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Anyone is trading Forex? 50:1?
- Thread starter PKJR
- Start date
Yes but *which* forex market - the futures or the cash
dealer/internet based outfits ??
A while back I had a run on a test account with one of these
forex dealers with their own cash books you can trade against. no commish. but pay up the pip (i.e. spread)
Do you know anyone who is a success with the later ??
I know many smart guys who trade forex options on futures
or futures.
dealer/internet based outfits ??
A while back I had a run on a test account with one of these
forex dealers with their own cash books you can trade against. no commish. but pay up the pip (i.e. spread)
Do you know anyone who is a success with the later ??
I know many smart guys who trade forex options on futures
or futures.
Forex is very appealing at first, but be very careful. It would be great to have a liquid market that traded 24 hours a day so that we all could trade whenever our schedules allowed. Free realtime market data and no commissions. Sounds like the perfect market....except that its not. The only reason you get "free" commsissions and quotes is the same reason web based brokers give you $5 market orders...they are trading the other side and taking the spread.
But worse than stocks, forex dealers don't even send your orders to a central marketplace to get the best prices, they quote you out of their own reserves (because there is no central forex exchange). In other words, they are trading against you! So now your broker has a real advantage, he knows what positions you have on at any given time, so when you go to get a currency pair quoted, he will scan your account first and "read" you and skew the quotes against your positions. Could you imagine being long INTC and you want to sell. The market is at 26/26.05 on your quote screen so you go to sell, but your broker quotes you 25.90/25.95. Since you can't route your orders anywhere else, you are stuck with a "take it or leave it" situation. Maybe you could overcome this on a longer term trading horizon, but to day (or night) trade it you will get killed paying 5 pips and with a broker trying to screw you at every turn, the spreads are really more like 10 pips when all is said and done.
For anyone who is curious, most dealers have a demo program you can try. You will quickly learn the problems trading a large spread with no limit order book to use. Some dealers claim to allow you to post your orders, but there are so few posted that they are all way outside the current market.
The other major problem with forex is that it is not regulated. Most of these deal houses are located overseas and you have no recourse if your money disappears. Your money is not SIPC insured, so a rogue trader at the bank (anyone remember Leeson?) could blow the whole wad and take you down with them.
Maybe someday forex will be a viable trading vehicle. It certainly has all the characteristics of a great trading market. They just need a central exchange with ecn like access so that you truely can find the best prices or make your own market. But right now, there doesn't seem to be enough pressure on the big banks to change the current situation. So please be very careful if you try it.
Kirk
But worse than stocks, forex dealers don't even send your orders to a central marketplace to get the best prices, they quote you out of their own reserves (because there is no central forex exchange). In other words, they are trading against you! So now your broker has a real advantage, he knows what positions you have on at any given time, so when you go to get a currency pair quoted, he will scan your account first and "read" you and skew the quotes against your positions. Could you imagine being long INTC and you want to sell. The market is at 26/26.05 on your quote screen so you go to sell, but your broker quotes you 25.90/25.95. Since you can't route your orders anywhere else, you are stuck with a "take it or leave it" situation. Maybe you could overcome this on a longer term trading horizon, but to day (or night) trade it you will get killed paying 5 pips and with a broker trying to screw you at every turn, the spreads are really more like 10 pips when all is said and done.
For anyone who is curious, most dealers have a demo program you can try. You will quickly learn the problems trading a large spread with no limit order book to use. Some dealers claim to allow you to post your orders, but there are so few posted that they are all way outside the current market.
The other major problem with forex is that it is not regulated. Most of these deal houses are located overseas and you have no recourse if your money disappears. Your money is not SIPC insured, so a rogue trader at the bank (anyone remember Leeson?) could blow the whole wad and take you down with them.
Maybe someday forex will be a viable trading vehicle. It certainly has all the characteristics of a great trading market. They just need a central exchange with ecn like access so that you truely can find the best prices or make your own market. But right now, there doesn't seem to be enough pressure on the big banks to change the current situation. So please be very careful if you try it.
Kirk
I heard good things about http://www.fxcm.com/ They do about $12 billion a month worth of business.
All client funds are deposited with triple-A rated financial institutions. For accounts with balances under $25,000, FXCM maintains an omnibus account at Citibank and Fleet Bank. Clients that open and maintain accounts with a balance above $25,000 are entitled to segregated escrow accounts at Citibank and Fleet Bank. Traders who elect to have such a segregated escrow account will receive monthly statements directly from the banking institution. They say <i>"In the unlikely event of Forex Capital Markets bankruptcy, all client funds are legally protected funds are held in escrow by triple A rated financial institutions. This is superior to other client protections such as Fidelity Bond Form 14, which does not provide protection to clients against bankruptcy as a result of poor management or trading decisions."</i>
They have a demo acct and a mini acct that you can use to get familiar with real money http://www.fxcm.com/mini/ $300 minimum for the mini but once you decide to trade over $5k they ask you to open a regular acct.
Margin:
-Accounts Under $50,000 Minimum $1,000 in equity per open lot (1%)
-Accounts $50,000 - $200,000 Minimum $2,000 equity per open lot (2%)
-Accounts $200,000 - $500,000 Minimum $3,000 equity per open lot (3%)
-Accounts Over $500,000 Minimum $5,000 equity per open lot (5%)
4-5 pips on the Majors and 5-8 pips on the Crosses. The dealing desk is continually open between Sunday 7:00 PM and Friday 3:00 PM Eastern Standard Time.
I would also check around and see if anyone else can offer better service. Go to http://www.global-view.com/ one of the best free forex forums online and see who the majority or those guys like and don't like.
Hope this helps.
All client funds are deposited with triple-A rated financial institutions. For accounts with balances under $25,000, FXCM maintains an omnibus account at Citibank and Fleet Bank. Clients that open and maintain accounts with a balance above $25,000 are entitled to segregated escrow accounts at Citibank and Fleet Bank. Traders who elect to have such a segregated escrow account will receive monthly statements directly from the banking institution. They say <i>"In the unlikely event of Forex Capital Markets bankruptcy, all client funds are legally protected funds are held in escrow by triple A rated financial institutions. This is superior to other client protections such as Fidelity Bond Form 14, which does not provide protection to clients against bankruptcy as a result of poor management or trading decisions."</i>
They have a demo acct and a mini acct that you can use to get familiar with real money http://www.fxcm.com/mini/ $300 minimum for the mini but once you decide to trade over $5k they ask you to open a regular acct.
Margin:
-Accounts Under $50,000 Minimum $1,000 in equity per open lot (1%)
-Accounts $50,000 - $200,000 Minimum $2,000 equity per open lot (2%)
-Accounts $200,000 - $500,000 Minimum $3,000 equity per open lot (3%)
-Accounts Over $500,000 Minimum $5,000 equity per open lot (5%)
4-5 pips on the Majors and 5-8 pips on the Crosses. The dealing desk is continually open between Sunday 7:00 PM and Friday 3:00 PM Eastern Standard Time.
I would also check around and see if anyone else can offer better service. Go to http://www.global-view.com/ one of the best free forex forums online and see who the majority or those guys like and don't like.
Hope this helps.
I have looked at MatchbookFX, and in theory its a good idea. The problem is that their "ecn" is only open to their clients, and they would never give me a straight answer about what the liquidity was like. They charge $150/month for the software (waived if your commissions exceed $150--$5 per $100,000 lot, so you have to trade $3 million worth). This isn't much different than a direct access broker, so if you could get enough liquidity around the market to keep from paying the spread it might be worth it. It looks a lot like a level II display with order entry. If only it was open to everyone. I just don't know how much volume they are processing. It does you no good to be able to enter a buy limit on the bid if there is no one willing to take it. But considering the alternatives, if you must trade forex, this is probably the way to go.
The FXCM post is clearly from an employee, it reads like their website. Don't be fooled, many FX dealers offer the same thing. No matter, it doesn't change the fact that they are trading AGAINST you by taking the opposite position, so if you make money they lose money (maybe if you are trading huge size they are immediately laying it off to other dealers, but for the small trader they handle it in-house), it is in their interest for you to lose and to just keep a constant stream of new accounts coming in the door.
Kirk
The FXCM post is clearly from an employee, it reads like their website. Don't be fooled, many FX dealers offer the same thing. No matter, it doesn't change the fact that they are trading AGAINST you by taking the opposite position, so if you make money they lose money (maybe if you are trading huge size they are immediately laying it off to other dealers, but for the small trader they handle it in-house), it is in their interest for you to lose and to just keep a constant stream of new accounts coming in the door.
Kirk
No I'm not an employee, actually I trade with Alaron (futures/options).
The reason I cut-&-paste most of the info is because most people are not willing to dig on the website's to get it.
I <b>personally</b> would never trade fx because of the lack of regulation in the US. I do believe England has a regulatory body, not sure (SFA
regulation maybe?).
Jay
<i>"Only two things are infinite, the universe and human stupidity, and I'm not sure about the former."
- Albert Einstein </i>
The reason I cut-&-paste most of the info is because most people are not willing to dig on the website's to get it.
I <b>personally</b> would never trade fx because of the lack of regulation in the US. I do believe England has a regulatory body, not sure (SFA
regulation maybe?).
Jay
<i>"Only two things are infinite, the universe and human stupidity, and I'm not sure about the former."
- Albert Einstein </i>
Jay,
If you aren't spamming for FXCM, then please accept my apologies. You will find that most posts on this site that look like advertisements usually are...you know, if it walks like a duck and quacks like a duck...
Its important that people interested in forex understand all of these problems before they get in over their heads, and sites like FXCM and others (I'm not picking on them, only that they were mentioned) try to paint a rosey picture of how easy it is to play in the worldwide currency markets. Its not. And like you said, the lack of regulation alone should be enough to make people cautious.
Good luck,
Kirk
If you aren't spamming for FXCM, then please accept my apologies. You will find that most posts on this site that look like advertisements usually are...you know, if it walks like a duck and quacks like a duck...
Its important that people interested in forex understand all of these problems before they get in over their heads, and sites like FXCM and others (I'm not picking on them, only that they were mentioned) try to paint a rosey picture of how easy it is to play in the worldwide currency markets. Its not. And like you said, the lack of regulation alone should be enough to make people cautious.
Good luck,
Kirk