How World Forex Broker Prices Affect Performance
Both the types of forex brokers found around the world and their policies are diverse. For a simple illustration, different trading performance will be caused by different broker price ranges. In other words, whether you win or lose can vary greatly.
Additionally, each international forex broker has its own policies, resulting in variations in the trading performance offered, including the trading signals, analysis, and software used. The fact that the forex market is decentralized is crucial.
Each broker, for instance, simultaneously denotes various liquidity providers, trading volumes, and prices. Whether you use trading signals or EAs, all of these variations can lead to varying trading performance.
Price Differences in World Forex Brokers
Most traders must have done their research on which forex brokers around the world can accommodate their trading styles and personalities. A reliable forex broker won't be able to save traders from failure, but at least they won't hurt them and will always give them helpful trading advice.
The price variations among the internationally regulated forex brokers have generated a lot of debate. According to one study, there may be a difference of up to 1.09% between the highest and lowest prices from various brokers.
Even though that might seem like a small percentage, what if one pair moves up to 100 pip increments at once? A 1% difference, for instance, is roughly equal to 0.5 pips if a pair moves 50 pip in a single day. Who cares if there's more?
This distinction frequently applies to licensed international forex brokers, and with smaller brokers, the distinction may even be more pronounced. When using short-term time frames, the effect of a 1% difference in price movements between brokers can be even more pronounced.
A one-pip difference on a one-hour chart can be translated into 4.85% of an hour, 7.2% of an hour on a five-minute chart, and up to 21% of an hour on a one-minute chart.
Consider a scenario in which the price fluctuates 5 pip on average for brokers in a minute, but 4 or 6 pip on another broker. This indicates that a pip's worth of variation represents about 20% of the market price offered by other brokers for the same pair.
Since forex is a decentralized market, the variation of the difference is undoubtedly different for each broker. There is a presumption that brokers will continue to offer deals that are worse than others and aren't any better than they were before.
A 0.5–1 pip difference between some of the forex brokers in the world at any given time is not unusual. There are both short-term and long-term negative effects that traders can anticipate if they select a broker who frequently offers outrageous deals.
Broker Affects Trading Profit
Simply put, a trader's level of trading profits can be greatly influenced by the broker they select. A difference of every single pip indicates that there is a difference between the stop-out position and the position in the trade, or it could be a missed target, especially when opening short-term trades (using 1-5 bars, for example).
For instance, if a trader takes a position that is too large, a small miss could result in a stop-out, making the strategy unsuccessful. The outcome might be essentially the same even if the price changes by a few pip on another broker because the difference is so minimal.
Long-term traders may experience slippage, stop-outs, price reversals, and other unfavorable circumstances if forex brokers around the world lack the liquidity to control the bid and ask prices offered.
Trading robots, automated trading, expert advisors, and similar tools are the traders' next course of action. The majority of traders will not take into account these short-term strategies, which typically can only be used for one or several brokers, even though it will initially not work well and appear to be spending money.
Therefore, there are other factors to consider besides the variations in pair prices among foreign exchange brokers globally. Some brokers frequently experience the problem of latency, or the time lag between placing an order and having it executed. This indicates that on brokers without latency problems, the price of the order will vary.
But once more, these variations may affect a trader's performance. Your choice of broker may not support automated trading strategies or something similar if they are slow to execute orders.
A trader may be able to enter at 1.52502 when the signal advises buying on a breakout at 1.5250 and the signal provider is a global forex broker with the ability to execute trades quickly. That indicates at a pip level 2/10 of a pip above the breakout.
The price taken may be 1.5251 (one full pip above the breakout) or 1.5152 if the broker lacks liquidity or takes too long to fill orders (two pips worse above the breakout). A difference of 1-2 pip is obviously substantial in short-term trading.
The results are obviously much worse if this is done on multiple trades, and traders will not make the anticipated profit. It's the same as opening the trade yourself but acting on the signal after it's too late, which makes it very challenging to turn a profit.
Broker Influence to Trading Strategy
Basically, traders must be prepared to change their plans and choices depending on the broker they select. For instance, traders need to be able to adapt in order to accommodate broker policies if they want to base short-term decisions on the findings of other traders' analysis.
It is important to keep in mind that international forex brokers frequently set different pricing policies depending on the law and the extent of their offerings. Selecting an unregulated broker is a bad idea because it means that there are fewer sources of liquidity, which will lead to more latency problems and price discrepancies.
Therefore, it is crucial for every trader to research the broker and avoid attempting to open a trade with a broker that other traders have recommended. It's likely that the price levels shown on a forex chart and those shown by the broker will differ.
If you believe that you are unable to offer prices that are reasonable, consider using a different global forex broker. Similarly, if there are high and low price variations that are clearly distinguishable, the broker may have an issue that affects trading performance.
Of course, spreads and commissions must still be taken into account because they have an impact on gains and losses. It stands to reason that it will be more difficult for traders to turn a profit the higher the commission and spread. Additionally, use the same broker every time you open trades and test your strategy.
It's best to wait before putting blind faith in a strategy that another trader is testing. To see if the results are identical, try performing the same test with different forex brokers around the world.