An elightening experience

Here I am, trying to blow two seperate demo accounts, in order to practice with funds that truly reflect my real capital. One demo is a broker that makes their profit from commissions, the other is a broker that makes profits from their spreads. In order to purchase an equal amount of the same currency with a broker that profits from speads is VASTLY more expensive (about 5 x’s more) then a broker who charges commissons. I was aware of this fact, but it is strongly demonstrated in my current excersise. Just a note to those in the search for a broker…

Yes, a spread broker can be more expensive. But, do the math when a trade loses. Add a string of losers + commission, then the commission broker becomes more expensive.

I demoed a broker who charged commission, think it ws MB. Commission ended up working in favor on wins, but could really hurt on losses.

Calculation wise their commission added up to a pip, but that pip can really add up. Also, take into account that the commision guys still have a spread. Which, I could be wrong, you still have to overcome for profit. So, you not only have to overcome the spread to profit, but also the commission.

Not knocking either type of broker. I just found trading at IBFX, a market maker that takes the spread, easier to calculate and account for wins and losses.

Ive known those spreads are less than the losses you would get if you do it by yourself. Think about it, they are pros and you don�t have enough experience to do it.

Huh? What are you trying to say? Enough experience to do what?

the old arguement concerning commissions vs spreads is beginning to become just that ------- a VERY old arguement !

as Phoenix notes, with the ECN setup, you pay commission AND THE SPREAD, and you will find their spreads are not always the smallest around !

the forex world is changing quickly, considering just a few years ago, none of us would have been talking or engaging in it ---- the higher end charting programs have all been equaled by what was once the “lower end” (MT4 in particular, which is way ahead of tradestation with “ready to wear” indicators and EA’s ---- brokers are now in competition with each other, which lowers spreads and creates more honesty and transparency, and the weak will fall away, leaving only the top dogs who have PLENTY of liquidity.

the biggest advantage of an ECN AT THIS POINT, is you dont have to consider the “broker” in the equation of whether you win or loss, as no ECN that i know of, will hunt stops or play games with you !

they simply want you to trade, giving them their commissions, and they dont give a rats rump if you win or lose, as it is simply not a part of their business methodology !

I believe it gets better and better, UNLESS we get regulated to death, with requirements of $25K to open a margin account (the SEC did that to the small trader back in the 90’s when they went over to decimilization, ostensibly to keep the small guy from getting into margin difficulties, but actually to chase away the real “scalpers” who were working with hardly any equity !

SO – maybe it gets better as far as “solid” brokers, but hopefully the small retail broker doesnt get chased out of the game as they throw the baby out with the bathwater !

btw — although youre doing the math and etc, i DO NOT believe the multiplier you come up with for differences between ECN’s and brokers on the cost of trading — at this point, its getting pretty dang close to each other, and what differences there are do not become part of the equation at the equity levels most of this site works at !

[B]EDIT ---- one thing i did forget to mention, and this can make a difference with some of the math ---- the ECN’s tend to run a currency pair out to 5 digits, while on some pairs the broker only goes out to TWO digits ---- THAT is a large amount of money that “could” be lost to the broker, although figuring ALL the combinations would drive one nutzoid ![/B]

enjoy and trade well

mp

[B][I]Within the great hall at Elfinore stands a wondrous coffer, precisely four cubits square and securely latched against the outside world. Inside that repository, shut away from impertinent eyes, abides many an intriquing trading secret garnered from around the world and over the ages !

As a child, i used to watch from the darkness as the secrets were debated and annotated by the elders. No one there held a single thought of my presence – BUT I KNOW WHERE THEY HID THE KEY !![/I][/B]