their skill and confidence increases.

Finally, Oanda allows the opening of subaccounts in different currencies. A benefit of this is that it allows the trader to deposit funds in one currency, transfer them to a subaccount in a different currency, and withdraw funds in that different currency. This is a useful way to get very low cost currency exchange services if large quantities need to be converted.

 

 User Interface:

Oanda offers a choice of trading platforms for forex traders including:

  1. The popular and feature rich MetaTrader 4 platform.
  2. Oanda’s proprietary fxTrade platform. This platform is intuitive to use, allows for the addition of most popular chart indicators, and allows customizations of many parts of the interface. The screenshot below shows the typical default setup.
  3. Oanda’s fxTrade Mobile web app. This app is available for both Android and iOS operating systems. The web app has an intuitive interface, allows for key mobile customizations, and includes customizable price alerts to your device.
  4. User customized trading solution using Oanda’s Application Program Interfaces (APIs). This allows tech savvy traders to develop automated trading strategies using the programming language of their choice. The programs can connect directly to Oanda’s fxTrade servers to pull in relevant data and automatically execute trades. Oanda offers a choice of APIs to develop for.

Oanda's proprietary frxTrade platform screenshot

Oanda’s proprietary fxTrade platform screenshot

 

 Other:

Oanda has the following additional features:

  • Commitment to transparency. In addition to posting historical spreads as noted above, Oanda also publishes a public view of open orders and positions to help you gauge market sentiment. They also maintain an open and public forum which includes any complaints against Oanda which Oanda will respond to publicly.

Oanda Open Orders and Positions EURUSD Nov 2014

  • Maintains capital reserves far in excess of regulatory requirements. This decreases the chance that Oanda will run into financial difficulty that will compel them to dip into client accounts for relief, which has been done by other brokers in the past.

  • Interest is calculated second by second. This can be an advantage or a disadvantage depending on which pairs you are trading. It is well suited to opening long positions on exotic currency pairs. Note that interest is also earned on your entire account balance.

  • Over 90 currency pairs are available to trade

 

Broker reviewed: Oanda
Review date:
Rating out of 5: 4.5
Reviewed by: