Broker Review: OANDA

Programming, Products & Research for Traders

Broker Review: OANDA

When you search for reviews of forex (or any broker) on-line you’re often left none the wiser as you just don’t know whether it’s a genuine independent review or something spammed up by the brokers themselves. I’m only going to review brokers that I’ve personally used and I can confirm that I have no personal interest in each broker other than having in the past, or currently using them. First up is OANDA.

Background

OANDA are one of the older forex brokers around and have always been a bit “different”. The original aim with OANDA when it was set up by Olsen and Flumm (the name is a contraction of “Olsen and Associates”) was the democratisation of forex. To this end they offered what at the time was a unique take on forex trading with completely variable lot sizes and also real-time swap payments. To this day, these two things mark OANDA out from the crowd. The variable lot size is a particularly attractive proposition for newbie traders: you can literally trade any size in a forex pair from 1 unit upwards, so you can for example take a position of 1 Euro of EUR/USD so 1 pip is $0.0001. This makes it ideal for when you don’t want to risk much money and this ultra-fine granularity also means that you can fine-tune the amount you risk per trade as precisely as possible.

 

They were bought out by a venture capital fund a few years ago who wanted to steer OANDA towards the gambling and casino end of the market. To this end they brought out lots of stupid innovations that were of no use to serious traders at all and only resulted in pissing off their existing clients big-time who all started leaving in droves. Eventually they saw sense and have gone back to their core business.
OANDA are a Market Maker type of broker: see here for an explanation.

Platforms

Their trading platform fxTrade, looks a bit old fashioned by modern standards. It does the job but their list of indicators is rather limited and there is not much scope for customisation. Their data doesn’t go very far back and there is no scope for backtesting or programming at all. One great thing about them though if you trade short term is that they offer sub-minute charts with 5s, 10s, 15s and 30 second charting all available. Also, they are one of the few people who offer mid-price charts rather than bid charts. This is especially useful during news releases where bid price charts can get distorted downwards as the spread widens.

 

These days they also offer MetaTrader though their demo version doesn’t allow you to hedge which may be a problem and their live version “simulates hedging” (whatever that means – I’ve not actually used their live Mt4 offering so far).

 

OANDA’s FX Trade platform – click image for larger size

Markets, Spreads & Swaps

OANDA used to offer fixed spreads but these days the have “dynamic spreads” which basically means that when the market is really quiet they are quite tight (1.5 was apparently the per-tick average of February 2016 for EUR/USD) but when things get more volatile the spread can widen. They used to widen their spreads to stupid levels (20 pips) during news releases and to keep them wide for a long time afterwards (double their usual spread) though thankfully they’ve now stopped doing this and they revert to normal levels much faster now.

 

Their swap rates are actually pretty good compared with most brokers though the fact that swaps are accrued on a real-time basis rather than at the end of the day is a drawback, especially in these straightened time when you can never actually earn money on the carry. Of course it does avoid the “Wednesday Night Triple Rollover Curse” which is always especially harsh.

 

As well as all the currency pairs you could want, including plenty of minor rates, they also offer CFD’s on all the major markets including indices, bonds and commodities. Their CFD spreads are reasonable (2.7 pips on Crude Oil, less than 1 point on the S&P 500) though it’s a shame that their philosophy of ultra-small lots doesn’t extend to their CFD offering which are comparatively chunky by comparison.

API

They offer an API – their old java API is now being phased out in favour of a free lightweight JSON/REST service which is more scalable and easier to support and to program against.

Summary

As far as Market Maker Brokers are concerned, OANDA are one of the better ones. I basically trust them and I keep a small account with them largely because their small minimum size allows me to test things out in tiny sizes if I want. I wouldn’t use them for short-term trading as their spreads are too large but I like their second charts and their mid-price charts. If you’re just starting out and want to dip your toe in the water I’d recommend OANDA for learning the ropes because of their small trade sizes. What’s more their uniquely small trading size does mean that you can size your trades exactly, rather than having to compromise with larger granularity lot sizes. This is especially important for trading larger time frames. I personally know of several serious and successful traders who use OANDA for their trading in reasonable size.