Read The Trading Conditions

 

Trading conditions is the most important factors that directly effect your each and every trade. Trading conditions are parameters relate to order placing, order processing, trading environment, trading fees... that set by the broker and you must agree with these conditions when trading. Trading conditions are different from broker to broker, from account type to account type of the same broker. Therefore, you should look into each account type of each broker to find out the most appropriate one for your trading strategy and style. Each trading method usually work best with a set of specific trading conditions.

Trading conditions

Followings are the most important trading conditions that you should care about:

 

Brokerage type:

A broker may have different brokerage types for different account types they provide. Read our guide about brokerage types to know more about it.

 

Trading platform:

Trading platform is a software that transform your trading decision into transaction data to be sent to trading server. Some platforms are simple and user-friendly, while others are more complex and professional. There are some adapt with auto-trading, some do not. You should try them on demo account to check if they are good for you.

 

Trading instrument:

Beside of currency pairs (forex), a forex brokers may provide some other instruments such as metals, oils, indicies, stocks and commodities. Of course, all of them are not physical, they are just CFD instruments. If you are interested in these stuffs, just choose the brokers or account types that has those in the list.

 

Maximum leverage (higher is better):

Maximum leverage allows you to trade with an amount of money larger than your balance. Higher leverage means larger lot size you can trade, thus more profits as well as losses you get. Basically, the higher leverage give you more space to adjust risk management.

 

Minimum deposit (lower is better):

Many brokers provide account that require a very low minimum deposit (even as low as $5). But don't day-dreaming about being rich with that initial money. However, the lower required deposit, the easier for you to join the market.

 

Average spread (lower is better):

This is the most common spread for a particular pair. Some brokers announce that they have spread "from" 0 pip (or any tiny amount), note that it's not typical spread, it's just their minimum record. The tigher average spread make lower cost of your trading. Scalpers specially love tight spread since they can make profit in a short move of price.

 

Spread type:

There are two types of spread: variable spread and fixed spread. Variable spread is changed in value due to market condition, it's usually tighter in normal condition, wider in an illiquid market (like in early Asian session) and extra-wide in unexpected fast moving market (like at news release). Variable spread is usually provided by DMA and ECN brokerage. In contrast, fixed spread is guarenteed to be constant in any market condition and provided by dealing desk and few regular STP brokers only. But in order for brokers not to get risk, fixed spread usually wider than average variable spread in normal market condition.

 

Commisson per lot (lower is better):

Commission is applied by ECN brokers and some STP or DMA brokers. Commission per round turn lot is the total cost you have to pay your broker after a trade is completed (enter and exit). Some brokers like to show one-way commission as it looks cheaper, but at our broker list we reveal the total commission per round turn lot for all brokers in order to make it easier for comparison.

 

Minimum lot size (lower is better):

This is the smallest acceptable trading volume, measured by standard lots. The lower minimum lot size, the more flexible you can adjust your trading volume. Some brokers measure this factors by mini or micro lots or currency units, but at our broker list we convert them all to standard lot for easier comparison.

 

Maximum lot size (higher is better):

This is the largest acceptable trading volume per position in trading platform, measured by standard lots. You should consider about this factor if you intend to trade with huge capital. If you want to trade with larger volume beyond the limitation, you can either place many maximum orders or place order by telephone (if your broker has this option).

 

Execution type:

Execution type is very important because it determines how your orders are accepted and processed. There are two types of execution: Instant execution and Market execution.

 

Instant execution fills the order at the price you see at the moment you choose "Buy" or "Sell" on your platform. If the price moves too fast, it's possible that the current price has been move far away when your request price arrives at trading server. In this case, a "requote" notice will appear to ask you if you still want to fill your order at new available price or not.

 

Market execution fills the order at any available price of market at the moment your order request arrives at trading server. With market execution, your order is always filled but might not at your desire price since it slipped away (this is called "slippage").

 

Execution type is critical, specially for scalpers and EA traders, because it will decide the entry price and the chance of order filling which are important factors for those traders.

 

Quoted digits (5/3 is better):

Quoted digits are the number of fractional digits after the decimal comma in quoted price. The classic format is 4/2 digits (e.g., EURUSD=1.2045, USDJPY=85.23), which is used by some market makers only; while the new format is 5/3 (e.g., EURUSD=1.20453, USDJPY=85.235), which is used by most brokers nowadays. The 5/3 is more advantage since it is 10 times more precise than the old 4/2, it allows spread tighten under 1 pip and let scalping strategies work better.

 

Margin call level:

Margin call level is the level at which the equity start to go lower than a specific percentage of your used margin. At that point, your broker will alert you through platform that your balance is in dangerous if the market continue to move against you. You may need to make more deposit in order to maintain the account in safe status. Some brokers set their margin call level equal to stop-out level.

 

Stop-out level:

Stop-out level is the level at which the equity start to go lower than a specific percentage of used margin. At that point, your broker will force your most losing position to close automatically (without your acceptance) in order to release your margin. High stop-out level protects your account better when you have losses. But low stop-out level gives you more space to keep your losing position waiting for a price reverse. To initiatively keep account safety, you better use stoploss instead of relying on stop-out level. In fact, stop-out level is more important than margin call level because margin call is just "warning level" while stop-out is "penalty level".

 

Stop/Limit level (lower is better):

Stop/Limit level determines the minimum distance from current price to the price that you are allowed to place a stop or limit order, as well as stop loss or take profit point of an opening position. This factor may not matter with regular/swing traders, but it's quite meaning for scalpers or EA traders because it may prevent them to trade precisely at a short distance.

 

Hedging:

Hedging feature allows you place two opposite position of the same pair at the same time. Without this condition, placing an opposite position means closing the opening primary position. If hedging position has the same volume with primary position, it will lock your profit/loss at a fixed amount since the profit/loss of a position will be cover by the loss/profit of the opposite one. Please inform that some brokers keep the margin of primary position for hedging (your primary margin is unchanged) while some others release the margin of primary position by the opposite position size.

 

Scalping:

Scalping is a trading technic that allows trader to open and close positions in a very short period of time in order to take advantage from ever-changing movement of price. The main target of this technic is to grab every chances to make small profits with the minor fluctuations of the market. Traders who scalping is called scalper. Two important factors for scalper is Spread and Stop/Limit level.

 

Automated trading:

Automated trading allow trader to install an algorithmic program on trading platform (also called robot or Expert Advisor) and let it automatically trade or send trade signal once a specific condition of price chart is met. This trading style free your attempt on watching the market everytime to find the trade signal of a predefine strategy. This feature is great if it combine with an effective stretegy.

 

Trailing stop:

A trailing-stop order is an order that is attached to a trade to automatically move (or trail) your stop-loss level at a fixed distance from current market price when the price go for you but hold the stop-loss level when the price go against you.

 

OCO order:

OCO order (One Cancels Other Order) allows you to set a trigger that will cancel an order when another order is filled.

 

Trade from chart:

Most professional trading platforms allow you to enter, modify and exit positions directly on the price chart (like drag and drop style). This is very useful and convenient since you can visually react with the price movement in real time.

 

Free demo account:

Most brokers usually provide demo account that has similar trading conditions with some of their live account types. However, trading conditions in demo account with some brokers may has a bit difference from whichs in live account. Just try it and have experience.

 

Bonus:

Many brokers give bonus program to promote clients making deposit. Most of bonus programs are interesting, however they usually attach some conditions to fully obtained.

 

Rebates:

Rebate is a policy given by brokers or introducers in which clients are paid back some money base on the transacted volume. This is a very attractive policy since it compensates a part of fee that you should have been charged normally (such as spread or commission). This rebate ammount can be significant after a period of trading.

 

Forexful.com, as an introducer partner of brokers in our brokers list, give you our own rebates if you open live account with some particular brokers through our website.