Best 5 Digit Forex Brokers

October 10, 2023

What is a 5-Digit Forex Broker

Prior to 2007, the system of forex price quotations using 5 digits or 5 decimals was virtually unknown. All forex quotes were 4-digit or 4-decimal priced quotes, meaning that prices would include 4-decimal points in the format 1.2345. However, over the last few years, we have seen a transition away from the 4-digit system to a 5-digit price quotation system.

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Almost all forex brokers now offer 5-decimal quotations, with the last decimal point in the quote representing a partial pip value, usually equivalent to one-tenth of a pip. Brokers presenting a 5-decimal point quotation system in pricing currency pairs are therefore referred to as 5-digit brokers or 5-decimal brokers, and pricing of currencies is done in this format 1.23456. Usually, the 5th digit is represented with a smaller font than the first 4 digits, to reflect the fractional nature of this digit.

5-digit brokers can therefore be defined as forex brokers that offer a 5-decimal or 5-digit price quotation system. The only currency pairs exempted from this rule are the Yen crosses, which have also undergone a transition from their traditional 2-decimal price quoting system to a 3-digit price quotation system.

Why a 5-Digit Forex Pricing System?

Forex trading really exploded in the 2000s and as brokers multiplied and began to reach regions of the world that were hitherto not engaged in forex trading, competition became fierce and brokers started to look for ways to attract and keep their clients, especially the high net-worth ones. One of the solutions that brokers devised was to create a more accurate and precise system of pricing forex products which would serve two purposes:

a) Reduce the cost of trading by lowering spreads.
b) Further decimalize prices so that traders could get more precise fills for entries and exits.

One of the benefits of using 5-digit brokers is that it allows those who trade large sizes to take advantage of the minute pricing differences created by the 5th decimal to make some money. Scalpers and those who use high-frequency trading algorithms are the entities that are best served with pricing from 5-digit brokers.