What Is A Broker And Why You Need One

To understand what is a broker and why we, as traders, need to use one, we must first clarify the concepts of trader and broker.

A trader is an individual that trades in the financial markets, but individuals cannot trade directly in the financial markets. To access the markets an individual needs to engage with a finacial intermediary, a broker.

A broker is an authorized and regulated financial entity that sends the trader’s orders to liquidity providers, thus providing the trader with access to the financial markets. In addition, the broker is also responsible for the security of the funds that belong to the trader.

Therefore, to access the financial markets traders need to choose a broker, and as we will see below, this is not a choice that one should take lightly.

How To Choose The Right Broker For MT5 Or Any Platform

One of the common questions that every trader makes themself at some point in their professional career is in what broker he or she should trust their trading and capital. There are so many brokers and with so many different offerings that finding the right one can become a real odyssey. And don’t be wrong, the choice is not trivial: choose a bad broker and you will be charged abusive fees for your trades or, what is even worse, you will compete directly against the broker.

If the broker has a dealing desk, then the broker is a market maker and it will take the other side of your trades. For you this means that when you win, the broker loses, and vice versa. This conflict of interest is bad, but it can get worst. If the market maker also happens to be located on a remote island of a country with a lax regulation, we now have all the ingredients to have a broker that does not play fairly. In other words, you will lose money regardless of your trading skill.

And if you think it cannot get worse than that, think again, because there are also “brokers” that will just take your money and run away. These “brokers” are usually promoted by young fake successful traders on social networks and win credibility showing fake MT4 reports manufactured by the broker (not sure if also for MT5).

So, you must be extremely careful when choosing a broker to trust your money, but have no worries, here I will share with you which is the best broker for algorithmic trading with MT5. But first, let’s have a look at what are the key features that we need to look for when vetting a broker.

No Dealing Desk

NDD brokers do not pass your orders through a dealing desk, instead they send your orders directly to the market via liquidity providers.

Regulations

Supervision by a reputable financial authority like the FCA or ASIC is essential to give us the confidence that the broker will not “cheat”.

Reputation and Presence

Long-established with international presence brokers are more likely to be there because they are doing things right.

Fast Execution

Low latency and fast execution are important, specially for short-term styles. The fastest your trade gets to the market, the better price you will get.

Servers Location

Brokers send your orders to their liquidity providers, so the closer they are, the faster your orders will get to the market.

Market Offering

This is personal preference of each trader, just make sure the broker facilitates access to the market you are interested to trade.

Trading Fees

Really important. Short-term traders need to look for low spreads and comissions. Long-term for low overnight fees and swaps.

Security

Both in terms of information security of their systems and financial security measures for their traders.

Withdrawals

Simple call, avoid brokers that charge non-sense commissions or put barriers to withdraw your money.

Customer Service

Customer service is important. Look for brokers that offer customer service in your language and with prompt response time and good client satisfaction.

Best MT5 Broker For Algorithmic Trading

During my career I vetted a good number of brokers and there are quite a few that are good and meet all the criteria explained above. However, there is only one, as of today and as far as I know, that stands out, and it is not because of its brokerage conditions, which are competitive and amongst the best, but because of the access they provide to third-party capital, Darwinex.

Darwinex is the broker I currently have most of my trading with and it is the best broker for both beginners and talented-seasoned traders.

In this article you will find out why, but first, let’s start by “What Is Darwinex”, because they are not just a broker, they are more than that.

What Is Darwinex

Darwinex is a technology company whose core business is to provide an asset management infrastructure for traders and investors. Traders can create an investible asset from their strategies and expose it to investor capital.

For that purpose, Darwinex also offers a brokerage service thus providing traders with the full package: access to financial markets under good trading conditions and access to manage third-party capital through Darwinex licenses.

Let’s see what Darwinex offers you as a trader in terms of their brokerage and asset management technology.

Best Brokerage Conditions For Trading

Overall, Darwinex brokerage conditions are competitive and very similar to what nowadays has become standard amongst serious-regulated reliable brokers. However, if you are a talented trader, Darwinex stands out over the competition.

In order to create an index out of your trading strategy, Darwinex analyzes it and calculates its D-Score, which is a proprietary metric that assesses the capability of the index to make profits in the future.

Darwinex rewards talent and if you are a talented trader, your trading commissions will be discounted by up to 40%, depending on the D-Score rating achieved.

The discount on fees is amazing, but talented traders are not the only ones to benefit from trading in Darwinex, beginners and developing traders can benefit too.

Here are the key details from their brokerage service:

Assets

Tradeable markets include Forex and CFDs of indices, commodities, US stocks and ETFs.

Platforms

Metatrader 4 and Metatrader 5 platforms with hedging position accounting system.

Ultra-Fast Execution

Servers are co-located with those of their liquidity providers to minimize transmission latency.

High Liquidity

Liquidity aggregation to offer fast execution and liquidity during high-volatility conditions.

Low Spreads

Interbank spreads that range from 0.0 pips.

Talent-Linked Pricing

Strategies with a D-Score from 55 to 60 get a 20% discount in fees, those higher than 60, a 40%.

Regulations

Regulations by the UK’s FCA and the Spanish CNMV.

Detailed Analytics

High valuable information from your strategies like VaR, loss aversion, correlation and more.

These are the points that are more specific to Darwinex and worth highlighting. However, it is needless to say that they also meet the other criteria exposed above to choose a good broker: good presence and reputation, security, customer support and easiness to manage your funds.

All of these points makes of Darwinex the best broker for trading, but that’s not all.

Unique Technology To Access Third-Party Capital

Traders that are interested in managing third-party capital can leverage Darwinex infrastructure to create an index of their strategy, which is called DARWIN, and expose it to investors.

A DARWIN is an investible asset that replicates the trader’s underlying strategy but with one important change. Instead of replicating the strategy with the trader’s risk, DARWINs trade with Darwinex risk engine, which adjust the DARWIN risk to 6.5 VaR.

  • DARWINs provide you access to third-party capital from Darwinex investors
  • You get 15% of performance fee from the revenue your DARWIN makes for investors

  • Participate in DarwinIA, a seed allocation program where Darwinex allocates up to €10 M notional capital to the best DARWINs every month

  • Protection of your intellectual property, not disclosing your trades to investors or other traders

Darwinex Wants You To Win

The asset management infrastructure is amazing, and the strategy detailed analytics do not fall short either. However, there is another point that completely separates apart Darwinex from other brokers and that definitely made them win my trust, brokenomics.

Good reliable brokers make money from your commissions and spreads, so they only care about how much volume you trade. That’s how business goes and that is true for all brokers (not talking about scams and market makers that also make money from your capital).

Darwinex business model is different

Sure, they also charge commissions, but the core of their earnings come from the fees they charge to investors (1.2% of amount invested as maintenance fee and 20% from performance fees, from which Darwinex retains 5% and pays 15% to the DARWIN’s owner).

This means that to have success, Darwinex needs 2 things:

  1. Successful traders
  2. Investors

Without one or the other, Darwinex business model fails. So, they want their traders to succeed, they want you to succeed, and that is something that completely blew my mind.

Darwinex
charges 1.2% maintenace fee and 20% performance fee to investors (They keep 5% and pay 15% to DARWIN's owner)
Traders
list a DARWIN to attract investor capital and receive 15% performance fee
Investors
look for DARWINS listed by talented traders to invest their capital and further uncorrelate their investments

That, by the way, is the reason why only 58% of traders lose money when trading CFDs with them, according to their risk disclosure warning. This percentage is significantly lower than those reported by other brokers, which usually ranges from 75 to 85% of traders that lose money.

In other words, Darwinex is a community of successful traders: there is no better environment to surround yourself with.

Join The Darwinex Movement

Darwinex is without any doubt the best choice for talented experienced traders, since they can benefit from accessing investor capital and lower commissions. On the other hand, since Darwinex offers excellent broker conditions and their business model needs talented traders to work, it is also our preferred choice for beginner traders.

Want to check them out?

Follow this link to find out more about them and open an account:

https://www.darwinex.com/register?ac=3CcWG%2BgMczys7qgHKUbTVXD7XU2kr89dx%2FGPn9FzJCg%3D&lang=en

Registering with this link will grant us a small percentage of the commissions that Darwinex charges you when trading under a live account, so your commissions will not increase, trading costs for you will remain the same.

And what you get from this? Well, not much for now. As I told you, Darwinex does not make money from your trading volume or your losing trades, so they don’t give money away for free for opening an account with them as many other brokers do.

However, in the future we might release privileged content and bonuses restricted to active investors and/or affiliated traders, so you may want to register with our link to have access to them when they are available.

Do You Know About Darwinex Zero?

Darwinex Zero is a new revolutionary offering where you can trade on a virtual account while building a track record. That account is run with virtual funds but under real market conditions and will allow you to create a DARWIN, rank in DarwinIA and access investor capital.

The main difference from Darwinex “Classic” is that on a D-Zero account your DARWIN will start participating in DarwinIA SILVER and win capital allocations from the very first month of trading. Then, if your DARWIN meets some criteria, it will advance to DarwinIA GOLD and compete with the elite managers that are already managing capital at Darwinex “Classic”.

Follow this link to learn more about Darwinex Zero and how you can benefit from it. Since on Darwinex Zero you trade without risking your own capital, it is our recommended choice for beginner and developing traders.