From the time of Jesse Livermore, the brokerage houses were not different from the current ones, which are playing against the trader in the financial market. Of course, today this case goes beyond the boundaries when the trader is not paid his well-deserved profits or simply deprives the whole deposit. It’s about the terms of trade.
Today, we’ll talk about what fix api trader should know about a brokerage company before opening an account in it.
To begin with, let us take stock of the main characteristics and types of brokerage companies.
- Brokerage houses with a DD (Dealing desk) system. I recommend you avoiding this, because this system involves internal processing and overlapping of warrants. That is, all purchase or sales requests that the trader makes are simply overlapped by the broker: you’re trading directly with the broker. And of course, there will be one obvious favorite in this fight. Your profitability is a potential loss to the company.
- Fix api forex broker with the NDD system (Not Dealing Desk). These companies provide market access through their STP or DMA services. The bottom line is that by using these services, all market applications fall directly to the liquidity provider. I mean the market, not the internal server.
But it’s not just a form of everything. There are also a number of negative parameters that can be set by both the first and second classifications of brokerage companies:
- Gapping. This parameter directly affects the financial result of the trade transaction. In essence, this is the moment of delay in the execution of the trade order. That is, when you open a deal, there’s a delay in the fraction of the second for which the asset’s price changes its value and the transaction is not opened at the planned prices. You’ll agree that fix api forex market is very volatile, and even a small fraction of a second determines the result.
- Spread. It’s the difference between the cost of bid and ask. Simply put, this is the difference between the buying price and the selling price. The greater the difference, the less profitable the result, as you know, purchases are for the sales price and vice versa. And if you’ve set the take profit level, the deal can go beyond your mark and not close because of a big recession. Conversely, transactions may not be closed at the level of stop loss, which increases the potential loss.
- Treaty. Even in an official document, brokerage companies find loopholes to leave the trader out of profit. Thus, many companies, for example, prohibit arbitration trade or even high frequency trading.
- Server rollbacks. It is often the case that when a failure occurs, brokerage companies make a small “rollback” of the system, so that all the transactions that were committed at that time are cancelled. And then, if you had any good deals, they just disappear.
- Dealing problems. This is rarely the case, but there is a time when quotations are very different from the market price and have other parameters, which nullifies the whole technical analysis.
These are the key negative points that can occur in trade through brokerage companies. You won’t find a completely clean broker. And if you do, let me know.
I can give my examples of what I pay attention to when I select a brokerage company, before I place my assets there:
– What system the company is working by;
– Availability and specifications of trade accounts;
– The ability to trade through fix api;
– Level of leverage;
– Swaps and commission;
– And, of course, gapping and spread.