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Brokers and their limitations

Every Forex broker is different and has his own advantages and disadvantages. It is very important to know what may work against you before moving to a new broker. In this short article we will describe the most common limitations enforced by MT4 Forex brokers.

Market Execution vs Instant Execution

Some brokers use Market Execution, which doesn't allow to specify stop loss and take profit at the moment of placing a new buy or sell trade. This simply means that you have to add your SL or TP later by modifying your trade. Of course it requires two operations instead of one, what takes more time and may be quite annoying. Moreover, you may end up with an unsecured trade if only something bad (e.g. loss of connection) happens between these two operations.

Using expert advisors instead of trading manually may be helpful, but it doesn't solve the whole problem. Although it will automate and speed up your trading operations, it won't assure you that every trade is properly secured by a stop loss, since connection problems and other errors can still occur just after the trade is placed.

Before using any EA on Market Execution platform make sure that your EA is capable of trading in such conditions.

To hedge or not to hedge

There are brokers who do not allow to keep opposite positions on the same instrument at the same time. This means you can't open any short position as long as there is a long position on the same symbol and vice versa.

FIFO rule

The FIFO (First-In-First-Out) policy forces you to close the oldest trade first. The rule is imposed over all trades on the same instrument and same size.

Example:

  1. Long EURUSD 0.1 lot, open time: 13:40
  2. Long EURUSD 0.1 lot, open time: 14:00
  3. Long EURUSD 0.1 lot, open time: 15:15
  4. Long EURUSD 0.2 lot, open time: 14:30

In the following example we are allowed to close trade no. 1 and trade no. 4 (because it has different size), but we can't close trades no. 2 and no. 3 as long as trade no. 1 is not closed.

The FIFO rule applies to expert advisors, too. That's why not all EAs will work properly. Some of them may need to be modified in order to comply with this rule.

4-digit vs 5-digit brokers

This is not a limitation, however, we must be aware of the fact that brokers may use different quoting precisions. For a currency pair such as EURUSD 4-digit quoting will look like 1.4143 and 5-digit quoting will look like 1.41433. For JPY pairs it will look like 105.25 and 105.254.

The point is that expert advisors often use parameters such as SL and TP which are specified in pips or points. The size of one pip may be different for 4-digit quoting and 5-digit quoting. Everything depends on the way your EA handles its parameters. It is always advisable to test your EA on a demo account first to know how it works with different quoting type.

No expert advisors

There are brokers who only allow for manual trading and block all expert advisors.

Disappearing order comments

Some brokers like to change order comments specified by a trader or expert advisor by adding something to the end or replacing the comment entirely. Although it may be annoying, it isn't harmful most of the time.