Why you don’t need broker with the lowest spreads

Algofxsolution

Algofxsolution.com Representative
Messages
11
One of the advantage of Low Frequency Trading is robustness for conditions in which you trade. Trading styles like scalping are too sensitive on market conditions and results similar to backtests are really hard to achieved. In Low Frequency Trading is situation totally different.

There are many reasons why is LFT more suitable for retail traders like probably you. In our approach to LFT, we use bad conditions in average for developing automated trading systems. You can see many presented backtests with ridiculous fees for trade. Real market is too dynamic and you are slipped many times on trade entry or trade exit. So you should calculate with this nature of market and calculate with bigger fees on trade in average.

For example on EURUSD our developing process calculates with expenses (spread + fees or slipps) about 2.5p to 3p. For most of time it is far more over than in standard conditions. That is very important for achieving similiar results as in backtests. Yes, there are times when spread is bigger due to news release. This is another reason to use LFT systems which can better absorb these situations and possible bigger expenses on trade due to slippage. Think about scalp trading in these situations. How could you calculate with a bad execution when you really need a very good execution to achieve the same results as in backtests?


Source: oanda.com​

On Oanda recent spreads chart you can see how many times within week is spread bigger due to some events like news release. LFT principles will help you survive this nature of markets.

Sure, low expenses are great so If your broker offer low cost on trading – good for you. But your trading should not be addicted on these conditions. Another advantage of not addicted on low spreads is that you don’t have to make compromises to choose broker only due to low spreads. Far more important thing is security of your funds or fair trading conditions from your broker.
 

ele020

Private
Messages
29
i dont agree with this fact. I am a scalper and what matters to me the most is tight spreads. I am happy to pay commission but spreads are big no to me.
 
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