Forex brokers comparison

How I saved over a million in one year of live trading

About the author:
Martin Pearce, professional forex trader and member of FX Trading Revolution team. He shows the truth about forex and brokers. To contact him, fill in the contact form at the website.

How I saved over a million in one year of live trading

Undoubtedly, every trader has already been thinking about how to make their first million by trading on FOREX. They tried a dozen various systems, strategies or indicators that are guaranteed to work, and yet the success dreamt of hasn't arrived yet. Have you really tried everything? Now I would like to show you a bit of a different perspective on how to save your first million with live trading.

This is the tenth year I've been investing in capital markets. Together with my business partners we work as portfolio managers for institutional clients. During our time on the FOREX market we've realized that success in manual trading depends on:
1) The traders abilities - how he can adapt, sense an opportunity for potential profit, and accept trading loss situations;
2) On the broker through whom he realized transactions.

Not even mentioning the importance of choosing a top class broker in normal automatic or even high-frequency trading.

Let me first clarify what costs every realized deal entails in reality. In the following illustrative example from real trading you will see how significant the difference in total costs could be with various brokers.

Spread. The first typical cost is called "spread", which is the difference between supply and demand - the price at which we buy or sell an instrument. We already know the amount of spread before opening a trading account with a given broker.

Commission. The second cost is called "commission", and it's an additional fee for opening and closing a trade. When you're comparing commissions with various brokers, it is important to find out the commission in the same currency (USD) for the traded 1 LOT round turn. Round turn actually means counting both the opening and the closing of a trade. If you have a commission per side, which the brokers usually give, then you must multiply the value by two in order to get the commission for the round turn. We also know the commission before trading begins.

Execution. The crucial difference between a real and a demo account is that trades on a real account go out to the market in real market conditions, while trades on the demo accounts only take place in a virtual simulation. Because of the so-called "slippage", which doesn't exist on a demo account, the trading results on the demo will always be excessively distorted.

Slippage represents another very substantial cost, which affects both the entry into the market and the exit from the market (closing trades by market order, stop loss, take profit, and any other orders), often without us even having the chance to notice anything! Its exact amount isn't known ahead of time. It mostly depends on the volume of transactions, the market volatility and the broker's liquidity.

The way slippage works is that, for example, you give the specific pending order BUY on the price 1.35000, the market pending order crosses, it activates, and the realization of a trade with the broker happens. During the realization of a trade, the broker finds the most appropriate offer from the liquidity providers, or one thanks to which the trade with the required volume can be realized with the closest possible price from the 1.35000 level. Yet, in reality the broker can fill your BUY order on the 1.35010 price or even higher, which means that the costs are increasing, and they're usually increasing by a factor of two in this specific case by 10 USD / 1 lot. You can't see slippage at first sight, and I dare say that with 90% of the brokers it will be a higher cost then the spread and the commission together!

Based on this we have been doing and still are doing extensive broker tests all over the world on live trading accounts where we are actually focused on the execution of trades. The direct market makers who try to lure clients with deposit bonuses, while they're actually creating counterparty for clients and profiting from their losses are the ones we exclude in advance. In these tests we asses capital safety as priority number one, along with the broker's performance, his support and important insider information that you normally can't get access to. We have discovered ties between seemingly unrelated companies and lots of interesting information, but let's keep that for another time.

The original purpose of these thorough tests was to find the most appropriate broker for a very specific trading style within which costs for every trade and the total qualities of the broker play an existentially important role. After extensive testing where we have tried dozens of various brokers, we have chosen the best one. With the chosen broker with a banking license, I and my business partners, based on deposited capital and high activity, have negotiated very individual conditions that aren't even available to the common and relatively fast, intraday traders. Furthermore, we are expecting a decrease in costs soon.
For example, we trade EURUSD with an average spread of 0.05 pips during the London and New York sessions - and a commission of 1.25 USD / 1 lot USD per side. With a simple calculation let's compare a regular broker (we will choose an average broker from our statistics, take into consideration that much worse ones exist) with our chosen top class broker with a banking license. In the calculations I will select the real values that correspond to the specific style that has fortunately led us to check and test brokers. So let's take into consideration that we realize 20 trades per day with a volume of 10 lots per trade. Now I will demonstrate how we saved a whole million in one year of trading!

Regular broker - spread on EURUSD 1.3 pips, without commission, average slippage minimally 1 pip. Total cost minimally 23 USD / 1 lot.
Chosen broker - spread on EURUSD 0.05 pips, commission 1.25 USD / 1 LOT per side (2.5 USD / 1 LOT round turn = 0,25 pips), slippage based on statistics for counting sufficient reserves of 0.1 pips. Total cost 4 USD / 1 LOT.

Costs with a regular broker = 23 USD × 10 lots per trade × 20 trades per day × 22 business days × 12 months = 1,214,400 USD.
Costs with the chosen broker = 4 USD × 10 lots per trade × 20 trades per day × 22 business days × 12 months = 211,200 USD.

The numbers talk for themselves, a huge decrease in costs that has an unimaginable effect on the results. I would like to remind you that this is a situation from live trading within which we realize approx. 440 trades per month. An acquaintance of mine, trades even a lot faster, and realize 1500 trades per month. You can calculate the difference between brokers yourselves. Remember, the lower the costs, the higher the profits (if there are any). You will also make profit much faster after opening trade, which means much less stress and a higher success rate of profitable trades. If you are really serious about trading, a quality broker is among the absolute basics for successful trading!

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