EasyMarkets OTC offering has been one of the most innovative with:
- The introduction of Deal Cancellation in 2017
- Fixed Spreads
- Guaranteed Stops
- Minimum Balance Protection
- No Slippage Guarantee
These features and other elements of Easy Forex (now Easy Markets) are discussed in detail below.
1) Deal Cancellation
When EasyMarkets OTC trading the unique feature of Deal Cancellation exists which allows a trade to be reversed within a set period. This feature is available on more products from forex to commodities but in certain circumstances may not be offered. The green icon (as shown to the right) is shown when the feature can be applied to a trade.
When a trader wants to adopt this feature, they need to click on the Deal Cancellation icon and activate it. Once the trade commences the trader has 60 minutes to cancel the trade before the feature becomes void. Within the forex trading platform a trader can review how much time is left before the feature becomes inactive.
When a trade is cancelled, the amount risked on that trade (their loss) is returned to the EasyMarkets account. The same occurs when a stop loss is reached within 60 minutes, with Deal Cancellation returning the money (loss) back to the trading account.
It’s critical to point out Deal Cancellation is not free. There is a fee made on each trade based on the market volatility of that forex pairing or CFD at that point-in-time. You also can’t activate this feature after a trade has been made. It must be pre-selected when making the trade initially.
2) Fixed Spreads
Most forex brokers offer variable spreads that periodically change. This gap between ask and bid prices are impacted by volatility, supply and demand. In general, when liquidity is optimal (regular trading sessions) spreads are tight but outside these periods they can widen. EasyMarkets offers fixed bid/ask spreads known as fixed spreads.
Fixed spreads means that the forex broker (EasyMarkets in this case) sets the spread regardless of volatility or the market conditions at the time.
The key advantages of fixed spreads including:
a) Improved Transparency
As the graph above highlights, fixes spreads means you know the costs of forex trading. Regardless of the time of the day, volatility or inter-bank rates, you know what the spreads are. These can be factored also into future CFD or forex projectionist using currency modelling.
b) Safeguard against volatility
High volatility triggered by key news events such as rate decisions can be confusing due to large big/ask fluctuations. With many retail forex traders choosing these periods to trade, having fixed spreads can assist in trading over these periods.
c) The potential to lower trading costs
Fixed spreads can help traders budget in advance their trading costs. There may also periods when fixed spreads will be lower than variable spreads. These two factors make it more straightforward when trading and understanding the cost of CFD and currency trading.
3) Guaranteed Stops
Having guaranteed stops is not unique within the forex broker industry. The difference found in this EasyMarkets OTC review was that the broker offers guaranteed stops on every trade. This means that when a pre-determined maximum loss on a trade is processed, the actual loss cannot exceed this amount.
On the right shows an example scenario in 2015 when many forex traders experienced extreme slippage. The event was when the Swiss Franc became un-pegged leading to a dramatic shift in it’s value. As this shift occurred in just a minute, many traders were not able to exit at their stop -loss level. Losses therefore will have exceeded the trigger level set by some forex traders. EasyMarkets on the other hand, still allowed their traders to exist at the pre-determined level set.
Unlike the majority of forex brokers that charge a premium for guaranteed stop-loss orders, EasyMarkets has no extra charges for this feature.
4) Minimum Balance Protection
EasyMarkets) offers one of the higher leverage levels of 400:1. This amplifies the exposure a trader has to the market by multiplying the deposit made by up to 400x. For example, a deposit of $300 would allow up to $120,000 to be traded on a currency pairing. A movement of just 0.1% would lead to a profit or loss of $120 which is almost half the deposited amount.
The issue with such high levels of leverage is that when no guaranteed stop loss order is made, the traders losses can exceed their deposit. There are a number of forex brokers that have been known to chase traders for amounts owned due to this exact circumstance. EasyMarkets though offers negative balance protection which means they will exit the trader when this occurs and ensure losses don’t exceed their deposit. This is an excellent risk management tool.
Over The Counter (OTC) Trading Explained
OTC trading refers to both forex trading and CFD trading. Both trading options utilise almost identical execution process. The ability exists to seamlessly enter and then exit specific markets speculating on them rising or falling.
Forex traders and CFDs both use the same forex trading platform. Charting and pricing are almost identical as the are both are OTC (over the counter) market products. Trades are made through financial institutions including banks. There are no central exchanges unlike shares.
Spreads are the key way forex brokers make their money from OTC trading. In some cases with ECN forex brokers, commissions are charged on-top of these spreads (although the spreads are often lower). Shares and similar products on the other hand often have different fees often based on each trade and volume.