When you look at foreign exchange trading and large capital building within long term periods it truly becomes evident that several problems arise as the amount of money you trade becomes bigger. It also becomes evident that as you have more capital the regular trading conditions of retail forex brokers become less ideal than what you can get with your capital and therefore the necessity to move to another broker and completely change your software implementation becomes evident. For example once you have captial between 100-200K it becomes clear that you can trade through a direct Currenex broker feed so why would you want to trade through an MT4 broker who offers far worse trading conditions?
I have given this subject a lot of thought and have searched for brokers that allow the flexibility to trade from MT4 when capital is low and then change to more reliable implementations as your account grows without the need to have to change your broker with the ability to have inter-operability between the different stages. The only broker I have found which fulfills all these characteristics which would allow trading under ideal conditions from thousands to millions of dollars seems to be Dukascopy. On today’s post I am going to share with you why I believe this is the best broker for capital building, the problems that arise when capital grows and how this broker allows us to go beyond them.
When you start building a lot of capital by trading two things becomes clear. You have taken a lot of profit from the market and therefore regulation which guarantees your ability to withdraw or claim your funds is paramount and you can access better trading conditions on the market because you can fill larger order sizes. The first point implies that as capital grows it makes sense to move towards more regulated brokers and that it also makes sense to move towards brokers which have better trading conditions (move away from MT4, get a direct FIX protocol API, etc). However wouldn’t it be nice if you just had a broker which was well-regulated which allowed you to move into more “big boy” solutions as your capital grows?
This is exactly what I found with Dukascopy. This is a swiss bank broker regulated by the swiss regulatory agency which provides you with the comfort of high banking reliability and fund safety. Dukascopy also has some additional safety features, for example if your account is greater than 250K they will allow you to keep your funds on a segregated account which you can withdraw from directly, just as you do from your regular checking account. This broker offers a lot of capital safety which is the chief requirement for a broker in which we would be willing to trade from thousands to millions.
The second thing I like about Dukascopy is that MT4 is available (although right now a pure MT4 is only in beta) through a bridge to their JForex trading platform which is a java solution to execute trading strategies and manual orders. This means that you can trade through MT4 when your account is small (they allow you to trade down to 0.01 lots so you can probably trade moderately sized portfolios from about 3-5K) and you can start moving to a direct and independent software solution based on their direct JForex platform API which allows you to connect directly to the platform’s servers to execute trading strategies. What does this mean? It means that you can probably run even large account number and complicated setups from a much more reliable Linux VPS with very little memory/processor consumption and the ability to do much more complicated calculations. The ability to have a direct client API is priceless and becomes a necessary component of added reliability as your account starts to grow.
Once your accounts reaches a larger size (probably around 250K) you can start to move away from this JForex API and move towards Dukascopy’s direct FIX API which allows you to have direct access to the Forex Interbank market. With this API you will be able to execute your trades just in the same way as the “big boys” do. You will be able to have very fast execution speeds and you will be able to get access to second level market depth and use it in your trading systems. This means that at this point you will need to implement liquidity handling functions and make your EA escalate its positions for partial fills if you need to enter the market at low liquidity times. Using a direct FIX protocol allows you to trade basically towards even billions of dollars in capital as your access to the market will be direct and you will have very good trading conditions which you would never have on an MT4 broker (where people rarely trade more than a few million — and that is rare).
Dukascopy is therefore my favorite broker for capital building because it allows you to move “up the chain” starting from the very basic tools retail traders are able to use (think MT4) up to a more advanced direct JForex API and finally to a much more reliable direct FIX connection which allows you to reach a higher level of reliability. On top of that Dukascopy gives free access to their tick data feeds so you could use this data to run adequate simulations for strategies which depend on very small time frames (since you will be trading under the same broker this data can be used for this purpose, although NOT in MT4!). This broker allows you to have the flexibility to use MT4 and then move to direct APIs, something I haven’t been able to find on any broker. The great advantage of Dukascopy is its intermediate JForex API which allows you to “close the gap” between MT4 and a FIX API (which requires much higher capital).
In the future – as Asirikuy migrates to something in the lines of a trading corporation – we will most likely trade our funds on this broker (or one with the same characteristics). There is also the added advantage of being able to open PAMM accounts after getting an approval from the Swiss regulatory authorities. If you would like to learn more about my work in automated trading and how you too can learn about the wonderful world of algorithmic trading please consider joining Asirikuy.com, a website filled with educational videos, trading systems, development and a sound, honest and transparent approach towards automated trading in general . I hope you enjoyed this article ! :o)