When you are dealing with the Forex market and you’re not trading alone, but rather have given the control of your options to a broker, you can end up traveling down one of two major roads. The first is one of calm and collected reasoning, where you’re getting strong returns on your investments and all parties are getting compensated for their work. The other is one of devious plans where a broker is taking advantage of the slight changes in currencies and taking more money out of your pocket than returning on the investments. Finding the discrepancies in the numbers can be difficult since many of the transactions are often fractions of cents that are minuscule in scope, but add up rather fast. That’s why it’s important to know 4 metrics when utilizing a broker for Metatrader configurations. The following should help you get a little bit more well rounded with the system.
The Spread – This can confuse many people, as there is several different definitions that play into the spread and can cause havoc for traders that aren’t paying attention to what’s going on with their investments. Often times giving brokers too much power can lead to issues with this. The spread is a matter of differences pointed to the bid and ask numbers. It’s between these two points that a broker gets paid, that is if movement is made. If no movement is made a broker makes money (the spread), it’s a slippery slope here, which is why it’s imperative that you not just close your eyes to activity being done in your account.
Slippage – Slippage matters greatly, and when you’re dealing with this marketplace it can mean the difference between .0010 and .0015 depending on the volatility of currencies. This once again can seem confusing, and it’s really a matter of understanding time stamps. The time between placing orders and fulfillment could see shrinking returns, purchases and sales. If there’s even the slightest delay between order placement and fulfillment slide in the value could prove detrimental. This is another dangerous thing to give your broker full control over, so be careful.
Ping Times – When dealing with ping times, you have to monitor the connections yourself. You cannot afford to allow the time between order and fulfillment to slip so you’ll need to be aware of the connect speeds at all times. “MT4” will not do it for you and a broker is not responsible for this, you will need to do this. Milliseconds could prove slippage rates rise, so in that regards take time to investigate the speed of your connection before any given trade and document when you are at pinnacle speed.
Execution Quality – You’ll need to look into the quality of execution that you’re dealing with. Quality means everything because it impacts the returns that you can gain from investments. Always look into the trade process to ensure that quality is met at all times, otherwise you could end up with latencies, slippage that is high, and ping times that are slow.
The above terms are just some of the things that you should be aware of so that you’re not losing money through Forex. This is especially true if you’re relying on brokers to make moves financially.