Day Trading & Forex Forum

Even a minimum 5,000.00 investment is needed with broker B to avoid losses. With broker A profits are possible starting at $760.00. Figure 4 shows a magnified graphic of the profit curve for Broker A. With an investment of ca. $5,000.00 about 96.9% of possible profits can be retained. Traders with small accounts are served well here.

However, there are limits. With a $2,000.00 investment, only 15.6% profit can be retained from a possible 20.30%. That’s only 66% of the maximum profit. The smaller investment size in this case leads to a 34% profit reduction.

It’s a matter of survival for traders with little investment capital to find the right broker. This is even truer for beginners who typically start with small accounts. In that case, even a good strategy will produce losses if the “wrong” broker is used, causing the beginning
trader to give up in frustration.

This is especially clear in figure 5. Here the investment was a constant $5.000.00 except for the model portfolio (turquoise line). The top green curve (23.44%) shows performance without order fees. The blue curve displays performance using a low cost fee structure. The turquoise line (15.90%) shows the model portfolio’s actual performance.

Even though the model account was traded with the most inexpensive broker, performance was lower. The reason being the amount of capital traded varied during the test period, account size was smaller than $5.000.00, and the broker first introduced the lowest cost fees on July 10, 2004 after the test had started (see Peripheral Factors).

The black line (1.32%) shows the best performance from the remaining brokers the red line (-23.80%), the worst performance. All others fall within that range.