Discuss How true broker comparisons are?

[ajbozdar]

Greetings,

Below is the comparison of OctaFX with other brokers available on their website. octafx.com/company/advantages/#summary

I'd like to know how true it is? At some point, it is obvious that slippage and delays occur when a trader executes a trade.

I compared a live OctaFX trade with a demo IC Markets trade of same pair and found out that there is a huge difference of profits. Not only OctaFX spreads were wider than IC Markets but also profits were lesser.

In general, I want to know how to correctly compare one broker with another one?

Thank you.

 

[Pharaoh]

There are some very bad brokers out there, so even a terrible broker can favorably compare itself to some unnamed little bucketshop that cheats clients badly.

You need to make sure to check spreads and include commissions (if present). I've seen more that one "ultra-thin spreads" broker make up for that by slapping commissions equal to 2 or even 3 pips on trades. Similarly, some of the "smallest commission" brokers end up with wide spreads (or serious negative slippage).

So, you must be sure you are taking all trading expenses into account. Sometimes, this requires live side-by-side testing.

 

[ajbozdar]

Sometimes, this requires live side-by-side testing.

Thank you very much for the support, Colonel.

I am comparing some brokers using their demo accounts. In addition to above trading expenses, deposit and withdrawals are also big concerns when it comes to traders in developing countries.

A trader who somehow manages to make 500 USD a month then ends up paying 20USD + conversion charges when it comes to withdrawing the hard earned money.

some of the "smallest commission" brokers end up with wide spreads

How much is actually the smallest commission? Is it 7 USD per lot round turn which AU brokers usually charge to their clients?

 

[Pharaoh]

Commissions and spreads vary from broker to broker and even by account type within a broker. Plus, you need to keep an eye on slippage. Be aware that demo trades never get anywhere near the real market, so demo can only be used as a very early filter of a broker's performance. If demo is bad, live is likely to be bad. If demo is great, live may or may not be good.

If you are buying for longer term trades with targets of 100+ pips, then swap rates become much more important than costs to open and close the trade. If you are planning to make multiple trades only lasting for minutes or hours, then swap isn't important, but spread, commission, and slippage all become critical to maintaining profitability.

Conversion charges are another issue. If you can get an account denominated in your own currency and the broker supports deposits/withdrawals in that currency, this saves headaches. Otherwise, no matter what the broker's website or support techs say, you may find yourself in for a "learning experience" when depositing or withdrawing.

 

[ajbozdar]

swap rates become much more important than costs to open and close the trade

This is something I am working on these days. However, I see that most of the times swap rates/admin charges are higher with brokers who have multiple regulatory licences.

Conversion charges are another issue.

One way or other, a retail trader cannot save himself that easily. If the account is using the local currency, the trading pair will still needs conversion. I assume overall costs for a retail traders would still be higher.

 

[Pharaoh]

This is something I am working on these days. However, I see that most of the times swap rates/admin charges are higher with brokers who have multiple regulatory licences.

One way or other, a retail trader cannot save himself that easily. If the account is using the local currency, the trading pair will still needs conversion. I assume overall costs for a retail traders would still be higher.

Sadly, sometimes the only way to find out all the fees is to open a small live account, deposit money, place few trades (including some that rollover - avoid doing that on Wednesday because that's when most broker charge triple swaps), and then try to withdraw some of the money. Learn as much as you can about the broker before doing this.