Your broker is your window to the world of financial markets. To succeed in trading, having a reliable and secure broker is extremely important. Here are the most important features you need to look for on a good broker platform.
Security and Stability
What does a nice and shiny broker platform help if it’s not secure and reliable? Security is the most important feature of a broker platform. This is closely linked to the regulatory authority and jurisdiction where the broker operates, so make to check this info on the broker’s website before opening an account.
Safe licenses are considered those from developed countries, like the FCA in the United Kingdom, CySEC in Cyprus (EU), BaFin in Germany, and ASIC in Australia. If your broker is registered with one of the mentioned regulatory bodies (or with another high-profile authority), you’re good to go.
Safe and regulated brokers usually offer secure and stable trading platforms, either an in-house developed broker-specific platform or a third-party platform like MetaTrader or NinjaTrader. MetaTrader 4 still remains the most popular trading platform among retail Forex traders.
Another important point to consider is the user interface of the broker’s platform. If you’re a day trader or scalper, you’ll likely spend many hours in front of your platform, looking to trade short-term movements in the market.
That’s where a nice and user-friendly interface can make your life as a short-term trader a little bit easier. User-friendly also means that the most important analysis tools are right there in front of you and that you can quickly close or modify open positions.
As a trader, you’ll spend a lot of time working with various analysis tools. Whether you’re a fundamental or technical trader, analysis is your main tool to find profitable trading opportunities in the markets. And we’re not talking only about technical analysis here: Fundamental analysis is equally important and should be easily accessible from your broker’s platform.
Many brokers offer real-time news updates where you can easily check for the most important news of the day. It would be nice if the broker offers a way to filter through the news based on the currency you’re interested in, the type of news, the importance of the news, etc.
Economic calendars should also be included on the platform as unexpected market reports can create enormous volatility in the markets. It’s a good idea to always stay up-to-date on the most important market reports and upcoming events, and the best way to do so is by checking an economic calendar.
Items on the calendar are usually categorized by the title of the event, the currency that will most likely be affected, the importance of the report (low, medium, or high), the previous value of the report, and the forecasted value. It’s when the actual number differs much from the forecasted value that markets tend to move rapidly in one direction or the other.
Some brokers also offer regular webinars where they touch on important trading topics. These webinars are usually advertised as an educational tool where traders can learn new skills and ask the host of the webinar whatever they have problems with. Webinars are a great way to improve your trading.
When it comes to analysis tools on your trading platform, most platforms include the most popular technical tools, like trendlines, Fibonaccis, and technical indicators. However, some platforms go a step further and offer more advanced technical tools, like Elliott Waves or harmonic chart patterns. Depending on your trading strategy, make sure the platform offers the tool you need in your daily trading.
Automated Trading Capabilities
If you’re a quant or algo-trader, you’ll need automated trading capabilities integrated into your platform. Most platforms support trading with automated strategies, so it’s only a question of finding the one that offers a programming language you’re familiar with.
Alternatively, you may use the broker’s API to connect with your broker’s platform and manage trades outside the platform. MetaTrader uses MQL for the coding of automated trading strategies. If you already have some programming background, you shouldn’t have any problems learning the syntax of MQL.
Trading costs are an important point to consider in trading, but not the most important one. Never sacrifice security and safety to save a few bucks on fees and commissions. Some unregulated brokers may try to attract traders by offering extremely low trading costs, but the headaches of recovering your funds from a scam broker are not worth it.
Trading costs come in the form of spreads, commissions, and fees. Spreads refer to the difference between the buying and the selling price of a financial instrument. For example, if your broker quotes GBP/USD as 1.3550/52, this means that you can buy GBP/USD at 1.3552 and sell it at 1.3550. The difference you’re paying here is the spread.
Most brokers offer quite competitive spreads which can be as low as 1 pip with some major pairs. However, spreads can also widen which increases your trading costs, especially when high-impact market reports are released or unexpected news hits the markets.
Commissions are usually paid to the broker based on trading volume. For example, a broker may charge $7 for a 1-lot (100,000 units of the base currency) round-trip (opening and closing of a trade). Fortunately, most brokers don’t charge commissions anymore, except in some special cases such as on zero-spread accounts.
Fees refer to other costs that you may have to pay to your broker for a complete trading experience. A common fee is the withdrawal fee, which is charged after you submit a withdrawal request.
Leverage and Margin
The Forex market is the largest and most liquid market in the world, but it’s also a market with relatively small price changes. If you think about it this way, it will make more sense: Currencies are quoted against each other, and unless there is an important shift in fundamentals that starts a multi-month uptrend or downtrend, currencies like to remain quiet and within familiar trading ranges. Most currency pairs don’t fluctuate more than 1% per day.
So, to take advantage of those small movements and make a profit, Forex traders like to use leverage – a lot of leverage. Forex brokers offer up to 200:1 leverage ratios (30:1 in the EU), which allow you to control $200 of buying power with a single deposited dollar.
However, trading on leverage magnifies not only your profits but also your losses! You need to take care when trading on leverage and always open a position size that is appropriate for your trading account size.
Leverage is closely related to margin. Margin refers to the funds you need to have in your account to be able to open a leveraged position. For example, if you’re trading with a leverage ratio of 100:1, your margin will be 1%, i.e. you’ll need to allocate 1% of your trade size from your own trading account.
Let’s say you have $5,000 in your account and want to trade 1 lot (100,000 units of the base currency) in USD/JPY. To open that trade size with a 100:1 leverage, you would need to allocate $1,000 as the margin for the trade ($100,000 x 1% = $1,000)
Popular Trading Platforms: MetaTrader vs NinjaTrader
MetaTrader is the most popular trading platform among Forex traders that is offered by the vast majority of brokers. MetaTrader 4, also known as MT4, was released in 2005. Its successor, called MetaTrader 5 (MT5) was released in 2010, but MetaTrader 4 remained the most popular Forex trading platform according to a study conducted in 2019.
MetaTrader features advanced technical trading tools, multiple market orders, and a highly customizable chart. Traders can also apply automated trading strategies using the MetaQuotes Language (MQL). In MetaTrader, those automated systems are called Expert Advisors (EAs).
NinjaTrader is another highly popular trading platform for the Forex market. However, unlike MetaTrader, NinjaTrader is a professional-grade platform that suits more advanced traders. The platform supports advanced charting features, analysis tools, automated strategies, back-testing, and trade simulation. It also allows you to select data feeds from multiple brokers and to select a specific counterparty to clear trades through.
Compared to MetaTrader, NinjaTrader offers more charting customization as traders can choose the level of historical data they require, from multiple sources if needed. It also provides true market depth that allows for instantaneous order placement at different price levels. This feature is often used by professional scalpers to take a few pips out of the market.
As mentioned, NinjaTrader caters to professional traders with larger account sizes. If you don’t need all the advanced features that the platform has to offer, you’ll be more than happy with MetaTrader.
When choosing a Forex broker platform, the first thing you need to look for is security. Make sure that your broker of choice is regulated by a top-notch regulatory authority, such as the FCA, CySEC, or ASIC, to name a few. You can look up the broker’s license at the regulators’ websites.
Most brokers offer an in-house web-based platform or an alternative, like the MetaTrader platform to their clients. MetaTrader is robust and well-tested, and although it’s not as powerful as NinjaTrader, it’s still packed with all the features and tools you need to trade the Forex market.