What is the Best FX Broker?

Quote from late apex:


Virtually no currency trading strategies, outside of sub-1-minute scalping, are optimal at, or even compatible with, leverage figures above 50:1. That's not just my opinion; it's an inescapable property of how expectancy works.
More...

late apex, that's absolutely correct, but it's not quite the full story.
With larger leverage offered to me, I can choose to use the same bet size but use less margin.
This leaves me with more margin available to implement other, uncorrelated strategies.

In theory this is true; in practice I doubt that more than 50:1 is ever very useful, based on that idea of diversification. Diversification is a bit limited in forex, I think.

I have heard of people making big money using maximum leverage, but I'm sure that for every one of those there's a thousand who've lost it all the same way.
 
Quote from late apex:

No. The statement "unless you are losing you will always make more money with higher leverage everything else being equal" is false. And some people who warn against high leverage are basing their reason on understanding the principles of money management.

Every trading strategy has an optimal leverage range, possibly dynamic over time. Below that range, you're still generating a positive equity curve, but not making as much as you safely could. You're consistently profitable, but potentially somewhat sub-optimal. That's OK. I am in no terrible rush.

However, above that range -- the true value of which is unknown a priori, but can usually be estimated reasonably well -- you enter a territory of increasingly stronger negative correlations between one's long-term trading P/L and leverage employed. The more you bet each time, the more you lose over time. Your equity curve has gone negative. That's a shame. You took a sound, positive-expectancy strategy and managed to ruin it. Quite an accomplishment.

Virtually no currency trading strategies, outside of sub-1-minute scalping, are optimal at, or even compatible with, leverage figures above 50:1. That's not just my opinion; it's an inescapable property of how expectancy works.
More...

I respect the fact that different people experience reality in different ways. In my reality I have 2 accounts with different brokers one with 100:1 leverage and one with 200:1 leverage. When I make a trade with 25 PIPs profit in the 100:1 account my profit is $125 per lot. When I make a trade in the 200:1 account it is $250 per lot. Using a risk mananagement of say no more than 5% of my account, I will always make more money in the 200:1 account. The only way I would ever not make more money in the higher leverage account would be if I have a losing trading strategy in which case I should not be trading. Over a year I end up with almost 20 times as much in the 200:1 account with the same results in PIPS.

There is some difference in the meaning of leverage. According to what traders consider 200:1 leverage, I have never used that if you base that on how much of an account is being used. I base the term leverage on the type of account and I get 200:1 leverage on the amount of the deposit in the trade although I am not leveraging my entire account at 200:1. That would be stupid. In a 200:1 account the results are higher with the same amount of risk and same # of PIPS profit. The higher leveraged account enables me to risk less to make the same amount of profit in dollars or it makes more profit with the same risk. And there is no "borrowed" money involved. So far the brokers have never asked me to pay back the 100 or 200X the amount of my deposit in a losing trade.

At least that is how my accounts work. I'm not sure what others experience in their realities.
 
Quote from waxwing:

late apex, that's absolutely correct, but it's not quite the full story.
With larger leverage offered to me, I can choose to use the same bet size but use less margin.
This leaves me with more margin available to implement other, uncorrelated strategies.

In theory this is true; in practice I doubt that more than 50:1 is ever very useful, based on that idea of diversification. Diversification is a bit limited in forex, I think.

I have heard of people making big money using maximum leverage, but I'm sure that for every one of those there's a thousand who've lost it all the same way.
More...

Agree. Besides scalping, simultaneously employing multiple weakly-correlated strategies is one case when higher maximum available leverage could be both justifiable and useful. We're talking leverage at the overall portfolio or account level, not individual strategy or trade level.

At least Oanda gives you 50:1 initial and 100:1 maintenance leverage. In practical terms, it means that anyone is free to use every bit of that 50:1 BP for putting on trades (unlike, say, IB IDEALPro), without playing touch and go with a margin call.

As you point out, most forex traders itching for leverage > 50:1 don't have multiple weakly-correlated strategies at their disposal and want it for anything but that (valid) reason.
 
MountainTrader, I am having some trouble with your math and your terminology.

First, 25 pips is always going to be worth $250 "per lot", on any ---/USD pair, regardless of leverage.

Second, it seems you might be using the terms "margin" and "risk" interchangeably. Risk (in %) of a trade usually refers to stop (in pips) x pip value (e.g., in USD) / account value (e.g., in USD). Risking "5%" at 100:1 and 200:1 leverage is nearly impossible, in terms of required tight stop size, barely above the spread itself.

It would be helpful if you could provide a hypothetical example of one trade -- currency pair, trade size, leverage or margin used, account value, TP, SL -- done in a 100:1 account vs. a 200:1 account.
 
Quote from RedDuke:

If you want to trade forex oanda and Intercative Brokers are the best 2 choices.

However, do some search on forex vs curency futures trading.

I would strongly suggest CME currency futures over forex.
More...

I would agree and second this. With forex, your broker takes the other side of your order--obviously a conflict of (your) interest. CME futures are exchange traded and regulated.
 
Quote from MountainTrader:

Many people on ET say that brokers are all scams. I agree to a certain extent. Well even if they have high leverage and are keeping trades in house, haave automated algorithms for maniplulation of price, etc, that doesn't mean that you cannot consistently win with them. There is no way that any of these brokers can prevent me from winning consistently.
More...

Having said all that you would still trade forex? I would say you are a sucker. Trade through regulated exchanges (i.e., CME)!
 
Quote from trader07:

Having said all that you would still trade forex? I would say you are a sucker. Trade through regulated exchanges (i.e., CME)!
More...

There are reasons not to. If you are a long term carry trader that doesn't want to close out a position for a profit/loss but would rather hold it long term (longer than 6mo). If you want the swap/Rollover/IRD added to your account during this period to grow your account size (open funds for other opportunities) rather than having the interest floating in the pip profit/loss. Also if you have a strategy to hedge or to stop out on a carry trade, then you have the exposure of the daily 1hr time when the currency futures are closed (I guess you could hedge your futures position in the spot market).

I agree with you in a way... But it also depends on the type of trader you are. Just my opinion.
 
Quote from NickBarings:

I had an IB account in the past and
have nothing but praise but with what I
know now, I would never trade forex
with serious money at IB
More...

May I know why and what are the problems? Thanks.

It seems IDealPro has changed and improved a few things since launching.
 
Quote from late apex:

MountainTrader, I am having some trouble with your math and your terminology.

First, 25 pips is always going to be worth $250 "per lot", on any ---/USD pair, regardless of leverage.

Second, it seems you might be using the terms "margin" and "risk" interchangeably. Risk (in %) of a trade usually refers to stop (in pips) x pip value (e.g., in USD) / account value (e.g., in USD). Risking "5%" at 100:1 and 200:1 leverage is nearly impossible, in terms of required tight stop size, barely above the spread itself.

It would be helpful if you could provide a hypothetical example of one trade -- currency pair, trade size, leverage or margin used, account value, TP, SL -- done in a 100:1 account vs. a 200:1 account.
More...

I'm sorry that I said that incorrectly. Here is a better way to explain it. Correct me if I'm wrong. In the 100:1 account with a hypothetical 10,000 capital at 5% risk with a 25 PIP stop loss you would be able to trade 20 lots. With 20 lots X $1.00 per pip X 25 PIPS your risk would be $500 or 5% of your capital. With a 1:2 risk to reward if you win 50 PIPs your profit would be $1000 or 10% of your account on one trade. That's not bad for one day.

In the 200:1 account the risk would be the same. 25 PIPS X $1.00 per PIP X 20 lots still = $500. The only difference is your deposit in the trade is half as much. I think this is where some of the income calculators that I have seen are flawed. The 50 PIPS profit would also be the same. I need to think about this again when my brain is more oxygenated. Maybe I have been in the habit of equating risk with the amount of the deposit which is incorrect.
 
You must log in or register to reply here.
Back
Top