Broker to Trading

Forex trading is at its most basic going long on a currency (Forex) pair in the belief it will rise in value and going short in the belief it will fall in value. Forex pairs do not tend to move in straight directions. Rather they can move in a direction then reverse, but with varying extents. This creates patterns on a chart, consisting of moves in a direction and retracements in the opposite direction.

Overall the pair may move up or down, but the retracements within the move creates patterns. These patterns are used to make trading decisions, as a pattern which existed in the past may exist in the future. Thus trading analysis becomes the search for repeating patterns. However what seems like a currently forming pattern, may become something different.

What is seemingly causing the complexity of movement are such factors as support and resistance and changes in the way a pair is valued, from such factors as economic data released into the market.

One form of analysis is technical analysis and it looks at charting behavior. So it could say this retracement for example is caused by resistance which is consequent on a value for a pair being reached, creating a chain of reasoning based on the chart itself. The other kind, fundamental analysis, looks to outside inputs into the market potentially affecting the value of a pair. Both are used extensively in Forex trading. Which to use depends to some extent in on the kind of trading used and market conditions.

Some traders base their analysis and consequent market beliefs on signals given by technical indicators, which may have an inbuilt rationale for the strength of support and resistance - i.e. they provide a tool to say that a pair may retrace or keep going or change momentum.

An indicator to some extent automates part of the analysis, it is like a black box which given an input provides an output with the trader relying on such indicator signals to trade on changes in the value of a Forex pair. The trader can look at the equations of the indicator and see why it is giving this output, but part of the point of using an indicator is to get and use its interpretation. A Forex trader may use indicator data and make their own decisions based on it to a greater or lesser extent, but they can supplement this with other data.

A trader can filter the output of an indicator by various means, including using another indicator which may provide a different view of the market. The trader can also combine both technical and fundamental analysis. Sometimes the market may move too quickly for technical analysis based on indicators, for example in news trading, but there may be a role for technical analysis even here to determine why a pair stalled for example and in the market before and after the news release.

Analysis is about conjectures which may or may not prove to be the case, rather than predictions. Analysis can help teach the trader about the varying effects of changing market conditions on the value of Forex pairs. This kind of knowledge can help the trader understand a trade and its outcome.

Because indicators are rule based systems, their output can be used to make decisions for the trader with a computer program on an online trading platform which supports automated Forex trading. This is automated or algorithmic trading, using robots. Robots just means computer programs which can execute instructions on behalf of the trader. However because the automated trading strategy is relying on rules, a robot can generate losses or drawdown in the trader’s account, even if it eventually turns positive, which it may not.

Automated trading is prevalent in the Forex market. But so is trading where indicators and other tools and data are used by the trader to make their own trading decisions. Platforms which support automated trading include MT4, MT5 and cTrader. All the platforms offered by the top 3 Forex brokers support trading without using robots (some may offers platforms designed to be user friendly for the human trader).

So to choose top three Forex brokers is to arguably to look for brokers which are well established and provide platforms supporting the kind of trading used in the Forex market or to provide particular support for a type of Forex trading (e.g. trading on MetaTrader). The trading platform is the interface the trader uses to place orders, manage a trade and analyse markets.

To use a broker's online trading platform, the trader opens a trading account with the broker. To be able to make a real trade, the trader needs to deposit at least the minimum deposit required by the broker. The trader can also open a demo account and trade with virtual money, to practice trading and familiarise themselves with the trading platform.

Some brokers are more focused on supporting automated trading than others. For example some brokers typically offer infrastructure support for automated trading, connecting traders with liquidity providers, offering tight spreads for more liquid pairs. However there is normally an extra charge made by the broker passed on to the trader, in the form of a commission charge.

Such brokers aim to process orders rapidly, which may suit some automated trading strategies and some higher frequency trading strategies and do this by using co-location of their servers in data centres with the servers of liquidity providers and infrastructure such as fibre optical interconnects, enabling low latency order transmission which can be on the order of milliseconds. These brokers also tend not to use dealing desk intervention, allowing a range of trading styles.

Traders who make their own trading decisions can use these brokers, but they may also find that they want to use a trading platform which is more intuitive and geared to the human trader. While brokers offering these kinds of platforms may not support some Forex trading styles these may be styles more suited to brokers supporting automated trading.

So for the top 3 Forex brokers, Broker to Trading has attempted to represent these different approaches to Forex trading and has chosen XM for its platforms and Cent account, Pepperstone for its high speed infrastructure and mutiple Forex trading platforms encompassing a wide range of trading styles and easyMarkets as a long established Forex broker, with a wide range of online trading platforms and offering fixed Forex spreads.