Hey Hey!, it is the time of the week where I like to drop bombs of knowledge on the world. For some people, this blog post might be pretty boring, but to others, this will be a great insight into brokers/exchanges. Over the course of my trading journey, I have been wondering why I still have the same issue.
For many, this is probably still a problem in their trading journey and I want to provide some guidance, where I can.
“Get to the point already” – The Little Big Movement Audience
Damn! ok, I will just get to the point. Market Brokers or exchanges, depending on what you are trading will never be your friend. The sooner you learn this, the faster you can start trading. There are so many traders (even professionals) who don’t understand this. Over the course of my research, I have found a lot of advice from the so-called professionals which have been completely wrong. There are the review sites, which are providing you with reviews to make you click on affiliate links. Of course, no one is your friend and no advice is free, but if you do not understand this early, then you will be losing in the long run.
Now, let us get down and dirty into the juicy information. Within the post, I will break down the key attributes that you need to consider when looking for a forex broker or cryptocurrency exchange. Some will say they are completely different because they deal with different asset classes.
“Well, Sherlock you are wrong!” – Nathaniel
The brokers and exchanges might be providing access to different asset classes but they work with the same business model. It is all about making trading seem/feel easy, providing you with market education and the tools to trade. Yay!, they are my best friend 🤦🏾♂️. That is all they provide and once we start looking at the negative, self-centered and untrustworthy practices that their business model is engineered around you will be thanking me after this post.
Let me write a disclaimer as my blog will one-day be influential with 1000s of views, and these firms will come after me with defamation lawsuits 🤣
DISCLAIMER: Everything I have written above is true and everything below this disclaimer is my own research. Do what you like with the information provided, but understand I am not directly stating any broker or exchange is bad. Little Big Movement is based in the UK and can only speak for exchanges or brokers who provide a service for European/UK (Brexit lol) clients.
Nice and simple, which should keep me out of jail in the near future. Cool, the scene is set, its time for the first act.
transparency? because no exchange has to be transparent to you. When they are, it just looks bad under the hood. Let us start with cryptocurrency exchanges. Like every exchange in cryptocurrency, you can see the live market data from the exchange. This is great but your attention should be within the details. Take for instance the price of “X” cryptocurrency on Bitfinex, Coinbase and let’s throw in a wildcard REVOLUT. 😂 sorry, the last broker/exchange has me cracking up. Please do not use Revolut and here is why. The price for any crypto is wildly different on each exchange and while they are being “transparent”, you could easily arbitrage on these exchanges all day long. The problem with Revolut is that you do not actually hold the Crypto, you are just speculating on the price. They never provide you with the option to move the cryptocurrency which means you can not hold it safe in your own crypto hard wallet 🤯😲
On the other hand, we have missed the small detail. Every exchange has a different price for X cryptocurrency, so if you are only trading on one exchange then you could be getting the worst market price. Trading is not like buying and selling on eBay, the best price matters and always will. This means you have to make the effort to look for the best exchange.
“What about FOREX brokers?” – The Little Big Movement Audience
Well, direct market brokers, which the average trader don’t have access to are taking price and liquidity directly from the global market pools. Price moves so fast that only computers can arbitrage in milliseconds. That means you don’t need to worry? Of course, you do because the retail forex traders get the leftover scraps in price. Damn!, when do we get a break? Never in retail forex trading and it does get worse😲🤷🏾♂️. Let us have a look at the January 2nd 2019 flash crash on two so-called transparent brokers (FXCM vs OANDA)
“On January 2, 2019, a flash crash was seen in the value USDJPY and AUDUSD, which dropped more than 4% in a few minutes.”
“The lows reported on USDJPY also varied with Reuters reporting a low of 104.90 on USDJPY while FXMarketAPI reported a low of 104.45.”
These extracts were taken for Wikipedia and already highlight that forex prices do not have any set standard across different market makers/brokers data 🤦🏾♂️. Now when we compare FXCM against OANDA we can see the difference once again.
There is a 16 pips difference in the lowest price of the flash crash. If you were trading on FXCM you would have been worst off than traders on OANDA. Now before you go running around stating that OANDA is better than FXCM, you should look at the charts of both brokers and compare sharp moves or overextended prices. What you will find is at every turn there is a point where one broker does better at handling the market conditions than the other. This is why they are not your friend, because they pick and chose when they feel like they should protect you based on their interest. You can not avoid this and I have checked the prices for this flash crash on a private broker (IG) who don’t freely publish their charts without registering for a demo account. Same “shizzle” and you can not hide from volatile markets, but it does not help when brokers magnify as and when they deem fit.
Number 2 – Mr Volume. This is the key to any traders success in a market. No liquidity in the market and volatility will just cause chaos, with traders struggling to get in and out of trades. Cryptocurrency exchanges are known for faking volume so they move up the rankings on coinmarketcap.com. Just do a google search for 2019 cryptocurrency fake volume and I am sure you will find a number of articles relating to this topic. On the other hand, Forex brokers cannot control their volumes. The more clients who trade on their markets, the more volume which can be seen. So, let me clear this little issue up very quickly if you want to do your own research. Just compare the exchange’s volume using the volume indicator, which most exchange or broker charts provide and see for yourself what exchange has the most money traded on it. There will be some huge difference when you are doing your comparison, but remember that the exchange/brokers which are not in your top 3-4 for the highest trading volume think twice about 👀
3. Demo Accounts & Fees
The demo accounts and fees go hand in hand. They will never truly be transparent unless you are actively trading on the exchange. The only way to do this is to be able to open a demo account. Demo accounts enable you to place free trades against live market data. Cryptocurrency exchanges will not allow you to open demo accounts. In my eyes, you don’t really need to as their fee structure is fixed and very transparent. Forex brokers are the shady bunch who will let you know that you pay by the spread, but they also have complex holding fees for placing long term trades or commissions on trade execution. There is no way I could attack any one of the brokers on my blog as there are pluses or minuses to each fee structure based on the type of trader you are. So my only advice here is to pick a broker which will give you UNLIMITED access to a demo account. Remember Brokers are not your friend. When they only give you 30 days for a demo account they are indirectly stating they do not have your best interest in mind 😥
You need to spend more than one day looking for the best exchanges or brokers. The 3 key attributes you need to consider will give you a head start against all the other traders who have not done there due diligence. All you need to do is follow the steps below.
- open up a few demo accounts with forex brokers who provide you with unlimited demo access
- Compare the way EUR/USD & USD/JPY & GBP/USD moves on each chart for every forex broker you can possibly gain access to. Also, look for any flash crashes in the past.
- Compare the volumes on these charts and make sure you always have access to the broker which has the most volume. You can use the demo account for the understanding of market volume analysis.
- Place the same random trades on each broker you want to test and understand the cost of Intraday trading or medium to long term trades.
And that is all folks, this should enable you to figure out which broker is the best for you and what their REAL pricing structure is. To be honest this could take a day or might takes weeks, but in the long run, you will save money 👊🏾