What should the trader know about the broker to avoid losing a deposit

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.

  1. 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.
  2. 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.

 

A bright trader always tests the new software on the market

When we buy a new product, we’re in a hurry to experience it in the first place. Whether it’s a phone, a tablet, a computer, or a car. We don’t understand how the new purchase works for us wothout trying it. Same with fix api trading. We will not be able to understand how the software for trade is qualitative until we try it in action.

Many have a need to test for trading, and only few do it. Because if you can simply download and use the free trade in the process, you won’t be able to get the fee. However, today many developers allow you to use demos of their product versions so that the normal trader can analyze how much software they are able to do. Such versions tend to be trimmed and have a limited list of trade instruments (multiple currency pairs fix api forex) However, the instrument itself, whether an indicator or a sales expert, can be tested. I therefore recommend that you pay attention to this. You can test any kind of software.

The software test plays an important role in shaping future profitability. That’s why you need to test it in a real market and with real conditions. Of course, no one has rebjektestyed with various strategy testers (for example, as in the fix api MT4), but market data will show a more real picture.

Therefore, testing the software allows you to:

  • To learn about the robot’s trade algorithm, methodology, and logic of doing business;
  • Analyse the correspondence between the trade strategy described and the actual results;
  • Know the actual profitability of the software
  • Learn the financial performance of trade (profit factor, recovery factor, boarding, sharpness coefficient, profit and loss ratios, espected value and AP.)
  • Understand the extent to which your trading style and trading system fit;
  • Identify “bugs” and software errors;
  • Understand whether your program is suitable for your fix api forex broker.

Market conditions are not a substitute, because profitability will be pushed only on the market, so the program needs to be tested on the market. All traders understand this well, and therefore they are sceptical about testing on historical data. The market is not constant and often changes trends, so the test must be in its current state, so that you can adjust the program, set it up with other software, and apply it in its trading.

What are the threats, the absence of premature software testing?

  • The trade algorithm may be based on non-current and non-operating trading systems, which does not guarantee the profitability of trading;
  • No flexible settings. For example, a list of working financial instruments for which the risks and manis of management will be traded or parameters;
  • Negative metastatic expectations of trade strategy;
  • Lack of integration with the trading platform;
  • Negative historical test results.

In order to test the program on the market, you don’t have to have the huge capital that you can allocate to the test. No. Here, you can try the minimum amounts and also set the minimum risk parameters (if any) in the program. In fact, I can recommend that you use cents to bring your testing closer to more market conditions.

Remember that it is necessary to test each product based on the current situation and at the current time, because the market is here and now. This is why it’s better to know what software is capable of, and also what to expect from using it in your fix api trading.

 

 

How do I choose the right software for trading according to the delay arbitration?

For sure, we’ve all been looking for the most effective tool for a comprehensive analysis of the financial asset. Whether it’s a trade strategy, a copyright indicator, or even a software program. Benefit from the development of the financial market, the additionally simplified industry and the fix api tradingand made this process automatic.

Today, I suggest that we review the trade strategy of arbitration delays (fix api Latency Arbitrage) and determine the most qualitative application of this system.

First of all, I want to determine that the strategy of Latency Arbitrage is to analyse price quotations, compare them in different sites, and if price deviation is detected, to engage in a trade transaction towards the expansion of quotes.

For example, the value of USD/CAD currency pair given by a one fix api forex broker is 1.3355, and second broker gives 1.3350. So the trade algorithm, knowing where quotations are delayed (by a slower broker), opens the transaction to the price in a faster supplier of quotes. This allows you to capture the minimum motion, but at the expense of a large number of transactions, to show a positive result.

Returning to the choice of the best software for this kind of trade, I would like to say at the outset that the software should be able to trade through the financial protocol fix, so that we can get more up-to-date information and trade without large spreads and slippage. This parameter must be mandatory in a merchant robot.

I also recommend that you pay attention to the following options in the software for Latency Arbitrage:

  1. Which sites compare the quotations. This will allow you to test the brokerage company in advance, review its terms, and get an opinion on the current customers. In most cases, you can select different sites (LMAX, SWISSQUOTE, Exante, and others), making your application more flexible.
  2.  Which trade instruments are used by the algorithm. It is necessary to understand whether there will be trade on all available tools or only on certain currency pairs. The quality criteria will be a broader list of available tools, both major and cross-currency.
  3.  Ability to be used with different trading platforms. If you still purchase similar software that will automatically trade using exchange rates, you should know if you can integrate it with your terminal. But again, trade through protocol FIX solves this problem.
  4.  Software backtesting. A very important parameter. It will generate and learn the expectations of trading according to this strategy. I recommend that you pay attention to indicators such as subsidence, profit factor and recovery factors, expected value, and sharp coefficient. And, of course, the profitability of a trading robot.
  5.  Feedback from current clients. To a trivial, simple, but current method of selecting software for fix api trading. The more feedback, the more users are there. The more users, the better the software manufacturer. I think it’s clear and we shouldn’t dwell on that.

By applying these 5 key parameters in the selection of quality software for FIX API Latency Arbitrage, you can find a reliable product.

In fact, I personally recommend that you pay attention to programs that were developed by companies rather than by a trader. This will be useful, because if necessary, you can always get an advice on application or optimize it for your trade with the fix api forex. The market is alway moving and the software must also be regularly updated.

 

What risk parameter to set when trading with Latency Arbitrage

Effective capital management is a key parameter in any integrated trading strategy. Capital Management includes parameters of risk management and money management.

Risk and money management must be considered in a complex with capital management, as components of the same whole.

  1. Risk management is risk control in each individual transaction.
  2. Money management is about managing all available deposit, allocating funds between transactions, and limiting general losses.

Rules for risk and money management, as well as the rules for transaction entry, should be:

  • understandable and logical
  • easy to apply.

Based on this, the risk and money management rules are part of each trading strategy, and the FIX API Latency Arbitrageis no exception.

Latency Arbitrage is a type of FIX API arbitrage trading which main feature is the simultaneous analysis of the same currency pair, but at different stock sites or different brokerage companies. To understand the basic principles of this strategy, I suggest that we consider an example:

The price of the EUR/USD currency pair at the “quick” FIX API Forex broker is 1.07220;

The price of the EUR/USD currency pair at the “slow” FIX API Forex broker is 1.07225;

The example shows that the spread between the two sites (in our case, brokers) is 5 pips. These are the five pips that are the potential revenue for the trader. Based on the data collected, the algorithmic trading robot (I recommend that you use special software to automate as well as simplify trading, because arbitration in manual mode is virtually unrealistic), makes a decision to sell the EUR/USD currency pair, since the second broker price is lagging behind, and it is necessary to open transactions in the direction of a “fast” broker. Thus, the algorithm would perform a  minimal potential trade operation.

Of course, such negative moments as spreads and slippages have a negative impact on the FIX API trading process. However, in order not to exceed the set risk parameters, the capital management principles of which I have written above are necessary. And in the Latency Arbitrage strategy, they also should be present. As we have determined that the potential for profitability in arbitration transactions is minimal, the risk should also be set to low values.

Therefore, I recommend to consider the following points before you install a certain risk percentage:

  • Maximum spread level;
  • Average slippage level
  • The maximum number of open trade transactions that are set into the robot;

When you know these moments, you can set the desired risk and set it according to these parameters.

I emphasize that you should trade “based on the risk”. That is, before opening a transaction, you should understand what percentage of your funds you are ready to give the market.

With the fact that Latency Arbitrage nets only several points, or even pips of profit, setting risk to profit ratio at 1 to 3 or 1 to 4 is unrealistic. But! Since the minimum profit requirement in this strategy is provided by the quotations in one transaction being delayed at the slower broker, I recommend that you set the risk to profit as 1 to 1, or as 0.1% of the deposit amount. This will ensure that the funds are preserved and, in the case of a large slippage, help not to close the transaction with a loss, but to achieve the fix level – the exchange rate. Moreover, in the event of increased volatility or a sharp market reversal, this would allow to exit the transaction with minimal losses.

Since the profitability of the Latency Arbitrage trading strategy is created by the number of speculative positions, the risk of 1 to 1 will guarantee the profit and positive mathematical expectation of the trading system.

Proper risk management improves the financial performance of the trading strategy as well as guarantees investment security.

 

Brokers against traders: the endless game

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:

  1. 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.
  2.  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.
  3.  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.

 

What do you need to know if you use the Latency Arbitrage strategy

Latency arbitrage is an arbitration strategy, which consists of simultaneous analysis of a financial asset at different stock sites, with the aim of opening a trade position towards the sites with latencies. Simply put, Latency Arbitrage is supposed to analyze the quotations of two brokerage companies and to carry out a transaction where the value of the asset lags behind.

Let’s take an example:

A FIX API trader is analyzing the EUR/USD currency pair at two different brokers. It costs 1.0755 at the first one and 1.0750 at the second. Let’s assume that the trader has already determined that the first FIX API Forex broker displays a more real market picture and provides the relevant quotes, while at the same time, the second broker does this with delays. Thus, the trader decides to purchase the currency pair at the second broker aiming at  +5 pips of difference. These 5 pips will constitute the profit for the trader. Since arbitration trading consists of instantaneous analysis and transaction making, the yield of the strategy is generated by large number of operations with a minimum profit level. But the level of risk and drawdown is also minimal.

As we have already determined, the essence of this strategy is in opening positions at a slower broker. Therefore, there are risks that you must know about:

  • The slower broker is the sign of poor quality company. This may incur additional investment risks. I recommend that you look for a price difference not between a stable and a weak broker, but between two top brokers. The exchange rate will be smaller, and it will be less likely at popular brokers (which reduces profitability), but it guarantees the security of funds;
  • Since the essence of Latency Arbitrage is in the opening of speculative positions with low income, large spreads and slips can bring the trade result to zero. To avoid this, I recommend that you automate your algorithm for trading via the FIX API protocol. This will help circumvent the unfavorable moments of trading such as spreads and slips. The main thing is that the chosen brokerage companies should not use the same liquidity suppliers. Then the exchange rate difference requirement will be met.

Use these key nuances in your favor. This will allow you to get the financial result of your Latency Arbitrage trading strategy to a whole new level.

 

Simple Forex strategies review

You may find many trading systems on the Internet that are ready to work on FIX API Forex. However, it should be understood that there is no such thing as a free lunch. Most of these “working systems” are nothing more than a set of trading rules and principles that do not guarantee results.

Today I will make a small FIX API tutorial, in which I will tell you what you should look for when searching for simple trading systems.

First, you need to understand what elements should a simple trading strategy include:

  1. Working timeframe. A trading system must necessarily have a work interval in its description. For example, scalping systems generally conduct the analysis on the M1-M5 timeframe. Fix api arbitration systems perform operations in a fraction of a second. And trend-based systems have a broad open position hold period and analyse within the H1-D1. At first glance this is a trivial method, but it’s still valid. The result of a system designed for FIX API trading on D1 period, will be significantly different from trading on the M5.
  2.  List of trading instruments. Also a simple but valid option. Some trading strategies are developed specifically for a particular asset or a small group of assets. As with the first parameter, if the system was made for the EUR/USD currency pair, trading on USD/CAD (or any other assets) does not guarantee the result.
  3.  Analysis tool set. Of course, the description of the system should include the full set of analysis methods, namely the technical indicators, turning figures or support/resistance levels. This depends directly on the trading strategy. Each system on the Internet has this parameter (while 90% of systems consist only of it). But here it is important to understand that the indicators in the set must be mutually reinforcing. That is, the system should include both trend movement indicators, and the oscillator. If you already have some trading experience, you can easily determine if this condition is satisfied in the strategy.
  4. The parameters of risk and money management. Each system must have both entry and exit points. That is, the algorithm that shows when to open a transaction according to a signal (as in parameter 3), when to close it, and what volume to choose for a trade operation. Effective capital management helps to avoid major drawdowns and preserve the invested capital.
  5.  Availability of process automation. It is not required, but if the system is capable to work in an algorithmic mode, then it will testify the reliability of the selected algorithm.

These are the key parameters that need to be included in a simple strategy for working on FIX API Forex market. With these parameters, you can filter out the selected strategies.

For example, trading systems, which are based on the intersection of moving averages, provide market entry parameters, however, is not always clear when to close the deal and what risk level to set. Strategies based on the candle (price action) analysis, describe the position entry and exit more accurately, however, only some of them include risk management options. Leveled strategies are much easier from this point of view. The levels already include the timeframe on which you’ll work, the instrument set, and of course market entry and exit points. Scalping strategies also are easy to understand and include an extended list of necessary parameters.

Here I’ve tried to outline the key points that should be addressed in the search for simple trading systems. FIX API MT4 trading terminal includes many tools to conduct effective analysis, to which you should also pay attention when choosing strategies. The main thing to remember: the trading system should be simple and understandable for you!