OANDA is suitable for short-term trading approaches, be it scalping, day trading, or swing trading. Here are the reasons.
OANDA is a well-known broker among international forex traders, both novice and seasoned. They are famous for providing trusted currency data and an innovative proprietary trading platform through fxTrade. But prospective clients may be interested to know whether OANDA is suitable for specific trading styles, such as scalping and day trading. In this article, we will dig into the advantages and disadvantages of OANDA for short-term trading.
What is Short-term Trading?
Short-term trading is a popular technique that strives to open and close trades in a brief period of time, typically days or weeks, though the time span can be much shorter. Commonly known short-term trading strategies are scalping, day trading, and swing trading.
- Scalping is a remarkably short-term strategy in which traders may open and close positions in a matter of seconds or minutes. On a typical trading day, hundreds of transactions are frequently made by scalpers in an effort to turn small gains into a sizable profit.
- Day trading is the most common short-term trading approach for any instrument. Day traders will buy and sell a variety of instruments throughout the course of the day, then close all open positions before the market closes. This prevents them from holding positions overnight, which saves them money on swap (rollover) costs.
- Swing trading is a short- to a medium-term technique that involves keeping open positions for a few days or weeks. Swing traders will determine whether an asset has future profit potential by looking at the swing highs and swing lows of its price, probably through a combination of technical and fundamental analysis.
While long-term trading strategies seek to generate constant returns over a longer time frame, short-term trading focuses on the volatile price action of a financial instrument to gain rapid profits. Short-term trading is therefore viewed as a more speculative investment type than a conventional buy-and-hold strategy.
Retail and institutional traders that seek quick profits from slight price changes are particularly fond of this type of trading approach. However, short-term trading strategies are not suitable for all types of instruments. It also requires more stringent trading environments.
Here are some necessary items needed to apply optimum short-term trading strategy:
- Derivative financial instruments, such as forex and CFDs.
- Cheap fees, particularly slim spreads and low commission fees.
- High leverage (margin trading).
- Low latency and/or fast order execution.
- Low to no slippage.
Aside from that, scalpers must specifically confirm with their broker whether they can open and close trades within a few minutes. Luckily, OANDA allows scalping.
OANDA for Short-Term Trading
OANDA is undeniably suitable for short-term trading approaches, be it scalping, day trading, or swing trading. Trader testimonies in online forums such as Forex Factory mention that they can enter and exit positions even within seconds. There is a one-click button that enables traders to send orders as fast as possible, and order executions are nearly instant.
OANDA has slippages, but they apply a fair slippage policy under which traders may get slippages that are both good and bad for them. This is good news for short-term traders because some other brokers are famous for delivering only negative slippages to their traders.
🌐 WebsiteTraders looking for brokers with accurate precision, OANDA can be an option. That is because OANDA is a broker that provides quotes with 5-digit accuracy and active price movements that follow market developments. Order execution speed is also faster in this broker.
It provides benefits for novice traders, as they can trade with smaller volumes using the calculation system based on currency value, unlike other brokers adopting the lot system.
Founded in 1996, OANDA was built by Dr. Michael Stumm who is a lecturer in Computer Engineering at the University of Toronto, Canada, along with his colleague, Dr. Richard Olsen of The Olsen Ltd., which is one of the leading econometric research institutes. They have a head office in San Francisco, United States.
OANDA branch offices can be found everywhere. Some of these offices are located in the United Kingdom, Singapore, Japan, and Canada. With this number of offices spread, OANDA has increasingly attracted the attention of clients worldwide.
OANDA's company is registered under several well-known jurisdictions in financial trading. They are regulated by CFTC and NFA in the US, FCA in the UK, ASIC in Australia, and many others. Traders do not need to worry anymore about security when trading in OANDA. However, these advantages make trading rules at OANDA more stringent compared to other brokers.
For example, OANDA only allows maximum leverage of 1:20, because the rules in the US and Japan do not allow leverage above that. Besides, the registration procedure is more complex due to various additional requirements that are not submitted by other forex brokers. On top of that, hedging is not allowed in one trading account as the client must open an additional account to hedge.
Nevertheless, OANDA is known for being a leading broker with many advantages offered. OANDA faces increased market risk during periods of price volatility, such as economic and political news announcements. When market spreads increase or decrease, their pricing engine widens or narrows spreads accordingly. That way, traders can get the latest conditions from price movements in the market more quickly.
Prices move very fast in the market. Especially when news releases have a large impact on market volatility. This condition is often exploited by brokers to take advantage of clients with Requotes. However, traders do not need to worry about additional costs when trading with OANDA.
The company never withdraws Requotes so traders can get maximum profit. When traders are unavailable to monitor open positions, they can set take profit orders to lock in profits and Stop Loss orders to help protect against further losses.
As an experienced and well-known online forex broker, OANDA is committed to maintain an efficient trading environment that reduces latency and provid tools to help clients manage the degree of acceptable slippage.
With a fast & reliable trading platform by OANDA, clients' trades are executed in 0.012 seconds. This suits traders who choose brokers based on execution speed.
Because of this exceptional execution service, it is not surprising that OANDA won many awards, including the winner of the world's Best Retail FX Platform at the prestigious e-FX awards. The broker is also voted number 1 for Consistency of filling trades at quoted prices, Execution speed, and Reliability of platforms.
There is no minimum deposit or minimum balance required to open an OANDA account. Deposit and withdrawal can be done easily. OANDA provides a variety of payment method facilities, including Paypal, Wire Transfer, Credit Card, and Debit. Traders can adjust it to the region where they live.
OANDA provides more than 100 trading instruments, including 71 currency pairs, 16 indices, 8 commodities (Brent Crude Oil, Copper, Corn, Natural Gas, Soybeans, Sugar, etc.), 6 Bonds, and 23 Metals.
The fxTrade and MetaTrader platform are available at OANDA. These platforms can be used for Desktop and Mobile. Another plus is they have an OANDA Technical Analysis that exists in collaboration with a technical analysis provider called Autochartist.
With these platforms, clients can monitor price movements easier and automatically recognize patterns created on charts, as well as receive alerts when the awaited patterns appear. Access to this technology can be enjoyed free of charge.
In conclusion, OANDA is an ideal broker for traders in need of fast execution backed by many years of experience. The company is also a good alternative for those looking for a well-regulated broker with flexible trading and deposit conditions.
OANDA offers two types of trading platforms: the proprietary fxTrade and the more popular Metatrader. Both are available for desktop and mobile, equipped with advanced charting and myriad trading tools. OANDA's proprietary mobile app is also very satisfactory for anyone who prefers to trade on the go.
What about trading fees? OANDA offers two pricing options for no less than 100 trading instruments, namely spread-only and commission plus core spread. Core spreads start at 0.1 pips, while a commission of $40 is charged on every million USD traded.
Leverage may be the only downside that OANDA short-term traders have to deal with. OANDA's US arm is governed by the National Futures Association (NFA) and the Commodity Futures Trading Commission (CFTC) which limit leverage to 50:1 on major currency pairs and 20:1 for all others. Needless to say, this ratio is far lower compared to other international brokers.
7 Comments
Mcallister
Dec 1 2022
As a new user of OANDA, it is true that we can place an order in a second, the order is executed back to the broker and with his scalping method. Slippage can happen at any time, so I won't complain about it. But I doubt their slippage policy which this article has not said. And I haven't experienced it yet For leverage, 50:1 and 20: 1 are too low. I was expecting a leverage of 200:1 so I can trade more without depositing too much money. In the other side lower leverage mean can limit my trading and actually good for money management. Sometimes I need to change my money management because of lower leverage. But so far all OANDA offers are good and no problem. As far as possible.
Juan Don Sanchez
Jan 20 2023
Mcallister: Yes, I agree with the slippage that you talk about. I have same feeling and same doubt about slippage policy. This article has discussed fair slippage policies, but if the market is very volatile, slippage is not the broker's fault and therefore cannot control slippage and the broker also can't prevent slippage during that time.
It's just like this:
"It's not our fault if you fall into a wet pool on a rainy day. So the best way to avoid slipping is to avoid walking in the rain"
This means that as a trader it is better to avoid slippage moments such as: B. We have become aware of news, some reports or other things that may affect the market during this period.
Jules
Jan 20 2023
In fact, OANDA's trading terms are quite unique. If you read carefully and visit review brokers on this site, you will find that the minimum deposit amount is up to you.You can easily deposit from as little as $1, but the fees are also unique. Did the article say $40 to millions of dollars traded? Since it is 10 lots, you will be charged if you trade 10 lots. It takes a lot of time for a beginner to reach 10 lots.
Looking at the size trades, it is quite unique as the smallest size trade is 0.00001 lot! Thus, it offers traders the freedom to set their own trading conditions that most brokers do not offer. For traders who want to try OANDA and want "custom trading terms", OANDA is for you.
Julisa
Jan 20 2023
Scalping in OANDA? For me there is some terms that needed to do scalping which is need more lower spread. But most of brokers offer spread zero spread but it floats. Meanwhile at OANDA, the spread is fixed depending on which currency pairs. It started at 0.1 pips and fixed one. It will be very good trading condition for scalping meanwhile the commissions only $4 per 1 lot which is good choice.
SO, Scalping in OANDA very fulfill the terms that I needed.
About the terms, I have read in this website's article, you can read in here : The secret of succesful Trader
Vincent Yo
Jan 20 2023
I think all the comments here point to the benefits of OANDA. In other words, where there are advantages, there are also disadvantages. Beside leverage 1:20, What is another drawback you may have encountered with OANDA? I know US brokers, in this case OANDA is regulated in a country that is very strict on financial matters, so they may prove to be very good and trustable..
Jonathan Spade
Jan 20 2023
Vincent Yo: I think the other downside is the trading terms that give the trader too much freedom. I am saying about person that in the comments section above were talking about customizable trading terms. If you are experienced trader, you may understand and know how to set your money management in such condition but if you are beginner? How can you swim in the ocean meanwhile you can't swim well?
Why do some brokers set deposit terms and leverage terms? Of course, to introduce traders to money management and risk management. If you have some restrictions, you can make them more directional and avoid many mistakes while trading. If you come across a broker that applies a minimum deposit of $100 at 1:500 leverage means the minimum trading balance is $100. Can you guarantee that your $34 will survive trading on a standard account when you come across a broker like OANDA?
read about managing risk in here
Vincent Yo
Jan 20 2023
Jonathan Spade: I also think same as you think, If high leverage can be the problem, what about your trading limit, right? If something that can you so much freedom become the tools that killed you at trading, it will be very dangerous with such condition trading that gives you customable trading condition.
About the leverage at OANDA also very low which is 1:20, to gain profit like standard account, you need at least $50,000 to trade with much more freedom with 0.1 lot size trading. But since it can 0.0001 size, all trader that have no experince may trade with that size but once again for beginner it will be hard to determine the limit of your trading rules.