Tips: Select a Social Trading Broker
Your broker is the actual company which is going to hold your money and execute the buy and sell signals from the traders you follow on the social trading network. Unfortunately we’re not in a position to test and review every single broker. However here are some useful tips to consider when choosing a social trading broker.
Which social trading network did you choose?
eToro, ayondo, IronFX, CM Trading, Tradeo, Gallant, CopyFX, InstaForex, CopyOp:
If you’re using these social trading platforms you don’t have a choice, as your brokerage account will be held with by the same company as well (i.e. they act as broker too).
You can use their own broker AAAfx, or one of their supported brokers (view full ZuluTrade broker list here).
Tradency, Myfxbook, MyDigiTrade:
You have to choose from their list of supported brokers.
In what currency do you want to keep your account?
Brokers will allow you to open and manage account in the currency where the broker is located and often in a number of other currencies as well. Many investors like to open their account in their base currency and hence this may dictate the choice of your broker.
What is the spread the broker charges?
The spread is where the broker makes most of their revenue and this normally differs between brokers and currency pairs. The smaller the spread, the cheaper each trade will be for you.
Are the broker spreads fixed or variable?
A “fixed spread” of for example 2 pips on EURUSD trades means that whichever time of the day the difference charged between the buy and sell price will be 2 pips. Some brokers though charge a variable spread. This means that they’ll widen/increase the spread when the markets are volatile, often around news releases or stock market opening and closing times. Fixed spreads are normally considered to be better.
What are the carry over fees?
These are the commissions the broker charges you for leaving positions open over night or over the week-end. The lower they are, the cheaper it is for you.
What is the slippage between the broker and the social trading network?
One of the main broker variables of slippage is the trade execution time delay. I.e. how quickly after a trader executes a trade in their own account, is this trade copied in your account. In our experience this ranges from sub-second to over 1 minutes. On average it’s probably 1-2 seconds, though it can vary depending on the time of day. Because the price normally changes all the time, the longer the delay, the higher change of slippage.
ZuluTrade does show a graph with the broker slippages on each of the profile screens for each trader on their network. This is very useful.
What are the platforms and tools the broker offers?
Each broker will provide you with an interface which you can use to open/close trades and manage your account. This can be via a computer application (e.g. MT4), a web browser, a mobile phone, iPad and/or tablet app. They may also provide additional charting tools, research and Forex news. However, if you’re only going to copy and follow other traders, you’re normally not going to use these applications.
What are the broker social trading network commissions?
This only relates to ZuluTrade, where your broker will charge you an extra commissions per trade (in addition to the spread) for executing the trade signals it receives from the traders you copy.
How much are the fund deposit and withdrawal costs?
Brokers will normally not charge you for depositing money, though depending on the location of the broker and your transfer method (bank wire, cheque, MoneyBookers, PayPal, …) you may be charged a fee. Some brokers also charge a fee for withdrawing money (often depending on the withdrawal method you choose).
Because of the low cost of changing brokers it’s very easy to try one and change after a few months if you don’t like them.