17. Reducing Broker Risk & Cost
Another significant risk to the aspiring trader relates to your broker, and the fact that finding a good broker is almost as important as finding a good trading system.
Trust me on this one!!!
The four biggest problems with forex Brokers are:
A way around these problems is to keep the minimum possible balance in your account, split your money between a couple of brokers, and only trade with a broker you trust or with whom you have done due diligence.
If you have $10 000 to trade with for example, then using my 1% rule you should be risking $100 per trade. You can easily risk that amount per trade with a $1000-$2000 account.
If you were to maintain two separate $1500 accounts for example, you can easily trade a $20 000 account using $3000 and you have only risked $1500 in total at a single broker!
Without the massive leverage that forex Brokers provide, you would not be able to safeguard the majority of your funds from your forex Broker.
You should use the leverage to your advantage to protect your money, rather than using leverage the way most people use it, which is to take too much risk in each trade and blow up their account.
My system involves trading many markets beyond the majors, so it is important that you trade with a forex Broker that provides good spreads.
It is hard enough to trade profitably without giving more money to your broker than you need to, or trying to profit from a broker who actively frustrates your attempts to trade profitably.
The unfortunate reality is that while spreads in general are improving due to recent growth in the numbers of people that want to trade forex, most brokers charge more than is reasonable, so much so that even my system might struggle to be profitable if I traded with many of them.
Keep in mind that the difference between a good broker and a bad one can be 100’s of % difference in transaction costs.
Over the years I have come to have several favourite brokers, but my most favoured broker is Global Prime.
Global Prime is sufficiently large, has been around for long enough, has tight spreads and has provided me with good support.
I recommend you do your homework when it comes to finding suitable brokers to work with, and keep in mind that from my experience most brokers should be avoided!!
A site which may help you do your research is forexpeacearmy.com. I want to repeat that my choice of brokers comes from many years of trading, but it also comes from discussions with well-connected institutional traders.
You should still however do you own homework, and remember to keep your trading account as small as possible (given your overall trading equity) whoever you choose to trade with. I have attached a link to Global Prime below.
