A few weeks ago I did a survey among the Golden Goose course members and I got lots of useful feedback. Some things have been mentioned very often, for example the term “Burned money”.
Every trader has burned money in the past I guess. And there are a few things, one can not influence. For example the Euro crash or what central banks decide.
However there are also some awful trading traps that one can avoid easily, once you know them. These traps are the topic we are talking about now, because I think nobody needs to lose money because of them.
Trap 1: trading cost
Often underestimated trading costs are the one thing that can even mean creeping death for a working trading system in the long term.
I fell into this trap myself and have paid unessecary swap fees for a long time, because I thought that cost would be unavoidable.
But far from it, there are definitely good brokers that can exist without swap fees and do only charge for commissions instead. My current main broker does take 7 percent for profits only and that is far, far cheaper than what I had to pay for Swap before.
If you don’t know about the term Swap, it is a fee that most brokers charge for keeping overnight positions. And most brokers claim that these costs are not negotiable.
Indeed most established brokers do offer trading accouns for people that do not want, or are not allowed to pay or gain interest, maybe because of their religion.
Once I knew that, I looked for websites that list and review several brokers. One of these sites is ForexPeaceArmy, another one is Brokerbewertungen.de
Of course there are lots of opinions and reviews on these sites that might be not the absolute truth, maybe because people have lost money and are convinced it was the brokers fault.
But you will find a huge variety of offers listed that you can use for further examination. Here is, what I did.
I was looking for brokers that support automated trading with MQL4, do not have restrictions for my trading style, allow lot sizes of 1 Microlot, do not require big deposits or huge trade volume and are regulated.
The keyword here is MIFID regulation for me, see the definition in the show notes for this episode.
That sorts out a lot of that list and I took a closer look at the remaining offers. Doing that, I found some more differences that I had not thought of before. For example if a broker offers demo accounts without restrictions in time or quantity.
I found two further aspects that are useful for automated trading. There is one broker supporting MQL4 and MQL5 and two brokers that offer cent accounts. I do trade real money with both brokers.
I will include these both weblinks in the show notes for this episode on TradingTutorialAutomation.com
(Attention: both weblinks are Affiliate links and I will get a commission when a contract is signed. If you want to avoid that, you can also google the websites and get your own picture from that.)
Besides Swap, Spread is another expense factor. Spread is paid when you open a position, because you will always get it a few points behind the current market price. If you are behind more than a few points, your broker might charge you a to hefty Spread.
Another hidden cost trap is transaction cost. Some brokers strike hard as soon as you want to transfer money away from your account. Often the exact bonus offer a broker used to gain new customers does not allow to transfer that money later on in your favour.
Take your time and try several brokers. Check out how the support responds when you ask uncomfortable questions. In my opinion the time it takes to find your own perfect broker is one of the best investmens you can make.
Whatever your decision for or against a broker might be, protect your trading profit against the first of our five awful trading traps: high trading cost!