Spread and slip: what will help circumvent them
For a trader, an important point in making a profit is to fulfill all the necessary conditions that allow him to increase his profits and increase his capital. These conditions must be based on the current market situation, and a broker, which is a kind of “bridge”, is between it and the trader. Unfortunately, it often happens that fix apiforex brokerage companies introduce a number of restrictions or hidden commissions that distort the result from trading.
The most popular types of trading condition distortion are the markup of brokerage companies on the financial asset, as well as the delay in the order execution, which were called “spread” and “slippage.”
Spread is a difference between the purchase price and the sale price of a financial asset. But brokers can intervene in this process and expand its value. For example, if the value of a currency pair on the real market is 1.1450 for sale and 1.1448 for a purchase, the spread is only 2 points. But the broker establishes a mark-up of 2 more points and then the deals are executed at prices of 2 points distinguishable from those on the market. Thus, these 2 points will be a direct loss for the fix api trader and at the same time will be a profit for the brokerage company.
Slippage is a delay in the execution of trading orders for a few milliseconds, which is enough for the price to change, and the deal is opened under other trading conditions. Slippage occurs when the trader opens a trade. Due to this small delay, the trader’s financial result is reduced, since the opening price will differ from the planned value. And the point here is not in the brokerage company, but in the very principle of order execution because of what there is a delay. The transaction is sent to the broker’s server, after which the broker sends it to the server of the liquidity provider, and only then the prime broker executes it on the market.
These two negative moments are the most popular types of distortion of the trading activity result. However, there are ways to circumvent these negative aspects:
- Trade directly through the prime broker. This will allow you to faster execute trading orders, which will reduce slippage and due to the fact that the prime broker gives market conditions, he will not set spreads and other mark-ups, which will not lose several points of profit on spreads. But you need to remember that to open an account at a prime broker, you need a lot of capital and you need to be prepared for big commissions for trading in their service.
- Use special software. The market already has software that allows you to connect to the prime brokers’ servers, yet to trade through an ordinary brokerage company. For example, this fix apisoftware (http://forexzzz.com/product/fixapi-zzz/) allows you to trade in the accounts of an ordinary brokerage company, but receive quotes and trading conditions in the prime broker. Thus, the program itself serves as a bridge and connects you to the supplier of liquidity. This allows traders to trade manually on their fix api account using available order types: FOK, IOC, GTS and with algorithmic functions such as: move the stop loss to no-loss level, transfer profit to no-loss level, use trailing-stop, etc. You can view and analyze the market’s depth (several affordable price/volume levels). Also, this software can be integrated into the fix api MT4trading platform.
Spread and slippage are not new types of negative interference in the fix api traders’ work. But the automation of the process, as well as the development of information technology, today allow to circumvent these moments in fix api trading.