There are so many forex brokers in the world and each of them always claimed they are the best, providing lightning-speed execution, fastest deposit/withdrawal, lowest commission and etc. Every trader will have to do their own research and due diligence before they sign up a new broker and we know it could be very confusing sometimes when you go through the review on the Internet. Today, we will discuss important trading condition criteria when you choose forex brokers to run our Expert Advisors (EA).
A reliable broker will ensure your money is in safe hands while the trading condition is another important criterion to select brokers. Putting reliability aside, good trading conditions will ensure you earn higher profits in the long run.
However, what are Trading Conditions? Devils are always in the detail.
In our terms, trading conditions are the following 3 factors.
- Spread
- Leverage
- Account Type
Spread
The “bid” is the price at which you can SELL the base currency.
The “ask” is the price at which you can BUY the base currency.
The difference between these two prices is known as the spread.
Also known as the “bid/ask spread“.
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Highlighted in yellow are the spread for EURUSD and AUDCAD. In this picture, the EURUSD spread is 9 points while AUDCAD is 25 points.
This spread is also how those brokers earn their income, especially for 0 commission accounts. Also, take note that spread is not a fixed amount, it will fluctuate up and down between a range. For example, our recommended broker – FBS, always fluctuates between 7-11 points for EURUSD. It also might spike to a very high amount( eg, 100 points) due to a news announcement or suddenly low liquidity in the market.
It is also very common that brokers to provide you cashback or rebate but they charge you higher on the spread. Hence, it is important to always observe the spread of the currency pairs that you are trading. To be frank, over these years, we observed some of our clients using a broker that charges them 30 points for EURUSD for a normal period (It is crazily high!). Hence, you must take note of this if you are not using our recommended broker like FBS or FPmarkets.
For using our EA for automated trading, a few points difference in the EURUSD could determine whether your trade will be able to close. In the long term, this will show a significant impact on your trading performance.
Leverage
The textbook definition of “leverage” is having the ability to control a large amount of money using none or very little of your own money and borrowing the rest.
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For example, you only need to have $1,000 in your account to control the $100,000 position, Your leverage, which is expressed in ratios, is now 1:100.
For our EA, we suggest using at least 1:500 leverage, and if your broker allows using higher leverage like 1:1000. You should use it as it will reduce your chance of hitting a margin call and stopping out.
Account Type
Different Brokers will always have their own naming for their account type. Based on our own experience, most brokers provide two account types – Standard and Raw.
A standard account mostly is 0 commission but a higher spread ( for EURUSD, the normal spread should be always around 6-14 points).
While the Raw account has a lower spread ( For EURUSD, around 4-10 points) but comes with a fixed commission ( around $5-7 per lot for EURUSD).
There are also some other brokers like FBS that provide more account-type options like Cents Account -> Each cent in that account become a dollar, allowing you to use a small amount of capital to test some new strategy or EA.
For account type, it is important to pick the right account type that suits your trading needs.
Conclusion
To give you the highest chance to be profitable and successful in forex trading using our EA, we suggest all our clients use our recommended brokers such as FBS and FPMarkets and use the account type that we recommend in our Apprentice Program. The reason is that we develop our EA based on the trading conditions in those brokers and account types. It will give you a higher chance to be profitable by having the same condition as us.
However, if you already have your own brokers and would like to stick with them, then the trading conditions such as spread, leverage, and account type are something that you should always be aware of and verify it.
Happy Trading!
