Eggs, Eggs, Eggs and Trading
January 28, 2015
3 Min Read
At the weekend I visited one of my old workplaces: Coutts Bank in London.I really loved that job, but what came next for me was much more exciting and was achieved as a result of trading. Thinking back to this big transition reminded me that change is good and we should always embrace it.Yet, with trading it sometimes feels like we get change wrong. Either we change too much and never get consistency, or we refuse to change and suffer the consequences.
One area where people need to change was heavily exposed recently. Let me explain.
An Eggs-tremely difficult situation
We are often content with our broker and stick with them through thick and thin, despite them perhaps not being the best option for us. We leave all our eggs in one basket and don’t consider moving them.A lot of people suffered the consequence of this after the big Swiss announcement 2 weeks ago. The knock-on effect of this caused some brokers to go out of business (like Alpari, a big name in the UK). So people who had all their eggs in one basket, suddenly found themselves with egg on their face and in a bit of a problem - scrambled eggs!So enough of the egg talk. Let’s cut to the chase – this is time for all of us to take note. We spend our days measuring risk in the market, but what about the risks we don’t consider or trade? We should be spreading our risk between brokers.If you are choosing a new broker, consider these 9 points:
- Check, double-check and triple-check that the broker is fully regulated in your country and that they are well-established.
- Compare the spreads that are on offer from the brokerages for the assets you usually trade. Usually spreads don’t deviate too far from the market average and typically brokers won’t charge additional transaction fees unless you are trading equities.
- Read the rules on withdrawals from the account. Occasionally some smaller brokers will have rules on withdrawals which can be restricting and misleading.
- Check out the additional charting offered by the broker. In general, well established brokers will at least offer you Metatrader 4 or 5, which is a very solid beginner charting package.
- Use more than one broker and start off small. Don’t deposit all of your money immediately – make sure you test the broker, in the same way that you would test your trading system before committing to it on a live trade.
- If the broker offers a demo account option, trial that account for at least a week before committing real money.
- Preferably speak to a human before opening an account. If you are assigned an account manager, establish a relationship with them prior to opening the account and make sure they are knowledgeable enough to help you if you run into any problems.
- Make sure the broker is optimised for the type of trading you will be doing. Analyse any data regarding slippage and the type of access you will get to the market. If you are unsure about the types of market access, contact me so we can find the best option for you.
- Read reviews of the broker from a number of different sources. Bear in mind that people are more inclined to leave reviews after negative experiences rather than positive, so don’t jump to conclusions, but make sure you research the areas of concern.
This might seem a bit extensive and over the top in some areas, but we are talking about real money here – wouldn’t you rather be safe than sorry? Good trading comes from being diligent… don’t fall short on this area.