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How forex brokers compete with each other

forex broker competitionYou might know by now that the retail forex industry is literally flooded by numerous brokerage companies. With the competition so tight, brokers are required to look at unique ways in order to create value and attract new customers to raise their market share. Almost all forex brokers offer nearly the same set of trading instruments, which make all of them similar. But this is where the similarities end.

In this article, we will look at some of the things that forex brokers use to attract customers. For you, as a trader this means that you can take advantage of such features and get more value from the forex broker you trade with.

Trading conditions

Trading conditions are probably the best place to start as this can easily help you to filter out uncompetitive forex brokers. Trading conditions such as spreads, commissions are important. These are recurring fees for the lifetime of your trading account with a forex broker.

Therefore, looking at the trading conditions is a best place to start. Now a days, traders can find various FX broker comparison tools to see real time spreads and fees. This can show you how competitive a forex broker is and whether you are getting a bang for your buck.

Choice of instruments

Although this is a retail forex industry, let's face the fact that sometimes variety is good. Not all forex brokers can afford to give you a wide choice of instruments. But the few forex brokers who do can really set them apart. Offering additional trading instruments such as European equity index CFD's, U.S. equity CFD's along with some commodity futures can be beneficial for traders who are looking to trade other assets besides just forex.

However, this is not applicable for all. There are still quite a few traders who are happy with just a few forex currency pairs or only a select list of assets that they want to trade.

Negative Balance protection

After the Swiss currency shock a few years ago, many traders ended up having to owe money to their brokers. This led an industry wide shift with forex brokers coming out with something called a negative balance protection.

This feature now widely used as a market tool ensures that you are never in debt with your forex broker. Once your trading capital falls to zero, your trades are liquidated.

Some traders might brush aside the concept of negative balance protection, but the fact is that in the event there is a repetition of a similar event or other events that could lead to market chaos, having a negative balance protection can come in handy.

Execution model

The forex execution model has also started to become one of the things that brokers compete on. With the negative connotations associated with a dealing desk or a market maker type of model, more and more forex brokers are moving to an ECN or a no-dealing desk type of model.

Usually, you can find such forex brokers advertising and taking pride in their execution model using phrases such as we do not trade against our clients and other similar advertising terms.

As a trader, it is up to you to decide what works best for you. Most of the ECN forex brokers have a market up on the spread and also charge a commission. The question for you as a trader is if you are willing to pay higher fees and commissions merely to have your trades executed STP.

Trading platforms

The more fancy a trading platform is, the better the chances of traders signing up to get access to them. Now a days, there is no dearth of trading platforms. Most of the forex trading platforms are available free of cost.

You only need to sign up and create a trading account to be able to start using the platform. Besides the MT4 and the MT5 platforms, there are numerous other trading platforms that are available. Of course, when you choose a unique trading platform, chances are that you might struggle to find developers who can code for you.

This is a trade off that you need to choose. On the other hand, there are some unique trading platforms that offer advanced analysis and trade and risk management strategies that are often found missing on the more popular trading platforms available these days.

Value added services

Some brokers go even further and offer value added services. These services of course come at a higher cost; meaning that you need to make a higher deposit and execute a certain volume of trades to get access to these fancy services.

Some of the most commonly offered value added services include:
• Exclusive access to analysis and trading signals
• Discounted pricing for premium news feeds
• Free VPS solutions and many more

If you are an active trader and execute a high volume of trades, taking a look into the above features can provide additional benefits for platforms

In summary, as competition continues to rise among forex brokerages, you as a trader are at an advantage. By doing your due diligence, you can certainly find a forex broker that offers the right set of tools for you without any additional costs.

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