For successful trading, a trader needs to not only have a good sense of market, an ability to process tons of information and a huge amount of data, to master elements of technical and fundamental analysis, but also to operate in favourable market conditions. And I’m not talking about the sector or the economy as a whole, but the conditions in which the certain trading transaction is being carried out. This is about spreads, delays in the order execution, and other things which depend on the quality of the FIX API broker company.
That’s no secret that most brokerage companies play against their investors and traders. They set conditions that are far from market, as well as unprecedented fees for opening and sometimes even closing the transaction.
With this in mind, you need to know which options you want to consider when choosing a quality broker. You start with an analysis of adverse trade conditions:
- Spread. This option determines the difference between the buy and sell prices of the financial asset. The greater the difference in this indicator, the greater your loss is when you open a buy or sell transaction. That’s because when the asset asset is sold, it is then bought for a different price. This difference is what constitutes the spread. Some brokers specifically impose an extra charge on an asset which price is going to be different from market. Thus, even 1-2 spread points will reduce your revenue (or increase the loss), and the broker will profit from it. Spreads are also often referred to as markup. To test this option, you must register with the broker, open a real account, and watch the spread of different currency pairs, because the promotional slogan “narrow spreads” or “spreads starting at 0 points” does not guarantee the result.
- The next parameter, which defines a bad broker, is order slippage. A slippage (or delay in executing orders) is the moment when the transaction is opened and there’s a lag of not opening the trade operation. For example: A FIX API trader decides to sell the GBP/USD currency pair in the FIX API Forex market for the price of 1.2200. But due to the slippage, the transaction was actually opened at the price of 1.2205. That is, at the time of the request from the trader, before the order was executed on the broker’s server, the price went 5 points up, which would eventually become the lack of revenue for the trader (or + 5 points of loss). If the spread can be analyzed visually, you have to open a deal to track this parameter. I recommend that you top up a price account and perform several trade transactions to analyze this option.
- Type of order execution. It’s also an important element for both manual and algorithmic trading. As you know, there are several types: Dealing desk and Non dealing desk (ECN and STP). I recommend that the first option be bypassed, because this type of performance indicates that all of your trading transactions happen on the broker’s server, not in the market. In this case, this option will be present in the broker’s Dealing Desk.
Of course, I could also write about those brokerage companies that do not allow to withdraw funds, do not comply with the terms of the contract, or simply “discharge” a deposit. The main idea was to show that on the market, there are some renowned brokers who still use these negative parameters. These parameters are the key negative points on the part of brokers.
Yet you can circumvent all these moments (or reduce the probability of spreads and slippages) if you trade via the FIX API. Trading through this protocol allows to connect the algorithmic strategy directly to the liquidity supplier’s server. This makes it possible to circumvent the broker’s server-side latencies and trade on market conditions.