What is there is a difference between the price on my charts and the price my broker quotes?
This is a question we often get in the forum. To a beginner, this must be really confusing but before you start with your conspiracy theories and blame all your losing trades on price manipulation, let me explain a few things. First of all, you need to know why you even need to have a chart cause if you are not using any, you are gambling. You also need to know that there are many free chart providers such as: TradingView, NetDania Chartstation, MetaTrader 4, ThinkorSwim, FreeStochCharts and many others and they all come with their unique price quotes. Got it? Okay, now we can start talking about why the prices are different!
The number one and root reason why prices differ from feed to feed is because of markets. Each asset trades in a specific market or markets. Assets like options, futures, commodities and forex may trade in dozens of markets around the world. In general, because of global technology, each will trade at the same price but variations creep in due to market opening times and other pressures. This means that any data you receive will be influenced by the root market from which it comes.
My MetaTrader 4 Charts and Broker’s Charts are Different!
Before you cry wolf and wake up the angry villagers, understand that MetaTrader 4 is just a software. The quotes (prices) you see displayed on it are coming from a Forex broker that you connect to – and it has NOTHING to do with your binary options broker. Which free Forex broker you connect to for those price feeds are up to you. Currently, I am using Oanda’s demo account on my MetaTrader 4. If I would switch to another Forex broker, then my prices are going to be different than the ones I have now.
But what about the binary options broker’s prices? Obviously, the binary options brokers are also getting their quotes from different sources! This means that depending on which quote provider they are connected to, the displayed price of the assets will differ. For example, one such quote provider is Reuters. The brokerage has to pay a fee and install expensive and fast servers that can quickly receive and display the prices they get from their quote provider. In conclusion, there is NOT just one single quote provider that the whole world is connected to – hence the variations. More advanced brokers/platform will use what they call an “aggregate” price which in effect is a blend or average of a number of price feeds for an asset. See the example below.
My MetaTrader 4 price quotes from Oanda vs 24Option price quotes for the same asset (EUR/USD) and the same candlestick. The difference is small, exactly 1.9 pips (for the “high”) which is totally fine.
The difference is only 1.9 pips for the same high on the same candlestick. As you can see, the price variation fluctuates a little. The difference between the lows was only 0.5 pips (5 pipettes) and the opening only 0.7 pips. The million pip question is – how much is acceptable?
More on Pips and Pipettes: Calculating Pips in Binary Options
Can I Trade Despite the Difference? How much is Acceptable?
This brings us to the next question – how much difference is acceptable between your broker’s and your chart provider’s prices? To be honest, it doesn’t really matter. After all, you are executing the trade on the broker’s platform and so long as you know there is an x amount of pip in difference, you can take that into calculation. And really, it only matters if you are trading super short term options like 60 seconds or 2 minutes. The best way to do so is to also check out the broker’s own charts so you know which price to execute your trade at. Don’t understand how?
Maybe this example helps:
Let’s suppose that you wanted to enter a put option when a candlestick reached the same closing price as the previous green candlestick as illustrated in the pictures above. If you would draw a horizontal line on your MetaTrader 4, it would tell you to enter at 1.11619. But then you would check your broker’s charts and it would tell you that you should enter at 1.11642. Now you know that you should not enter the trade unless the broker’s price reaches 1.11640 on that asset! Even though your line is reached on your MetaTrader 4. Eureka!
Not Acceptable Differences
As we discussed above, a difference of a few pipettes up to even a couple of pips is nothing to worry about and you can easily get better entries by taking this difference into consideration. However, if the price difference is so much that the candlesticks totally look different when you compare your broker’s charts to your online charts or MT4 it means trouble. This will totally mess up your analysis! Imagine you see a big bearish candlestick but on the broker’s charts that candle is a doji. Now this is very confusing and you should definitely change the broker you are connected to on MetaTrader 4 or whichever charts you are using. I can give you a tip, always ask your binary options broker which online charts they recommend for trading with them! In my case, my broker recommends NetDania but I am fine using MT4 with quotes from Oanda.
Don’t be lazy, try this: ► Test Your Broker – MT4 vs. Your Binary Options Broker
Latency Causes Differences
Another reason for why your prices might differ significantly from your binary options broker’s prices is lag. Say you wanted to execute a call option at a support line but on the broker’s charts the price has already bounced off of that same price level. Houston we have a problem – a latency problem. What does it mean? Your charts are probably lagging behind. I had that problem once. Apparently, my charts were about 10 minutes behind my broker’s quotes! You need to be aware of the type of data feed you have. Some are live, that is.. it is the spot price of the asset as it is being traded now ad most likely the price your broker uses, or they can be delayed. Typical delays are usually 15 to 20 minutes and are obviously not good charts for day trading. The solution is simple, reconnect to another source for the data.
Additional good read on Financemagnates: The Pitfalls of Data Feeds for Exchange Prices
Test Test Test
These were some of the major reasons for why prices differ. There is no way to come around it. Well, unless you want to pay thousands of dollars to buy price feeds from the same data provider that your binary options broker is connected to. Most traders, however, do fine with a few pips in difference, just make sure you test your broker and carefully compare the prices before getting started.