Broker to Trading

These are FCA regulated brokers offering online currency trading. But what criteria may be used to find a suitable currency trading broker ?

Is there such a thing as a best broker ?

It would probably be fairer to say that what is the more suitable broker for a trader, depends on a number of factors, such as the trading style of the trader and how experienced they are. Currency trading can be approached in a number of ways, some more more advanced, some less advanced, however what is advanced or not can depend on how it is used, as well as what it is. A trader may trade using a purely discretionary approach. This means that they make the trading decisions themselves. But the trader may explicitly or implicitly use rules to decide when to enter, when to exit, and to manage the trade.

When a human makes trading decisions they are prone to human errors, such as letting emotions intrude too much on the decision making process or by making mistakes from getting tired, or from simply trying to trade like a machine. One approach to this is to let computer programs automate the rules, allowing them to trade on the trader's behalf. Another approach is to make the platform as human user friendly as is possible. Easy to read clear text and simplified designs may make for a more human centric trading environment. Typically this will be seen as a custom web trader at a broker, which is not based on third party platforms such as MT4.

Forex is a complex market and trading Forex is also complex and moulding a platform to the needs of the human trader may be an approach which can be helpful for the trader. For a trader who does not wish to automate the trading process, such as platform may help qualify a broker as a best or at least a better broker. However the trader may wish to use automated trading, either to compliment their own trading or as an alternative.

Some trading platforms allow the trader to automate the trading process. MetaTrader 4 (MT4) has programs called Expert Advisors (EAs). These are automated trading strategies, allowing computer programs or algorithms to trade for the trader. The trader can simply trade with these strategies with their computer connected to the broker. But this means that connection problems can disrupt the process.

So another step is to use what is called a Virtual Private Server (VPS). This is another computer which can run 24/7 that hosts the programs the trader is running. Automated trading can be problematic as simply following rules which a computer will do in a tireless fashion, may result in drawdown where the account goes negative. Because a strategy has performed well in the past does not mean it will necessarily perform well in the future. Thus the best broker depends on what it is the trader wants to do and this can change with experience.

One argument for getting to grips with a platform which allows automated trading is that the trader can grow into this way of trading (as all these platforms can be used by traders who make their own trading decisions). This said, it is possible to trade currencies without having to use automated trading. In fact even if the trader wants to use trading robots, it may be considerably more optimal to understand strategies from having implemented them at the trader's own discretion.

Thus automated trading becomes a tool to use in certain trading environments and situations. A vital part of trading education is arguably trading in different market conditions, to understand the limitations and potential of all strategic approaches to trading. Although a robot has the advantage of speed and accuracy, the complexity of the market in in all its forms means that this is not necessarily a route to take solely for the sake of taking it. This indiocates why a discretionary trading approach can be advanced and why automated trading is arguably intrinsically an advanced technique.

There are other factors to consider such as minimum deposit and what markets are available to trade and other features such as the kind of spreads available. One important factor is whether to choose a broker which offers ECN trading. This allows the trader to more directly access the market, particularly the currency market. Typically these brokers can offer very low spreads on the more liquid currency pairs. However they also typically charge an additional commission charge. Thus the total cost is the spread plus the commission charge. This means that the cost of the trade may not necessarily be lower than the cost of a trade without a commission charge. These kinds of spreads are typically variable, however ECN brokers may offer spreads with a low average spread as well. Fixed spreads may suit some traders, but it needs to be considered that these can also alter in some cases. An important consideration is this: is the broker regulated. All these brokers are regulated by the Financial Conduct Authority (FCA) in the UK.