Having advised you against free online trading software, particularly in the forex market, there are some brokers who are better than others, and indeed this is the way I first started, when I began trading currencies. However, in my case I had two major advantages. First I understood the industry and the associated malpractice that goes on day in and day out, second, I had a large amount of trading capital, and third, I had a clear trading strategy. All of these helped me to survive, as the primary reasons that most forex traders fail is that they are under funded, and have no strategy. The majority of forex accounts are opened with a few hundred dollars, and with forex brokers offering leveraged accounts, sometimes as high as 1:400, then it is little wonder that most traders lose very quickly. This makes it so easy for the market maker broker to clear you account, that it is almost criminal, but so far not illegal, and until retail forex traders wake up and start to understand how the forex market works, then these abuses will continue unabated. I cannot stress too strongly that in any OTC ( over the counter) market such as this, your choice of broker is far more important than the forex trading software you ultimately select, and in using a market maker broker you are putting the fox in charge of the hen house, and you might just as well give all your money to him now – it is easier, quicker and less painful. Unlike the classic brokers found in the stock market, your market maker broker quotes his own prices, as well as seeing all his clients positions, in addition to the stop loss and limit orders, and then promptly trades against you! What could be easier – rather like betting on a race after it has finished or trading on a 15 minute delayed feed. So what’s the answer?

First, do not open an online trading account with anyone other than an ECN broker. This means that all your trades will be matched against other traders, and you will not be trading against the broker. As such you will get the best prices and tightest spreads, safe in the knowledge that you will be trading close to the market. In addition you will be able to use any forex trading strategy you choose, so whether you use a scalping strategy, a hedging strategy, or more complex trading strategies these will all be available to you. Now the bad news of course is that you will have to pay commission on each trade, but this is a small price to pay in my vie and in general will be somewhere between 0.2 and 1 pip per trade. Below I have listed the principle aspects of the trading software, news feeds, charting software and other issues that you will need to consider.

Online trading platform

In terms of the online trading platform, this is likely to be more complex if you use an ECN broker, and will be a world away from the simplistic trading software of the market maker, and indeed will generally have the look and feel of a professional trading platform normally seen in the large city dealing rooms. Having used several such platforms myself, I can assure you that they do take some getting used to, and you will need to be careful not to make mistakes in both opening and closing positions. Some of the terminology used in these proprietary trading platforms may be confusing if you have come from the world of free trading software, and you will need to practice beforehand to make sure you understand what you are buying or selling, how to place limit and stop orders, and of course how to close any open positions.

At present I use two ECN brokers, one who operates a proprietary platform ( Interactive Brokers )  and the other who uses MT4 Metatrader. Both platforms have their pros and cons, although of course MT4 ( which has recently been upgraded to MT5 ) has a huge array of Expert advisers to automate your trading. Personally I am not a fan of automated forex trading, having seen many of these ‘black box’ systems come and go, arriving in a blaze of publicity as a way to finally beat the market, only for them to disappear just as quickly as traders lose money when the market breaks the systems back tested theories, through volatile or unexpected price action. However, the metatrader platform is an excellent package, easy to use, simple to execute and manage trades, and is also very widely supported, so an excellent choice. If you like MT4 or simply want to try a demo version, just follow the link here for a free MT4 demo download from the broker that I use currently.

Online trading news feeds

Most ECN brokers will provide you with a delayed news feed free of charge, but as these are professional trading platforms, most forex traders opt for the real time news feed which is generally from Reuters, of which there are two principle services. The first is the simple Reuters news feed which provides updates on news from around the world, whilst the second is called the Reuters Worldwide Fundamental News feed, which as the name implies provides the latest updates and analysis on fundamental news as it is released. These are crucial numbers of the forex trader, and whilst you may be a technical trader like myself, like it or not, the fundamental news provides the framework against which the market price action takes place every day. In my view both these news feeds are vital if you are to keep in touch with the market pulse and latest news, particularly if you are using a short term trading strategy such as scalping forex pips, or trading/fading the news.

Online charts

I hope I have made the point already about the ‘free’ charts provided by your market maker broker, but if you do need further proof, then simply run two or three other charting packages ( free or paid ) alongside your existing data feed, and you will be amazed at what you see – let me give you a flavour. First, you will see spikes in some charts and not in others, and most likely on your market makers platform. The reason for this is that any market news or volatility allows the broker to take our your positions using his knowledge of where your stop loss has been placed – easy really! Anyone that complains will be told that it was a spike in market data caused by the volatility. You will know for a fact that this is not the case, as it did not appear on the other charts. The next thing you see will be the screen freeze when markets are moving quickly. The ECN broker will simply widen spreads to reflect market conditions as dictated by the interbank prices, but your broker who is quoting a fixed spread will not have this option available, and therefore freezes his online platform, stopping traders from opening or closing positions, whilst he waits for the market to calm. Finally, the forex brokers favourite trick is slippage – in simple terms your order is filled at a price which is worse than that on the screen.

All of the above are compelling reasons that you must have your own data feed which should preferably be from an independent company, and one which only provides live feeds and charts, and has no connection to any of the free online trading platforms or brokers. Check with the provider where they obtain their feed, and how many of the central banks supply data. In general the more the better as this will create greater liquidity, tighter spreads, and tighter alignment to the true market. Sadly. most of us as retail traders cannot afford a direct Reuters feed, or an EBS feed through Bloomberg, with the three biggest being Currenex, EBS or FXAll. All of these will provide you with a price and spread which is very close to those being traded in the interbank pool, but each comes with a heavy price tag at several hundred dollars a month or more, but if you are proposing to trade in large lot sizes then they may be appropriate. However, you should also be aware that many of these are for institutional traders only and the companies concerned will not provide a feed to a private individual.

The alternative, and more realistic option, is to subscribe to one of the many forex charting packages now widely available, and my own favourite at present is that from FXtrek, and I have provided a link here to their site. As you will see there are a variety of alternative packages depending on your trading expertise and budget. The key point is that whatever charting provider you use, make sure you pay for your charts, and do not be tempted to use the free online charts provided by your broker – it will pay you dividends in the long run!

Now one other aspect of online trading that I wanted to mention at this stage is that of so called ‘paper trading’ – a hotly debated subject amongst traders so let me give you my thoughts on this aspect of online trading.