Business & Investment

How to choose a forex broker

Most traders usually focus most of their efforts on searching for a good system or EA to get the best return on their investment.

But what most traders are unaware of is that good brokers can have a significant impact on their expected return. And, as you can see in this article, spending time choosing a good broker can certainly pay off. Big time.

Since 2007, the number of Forex brokers available to retailers has exploded. Only a few have been available for four or five years, but now there are hundreds. We are content with the choices, but choosing the right broker can still be a daunting task.

When comparing brokers, traders tend to create a primary ranking based on the following criteria:

  • Spread
  • Fee
  • Broker types: dealing desk, straight-through processing, ECN, etc.
  • Regulation
  • customer service
  • Tick ​​speed

Not surprisingly, spreads are at the top of the list because they are a quick and easy way to compare brokers. However, before elaborating on how spreads and price feeds affect transaction results, we start by splitting the broker into two buckets (dealing desk / marketmaker broker and non-dealing desk broker). Let’s do it. Many troubles start from there.

Dealing Desk / Market Maker Broker

This type of brokerage is probably the first to hit the market. These brokerage firms trade in their own stocks (with little or no access to liquidity providers) and do “market making”. This usually means that they take the opposite of your transaction in their account.

Example: A “dealer” receives a long-long order from you, and when you accept your order, it may take a short position or match another order from another client who wants to short at that point (hence). , Their orderbooks are “balanced” and their exposure is reduced).

One of the dealer’s main tasks is to ensure that the broker maximizes profits and minimizes his exposure. To maximize profits and reduce exposure, dealers have access to numerous tools to manage their business and balance their purchase orders.

The screenshot above shows an example of how a dealer can actually “manipulate” an order. The dealer can choose to postpone the order, reject it, or issue a re-quote to offer a different price. Be aware of how they can raise prices and spread freely.

The business model for these types of brokers is simple. Maximize spread returns, delay orders, and process orders with different price requests (requotes) to get even higher odds. In addition, if the order book balance allows, they can start a stop hunt by moving the price up and down with fast spikes to trigger your stop.

Below is a screenshot of the Metatrader 4 Market Maker Handbook showing the citation tools.


As you can see, brokers (dealers) can adjust spreads on a global level for each pair and add spreads to the quote flow in the price feed. This is called “bid markup” and modifies the actual price feed to affect the EA’s results.

Can this be exacerbated?

Unfortunately it is. For example, take a look at the Virtual Dealer plugin developed by Metaquotes, the same developer who provided Metatrader 4, another tool at your disposal.

With this tool, Forex brokers can add more odds to you. They can manually or automatically delay execution, slip transactions, trigger stops and stopouts, and even-quietly and temporarily (!)-Adjust leverage to make margin calls. I will.

But don’t believe our words. See the screenshot below.



If you’re interested in reading more about this, the full PDF is Download from here..

So how do you know which game broker is playing?

Well, I have hope. Watch this video:

Members of seem to have developed a great tool called 4xSentinel to detect suspicious broker activity. I’m currently testing with a live account. If you would like to know more about this tool, please visit:

Non-trading desk broker

These brokers play different roles. They basically “pass orders” to liquidity providers. Non-Dealing Desk (NDD) brokers are often also referred to as straight-through processing (STP) or electronic communication network (ECN) brokers. Learn more about the differences and how they work. (Also shows major liquidity providers)

The business model of these brokers is relatively simple. You will be charged a commission for each order from a trader and may also be commissioned by a liquidity provider based on volume. Alternatively, they can “fill the spread” to make money.

The liquidity providers on which these brokers depend are usually large banks, and most NDD brokers are connected to interbank feeds via bridges, allowing all orders to be sent directly to the interbank network. I will.

Be more honest with traders because they don’t manage their purchase orders, so these brokers don’t have to manipulate orders or take the other side of our deal to make money There is a tendency. However, you can “impact” your transactions by marking up spreads and delaying orders. Also, if they do not have access to sufficient liquidity, your order may be filled with a worse price (slippage).

Understand that NDD brokers that advertise “no fees” want to avoid using the tools above as they earn money by filling spreads and affect their price feeds. Now, some of them claim to be making money from liquidity providers based on trading volume, so check with them first.

We feel that a true ECN broker that charges fees is the type of broker that has the least incentive to “ruin a transaction.”

Spread is a word

Comparing spreads of the currencies you trade most often is a good first way to create a short list of brokers.

The best sites with a comparison spread table are:

For two pairs of EA trading, you only need to accept a broker if it offers a spread of less than 2.0 pips on EURUSD and an average of less than 3.0 pips on AUDUSD.

Not only are you penalizing yourself by paying more, but at higher spreads something else works: changing the price feed. And while paying a little more spread may seem acceptable, changing the price feed can actually negatively impact far more trading results than you might think. For example, the EA may be coded to trigger a signal at the ask price or end a long trade at the ask. The larger the spread, the higher the risk of missing an entry signal or failing to close this transaction successfully.

Impact of Tick Speed ​​and Price Feed on Trading Results

Perhaps the most underrated feature when comparing brokers is price feeds. We all heard about it and already mentioned it several times in his article. But what is it and how does it affect the results?

As we saw above, some brokers have their own “own” price feeds (dealers with their own orderbooks), while others rely on price feeds from liquidity providers.

The concept behind the price feed is actually quite simple. It describes when and how bars are formed on the chart. For each tick that comes in, a new price is set and a new part of the bar is drawn. Every tick represents a transaction made, so the more ticks you receive from your broker, the more realistic your price feed will be. This means that brokers have access to a lot of liquidity, and prices probably accurately reflect current market conditions.

How do different price feeds affect our trading?

See the screenshot below.


Note: In both brokers, TP was a hit and all positions were closed with great total net profit. However, the first broker (left) took some time to reach the TP.

This is just one example of how a price feed that looks exactly like the eye can have a significant impact on results when trading.

How to choose a forex broker How to choose a forex broker

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