How to choose the best Broker for your EA

by Lawrence Fayman

Fri May 5, 2017

Expert Advisors is an add-on software program that allows automation of the analytic and trading processes in the MetaTrader4.  You can increase your trading opportunities with the MT4 Terminal by utilizing your EA as it allows you to monitor the market- second by second- and therefore, trade faster.  Some of the more popular EA strategies consist of:

● Technical Analytics/Indicators – using graphs or technical indicators to open and close positions.  Some of the more popular indicators are the following: moving averages; MACD; Momentum; Moving Average; Candle Sticks; Stochastic; and many more.  The graph time intervals will make a difference in what to look for in a brokerageand we broke them down for you between Short Term (M1, M5 charts); Medium term (M15, M30, H1); Long Term (H4, D1, W1, MN)

– Fast / Medium / Long Term Trading Strategy

– Medium Volume

● Arbitrage- the EA uses 2 different brokerages which open  buy and sell trades of the same currency pair. Because the EA uses 2 brokers, the summary profit of buy and sell trades is the floating value.

– Fast Term Trading Strategy

– High Volume

● Scalping- this strategy  attempts to make many trades on small price changes. Traders who implement this strategy will place between a few trades to a few hundred trades in a single day in the belief that small moves in the currency price are easier to catch than large ones.

– Fast Term Trading Strategy

– High Volume

● Hedging / GRID – An EA trading technique that seeks to capitalize on normal price volatility in currency markets by placing buy and sell orders at certain regular intervals above and below a predefined base price. Such buy and sell orders, generally spaced at 10- or 15-pip intervals, create a trading grid.

– Fast/ Medium / Long Term Trading Strategy

– Medium / High Volume

● Dollar Cost Averaging (Martingale Strategy)- is  an EA strategy of investing in which the dollar values of investments continually increase after losses, or the position size increases with lowering portfolio size.

– Medium/Long Term Trading Strategy

– Medium / High Volume

After programming or choosing your EA strategy, you will need to make a decision which brokerage to trade with.  Each FX Broker has different characteristics that can affect your EA either positively or negatively.  Some of the features to look for when choosing the right Broker for your EA would be:

● Connectivity or Speed of Execution – how many milliseconds does the brokerage take to accept and confirm the trade.  Also, will the brokerage provide you with a free VPS?  This is important for your EA as the longer a trade takes to be confirmed, the more likely your EA could miss the price.

● Last Look or No Last Look – The term Last Look simply means that a brokerage has the opportunity to reject a trade within a given time interval.  No Last Look simply means once an LP gives a price quote it must accept the trade on it. This is important to your EA as a No Last Look brokerage may reject your trade and a Last Look brokerage provides a fill with possible slippage, but you will enter in the trade.

Depth of Market– shows how many buyers there are at a price level, and how many sellers there are at a price level.  This feature may be important for your EA to determine if there is sufficient volume to execute your trades.

Scalping allowed – Some brokerages do not allow high frequency traders or short term fast execution.  This is important to your EA, as the brokerage may not allow your EA to operate.

● Dealing Desk / STP –  A Dealing Desk brokerage will execute and hold your trades at it’s own trading desk.  The STP brokerage will pass the trade to a bank or larger liquidity provider.  This is important to know who is taking the other side of your EA’s trade and are they trustworthy?

● Back Testing – is accomplished by reconstructing, with historical data on the brokerage’s DEMO , trades, how the EA would have performed in the past using rules defined by the EA strategy.  A brokerage’s historical data is important to ensure how your EA will perform in the future with the same liquidity.

● Leverage – The brokerage will offer leverage on your deposit / equity.  Leverage will vary with every brokerage. A good rule of thumb is any leverage under 200:1 maybe an STP brokerage and anything over 200:1 is a Dealing Desk.  This is important to your EA to have enough leverage to run your program along knowing what type of brokerage you may be dealing with.

● Commission / Spreads- The commission is the cost the brokerage implements to each trade.  The spread is the difference between the bid and the offer the brokerage streams to the trading account.  The trading costs are important to your EA as they can turn your successful back testing into a losing EA if the spreads are too wide or the commissions too high.

You have now learned that creating your own strategy or purchasing an EA is just the first decision you have to make when assembling a successful strategy.  Choosing a brokerage or liquidity provider that suits your personal EA strategy needs could be just as important.  This list of brokerage features are just some of the important aspects a brokerage or liquidity provider will need to meet before opening an account for your EA.

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