Gft Account Opening - But Am I Giving Away All My Power?

I have demo traded many months and eventually opened a mini (10,000 lots) live trading account with GFTForex with about $1000. However, upon a scrutinized reading of the Terms and Conditions - and indepth look into the Trading Terms, I am thinking of closing that account and opening a micro with oanda with the same capital - as I am trading forex live for the first time, I just wanted to know if these implied meanings are normal in this industry;;; personally, it appears as if the whole stuff is tilted in the favour of GFT forex and when I start operating the account- they could act as they wish leaving me with no power but reminding me of 'clause blah blah' - how do these compare with other terms in the industry (I have paraphrased the meanings I got to from it instead of quoting the real thing to protect their terms).

1. They will reject my trade if "(acting reasonably)" they think it would not be commercially viable to accept that trade. - could this be the reason why they sometimes delay news traders (from my reasearch) - and waste time in certain trade entries and exits because it will not be commercially viable but at the detriment of the traders pocket?

2. There is an inactivity charge so if my account is dormant for more than 60 days, I will be charged a certain fee of more than $60 for each further month of inactivity.

3. It appears that a leverage of 400:1 is mandatory for their mini accounts - this could lead to a quick blow up of the account.

4. They require Variation Margin which requires some sort of complex calculation of Risk percentage (computed as a percentage of ) which is supposedly payable for each open position.

There are other hidden charges - I am thinking I will get better terms with an oanda micro account with this $1000 - any inputs welcome./

First let me begin by saying that Oanda uses similar language in their trading agreement. That is because Oanda and GFT are both "dealing desk firms" which means they take the other side of your position and offset their overall exposure only when their internal risk models say their exposure is too great. (Why offset your exposure when more than 80% of traders lose unless the risk is too great, right?)

1. If you scalp or trade news, your best bet is to go with a "no dealing desk" firm that does not take the other side of your trades and so can still be profitable handling your order flow in a timely fashion. Try trading the news with a "dealing desk" firm and chances are you will experience delayed execution, possibly with requotes or get spreads that are so wide you'd be better off not trading at all. It is nothing sinister on their part. It's simply that they cannot fill your order at a price that does not give them a chance to make a profit. In my experience "dealing desk" firms tend to be better staffed and offer great customer service, but you should only use them for position trading. Go with a "no dealing desk" firm for your scalping and news trading.

2. At least half the big firms out there don't charge an inactivity fee, so if you think you might be in a situation where you'll not be trading for 2 months straight, go with another firm.

3. Just because you are offered 400:1 leverage does not mean you have to use it. (You might have sports car that has a top speed of 180 mph, but you'd be a fool to drive that fast in most situations.) The actual leverage of your account depends of the notional value of your open trades versus the actual equity in your account. For example if you have $1000 in your account and open a 10k USD/JPY, you are controlling $10,000 with your $1000 equity. That is 10:1 leverage. If you open 20k USD/JPY with your $1000, you are using 20:1 leverage.

4. Variation margin would not be a fee you pay but a minimum about of equity you must maintain to keep your existing trades. If you use modest leverage and don't risk more than 5% of your equity on anyone trade, you should not have trouble keeping sufficient margin in your account.

As a final note: if you have been news trading on a demo, I think you are in for a rude awakening when you start trading with real money. There is no way a demo account can approximate how illiquid the market can be during new events. On a demo if you see a price on the screen you get it.

In the real market you might see a price but there might be no liquidity in the market behind that level to fill your order. (The Nintendo wii might retail for under $250 but good luck getting one for that price around Christmas if there are none in stock.)

I'm not saying you should give up on trading the news, but place the smallest size trades you can until you get a feel for how it works in the real world. Best of luck.

Even if GFT is the most fair broker in the world, a $1000 account is too small for trading mini lots, you'll be better with micro lots. I think Oanda is your best option since they are the most flexible broker out there when it comes to position size.

Read this post:

http://forexfactory.com/showpost.php...5&postcount=29

That will show you the difference between broker leverage and real leverage.

Good luck

Not only 'deal desks' have these clauses in their customer agreements, also ECNs and futures/options/stocks brokers do. I have yet to read one that does sound fair to both sides, the client and the broker.

For example IB (i just mention them because the IB agreement happens to be the last one i read) has a clause that prohibits you from sueing them. Another highlight is, that the risk of any kind of IT failure (and possible associated losses), be it on the clients computer or on their servers, is upon the client. These things read like true horror-stories. But all firms are really the same in this regard, if you read the fineprint.

Do you read the fine print on your car, mortgage, credit card, Blockbuster Video card, etc? I've had an account with them for awhile and have never had the fine print come up and bite me. Hasn't happened with my Blockbuster card either.

Thanks a lot for your replies! Has been extremely valuable. I will heed the caution on live news trading.


"Another highlight is, that the risk of any kind of IT failure (and possible associated losses), be it on the clients computer or on their servers, is upon the client. These things read like true horror-stories. "

True say.

Thanks.

Yes Oanda is one of the most flexible broker and their services are very fine. I started my mini account with $1500 and had some good trading with them.