Broker For Algorithmic Trading
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 individuals 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.
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 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:
Tradeable markets include Forex and CFDs of indices, commodities, US stocks and ETFs.
Metatrader 4 and Metatrader 5 platforms with hedging position accounting system.
Servers are co-located with those of their liquidity providers to minimize transmission latency.
Liquidity aggregation to offer fast execution and liquidity during high-volatility conditions.
Interbank spreads that range from 0.0 pips.
Strategies with a D-Score from 55 to 60 get a 20% discount in fees, those higher than 60, a 40%.
Regulations by the UK’s FCA and the Spanish CNMV.
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 retail traders, but that’s not all.
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 differentiates 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 Busines 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:
- Successful traders
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.
Traders can list DARWINS to attract investor capital and will receive 15% of the revenue generated for the investor as concept of performance fee.
That, by the way, is the reason why only 60% 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.
Darwinex Types of Accounts
In Darwinex you trade with an OTC account that ahs full access to Darwinex infrastructure, but there are other services or accounts that also join the benefits of Darwinex technology and you might want to consider.
In short, they have the following accounts:
- Darwinex OTC
- Interactive Brokers
- Darwinex Zero
These are Darwinex brokerage accounts that allow you to trade forex, stocks, ETFs, commodities and indices CFDs and provide full access to Darwinex infrastructure. This means that these accounts allow you to access detailed analytics from your strategies, list DARWINs and access third party capital, including DarwinIA.
They run in MT4 and MT5 under the hedging position accounting systems have live and demo versions and are the ones we use by default in our courses.
You can trade with an Interactive Brokers account and benefit from Darwinex infrastructure to attract investor capital. You will trade under IB trading conditions but you will be able to access detailed analytics and third party capital as if you were trading with a Darwinex OTC account.
While an IBKR account allows you to trade a large selection of assets, only assets supported by Darwinex are entitled to list a DARWIN. These include IBKR futures, USA stocks and ETFs.
If you open a Darwinex Zero account you will trade under a real live account, which mean real market conditions, but with virtual funds. This allows you to start building a track record without risking your own capital (other than a monthly subscription) and it entitles you to participate in DarwinIA and access investor capital.
In a D-Zero account you can trade a wider variety of assets than in a Darwinex OTC account and it is open to traders from more countries, like the US, Canada, or Japan.
Any trader can open a D-Zero account, but I personally find it ideal for: (i) traders that do not have full confidence in their trading yet, as they might want to limit their risk to the monthly subscription fee and not to their capital, or (ii) traders that do not have their own capital.
Darwinex Zero should not be confused with a prop firm funded account, follow this link to learn the full details about the service.