There are many articles on our blog that say that the determining factor of success is not the trading strategy but the trader himself. However, don’t forget that trading terms also affect trading results. Let me tell you what to pay attention to when choosing a broker.
Spread
If you are not yet familiar with this term, then spread is the difference between the buy and sell prices of a particular currency. For a Forex trader, it is also a commission charged by a broker for providing access to the world currency market.
Each broker sets its own spread level. However, it varies depending on the account type and trading instrument.
Since the spread is paid for each open trade, the tighter it is the lower your trading costs are. This is especially true for high-frequency traders that open 10 or even more positions every day. In this case, to make money they need to cover not only possible losing trades but also the paid spread.
When choosing a broker, give preference to a company that offers the tightest spread. This way, you will be trading larger volumes with lower commission.
Order Execution
There are two types of order execution in Forex:
- Instant
- Market
Market order execution is optimal for traders that value the very fact and the speed of entering a trade rather than the open price. This type of execution will open your trade regardless of the fact whether the market price has changed or not. The downside is that the price can jump sharply to a disadvantage for you.
Instant order execution works a little differently. Please note that the name of the method has nothing to do with the order processing speed. It should be called “accurate” execution since this is its main function. When orders are executed instantly, the broker opens your position at the price you specified or doesn’t open it at all.
Since the market situation is constantly changing, the price at which you set your order may change while the order is being executed. In this case, the broker may offer you to open a trade at a new price. This is called a requote. If you received such an offer, then the price has moved in a direction not favorable to you. However, you can refuse to open a trade at a new price and wait for a new opportunity to enter the trade.
Which method to choose? Before registering with a broker, make sure they have both execution ways. You may want to change your trading tactics at some point.
If you are a novice trader, prefer instant execution. Why:
- Basically, orders are executed at the price you want
- Requotes with high volatility are extremely small
- Fixed spread
These are two main trading terms to pay attention to when choosing a broker. If you haven’t yet decided on a broker, then be sure to consider FXCL. They have created the most favorable conditions for both beginners and experienced traders.