3 factors that represent the quality of Forex brokers
There are many factors that you should consider when choosing a Forex broker but in this article we are going to focus on three that are of upmost importance when trying to work out the quality of their service.
Quick execution is crucial to any trader especially if they focus on lower time frames. Try and picture how fast the 1 min chart moves up and down when important news and data are released. Believe it or not some traders trade in this manner so it is essential that their orders are filled straight away at the price that is quoted by the Forex broker. Any delays will simply mean that their profit is lowered every second that they wait. One second can be a large amount as currency pairs can spike or drop over 100 pips within a second, depending on the importance or surprise of the news/data release. If the execution is not instant then we should be asking a lot of questions. The most logical answer is that your Forex broker is making money out of you through slippage. This is not an honest Forex broker. They should only make their money out of the spread or the commission they charge you for creating orders. Anything else can be viewed as cheating.
No dealing desk
You must ensure that your Forex broker does not have a dealing desk. If they have one, chances are that your trades could be placed into the ‘B’ book rather than the ‘A’ book. Traders that are left to trade in real market conditions (who are usually successful) are placed in the ‘A’ book and those that are not so successful are placed into the ‘B’ book. If you open a brand new Forex broker account, you may be put into the ‘B’ book simply because you are new. Then, you may need to prove yourself as a successful trader in order to be put into the ‘A’ book in order to trade in a fair environment. Why should you have to prove yourself? This is not fair.
Your trades should not be sectioned into brackets and your trading personality should not be concluded through a Forex broker account. You should be trading in real and un-manipulated market conditions from the start through to the closing of your account. Trading is not a privilege you need to work for, it is a business model. By automatically scanning your trades dealing desk Forex brokers know everything about it – your stop loss, profit target and your historical success rate. This is how they decide in which book to put you i.e. in the one where you will make them the most money.
It’s your money
Some dealing desk Forex brokers even go as far as banning a certain type of trader such as a scalper. They claim that their business model or trading platform does not allow people to scalp as it is an un-ethical way of trading. The truth is that all types of trading are ethical, as long as they don’t involve cheating practices such as having inside knowledge on a news/data release. If you don’t know this, then you should be good to go and if your Forex broker approaches you and bans you because of the way you trade, it is because you are good and you are costing them money. This is not a good company to partner up with.
In reality, this is your money and you should have the pleasure of deciding what to do with it at any time. You should be able to open and exit the trades whenever you want, even if it is losing you money. Your Forex broker should have nothing to do with your trading. All they should focus on is providing a good platform and market conditions that will not cheat their customers.
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