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How the retail Forex works. Dealers vs. Clients

  • #21
  • Apr 8, 2007 6:27pm Apr 8, 2007 6:27pm
Quoting cementman
Igrok....
Quoting cementman

1- What do about GFT UK they are based in london so are they up to your standards?

2- What is the difference between IFX markets and CBFX are they the same or one of them is an IB for the other and which of them is the best?

3- Would you kindly point out 2 or 3 names that you can say that they were the best among that you've dealt with?

4- By favouring the UK based does that mean that the UK rules are more strict?

5- Would you be so kind to to make it more specific about the links for those banks caz i've tried to go to the websites but i couldn't find any thing about forex ..also what are the minimum to open an account and what leverage do they offer?


1. I don't know about GFT. Have never worked with them.
2. A few months ago IFX has been bought by City Index Ltd. So far I haven't noticed any changes but they are likely to appear some time in the near future. To better or worse I don’t know.
3. It's very difficult to be more specific on the names because the situation is changing all the time. GNI used to be a good company but I don't know what has happened to them since it became a part of Man Group. CMC was the first dealer that offered on-line trading to the retail customers in 1995 with pretty good service that time and for some time but somehow over the years every new version of their trading platform traditionally becomes worse and less "customer friendly" than the previous one. I also suspect that they bucket inside the house even bigger customers with multi-million USD accounts that potentially might be risky for their business. Most of those companies also offer CFD (contracts for difference) betting that unlike retail forex is an undisguised gambling based on financial numbers, which is still illegal for US customers because on-line gambling is prohibited in The States.
4. Being FSA regulated is the main advantage the UK dealers might have over US based dealers. FSA is no nonsense organization and unlike CFTC knows exactly what they are doing out there.
5. The banks usually require $5-10 million minimum account size with up to 1:20 leverage and always perform a thorough due-diligence investigation before signing a contract with a new customer. It might take time (up to several months) just to open up an account with one of them and their decision depends on how safe they would feel with a new client. Due diligence procedure usually includes someone from the bank coming to the customer’s premises with the inspection. You will not be able to open an account in the bank of your choice easily, as it requires a lot of paperwork, personal contacts and negotiations. Very likely you will have to prove in advance your competence in FX trading as well.
  • #22
  • Apr 9, 2007 5:34am Apr 9, 2007 5:34am
Thank you very much for your help..now i know about the FSA being great and i know that banks need a great sum of money which i don't have but the only thing that i still don't know is how is the best brokers out there for small amounts like 10-20K or at least the safest that i don't go to sleep praying for God that he don't go bankrupt on the mornning or that he don't want to send my money..if you got something in mind please help me with my biggest problems..thanks again
  • #23
  • Apr 9, 2007 6:17am Apr 9, 2007 6:17am
Quoting Igrok
There could also be some dirty tricks that some of the dealers practice for increasing their profits and minimizing the risks. Some of the most common are:

  1. Skewing quotes away from the real market price. Usually shifting them in the direction of the immediate trend. (Doesn’t happen with the most reputable dealers nowadays)
  2. Executing stops before the market has reached them or outside actual trading range. (Pretty common for small “bucket-shops”).
  3. Suddenly increase dealing spreads to hit the stops or do not execute limits even if the market has traded there. (Happens sometimes even with reputable dealers. Limits execution problem is my most frequent problem that I have to deal with on a regular basis).
  4. Executing stops with unreasonably large slippages. (To me happens mostly only if trading large contracts. Even with banks).
  5. Canceling executed trades. (Have never seen it personally but have seen lots of reports from others).
  6. Re-quoting market orders in a slow market for a worse price. (Extremely common practice on all levels).
  7. Constantly re-quoting every order in the fast market without offering an alternative price and thus not allowing making a trade at all. (Only those dealers whose trading platform is intentionally programmed to perform such a trick).
  8. Disconnecting internet-based trading platform at the moments of increased market volatility or just freezing it for a while. (Usually, right before or during a major economic news release) (Normal practice for smaller “ bucket-shops” but now also becomes relatively popular among larger guys too).

Do traders experience the same problems with ECN brokers such as Interactive Brokers?
  • #24
  • Apr 9, 2007 7:03am Apr 9, 2007 7:03am
Hi Igrok

Please comment on Swiss banks and brokers as well , if you have any experience and as to what possibilities and facilities are available over there, with names if you don't mind.
Regards
  • #25
  • Apr 9, 2007 7:11am Apr 9, 2007 7:11am
Quoting Castlemain
Do traders experience the same problems with ECN brokers such as Interactive Brokers?
Of course igrok will reply to your query; however I have been with them for 8 years now, UK based SFA regulated; very big company with universal trading platform, you can trade anything and everything on the same account, I have not had any problems, the only drawback is the customer service which is not that good.
Regards
  • #26
  • Apr 9, 2007 6:20pm Apr 9, 2007 6:20pm
Quoting cementman
Thank you very much for your help..now i know about the FSA being great and i know that banks need a great sum of money which i don't have but the only thing that i still don't know is how is the best brokers out there for small amounts like 10-20K or at least the safest that i don't go to sleep praying for God that he don't go bankrupt on the mornning or that he don't want to send my money..if you got something in mind please help me with my biggest problems..thanks again
I don't do comparative analysis of existing retail FX services. In my mind, for as long as the spreads are low, slippages don't exist and the quotes offered match real market prices at any given moment, such a dealer is OK for a small account. Just avoid those, who have been in business for less than 5-7 years, those who would allow keeping opposite positions on the same pair open (definitely a scam!!!) and those who charge interest both ways for overnight position keeping (in case it's not based on LIBOR differentials).
  • #27
  • Apr 9, 2007 8:12pm Apr 9, 2007 8:12pm
At this point, a few things come to mind.

1. Is the retail FX growing at a substantial rate, and if so, is this why so many brokers don't mind continually emptying the little guys accounts with all their nasty practices, because they know more customers will come along anyway?

2. Can brokers actually make money without engaging in these practices, if they can't, are we ever going to get a true service without having to invest millions in a bank?

3. I'd like to think there are honest businesses out there that will truely offer a good service, but will they survive in this retail marketplace that is dominated by dirty practices?

I don't mean to sound like its all a hopeless wasted endeavour, but I feel really sorry for anyone that doesn't understand that in this business, you're not only up against the market which has its own set of challenges, but most of us are up against dirty greedy businesses that couldn't care less if we lose our 20K we've worked our butts off to earn..

On a positive note, its good to know that us "little guys" can come to a place like Forex Factory to learn and benefit from each other.

Hats off to you Igrok, its knowledge like this, that really goes a long way in helping the great majority of us.
  • #28
  • Apr 9, 2007 9:43pm Apr 9, 2007 9:43pm
Quoting Blackinc
At this point, a few things come to mind.

1. Is the retail FX growing at a substantial rate, and if so, is this why so many brokers don't mind continually emptying the little guys accounts with all their nasty practices, because they know more customers will come along anyway?

2. Can brokers actually make money without engaging in these practices, if they can't, are we ever going to get a true service without having to invest millions in a bank?

3. I'd like to think there are honest businesses out there that will truely offer a good service, but will they survive in this retail marketplace that is dominated by dirty practices?

I don't mean to sound like its all a hopeless wasted endeavour, but I feel really sorry for anyone that doesn't understand that in this business, you're not only up against the market which has its own set of challenges, but most of us are up against dirty greedy businesses that couldn't care less if we lose our 20K we've worked our butts off to earn..

On a positive note, its good to know that us "little guys" can come to a place like Forex Factory to learn and benefit from each other.

Hats off to you Igrok, its knowledge like this, that really goes a long way in helping the great majority of us.
Retail Forex in its nature is no different from a regular gambling business and a dealing company is no different from a casino. Slot machines on a casino floor can also be programmed differently providing bigger or lesser winning probability for a gambler. Levels of honesty or dishonesty of such a business owner is usually controlled and regulated by some sort of a “Gambling Commission” that sets up and enforces rules for the industry. In UK FSA does such a job and it does seem relatively effective, but in the States no one does. CFTC and NFA have only partial control over those matters. There is a paradoxical situation with CFTC’s involvement in Forex regulation exists in US. In order to be able to nail down a Forex scammer in court, CFTC first has to commit a scam of its own. CFTC has to scam a judge and a jury by falsely claiming that the alleged scammer has been involved it trading “currency futures” instead of being involved in FX “spot” market. They just must do it because by the law they have no regulative authority over the “spot” or “cash” currency market. This is why on their website they never use the word “spot” when talking about alleged Forex related scams and always use some senseless BS definitions like “illegal futures” or “over the counter futures contracts” when such things don’t even exist in nature. When presenting a case against an alleged FX scammer in court, CFTC has to “pull wool” over a judge’s eyes convincing him that the case is really about the “illegal futures” and not about the “spot” market. Sometimes it works, sometimes it doesn’t. If a judge if neither stupid, nor biased or ignorant, he usually just throws that case out of court for the reason of CFTC not having a regulative authority over the issue. The most famous case on the issue was the one held in Chicago a few years ago. It is called “CFTC vs. M. Zelener”. In his final decision the judge admitted that it is very likely that the defendant has committed a scam against his customers but he also ruled that CFTC has no formal authority to go after him and to prosecute the defendant and thus he must rule in the defendant’s favor.
  • #29
  • Apr 9, 2007 10:38pm Apr 9, 2007 10:38pm
Quoting Igrok
Retail Forex in its nature is no different from a regular gambling business and a dealing company is no different from a casino. Slot machines on a casino floor can also be programmed differently providing bigger or lesser winning probability for a gambler.

Hmmm.. the quote "The house always wins" bothers me..
  • #30
  • Apr 9, 2007 10:42pm Apr 9, 2007 10:42pm
Quoting Blackinc
Hmmm.. the quote "The house always wins" bothers me..
It is what it is. You always have a choice either to participate or to stay away from it.
  • #31
  • Apr 9, 2007 10:54pm Apr 9, 2007 10:54pm
Quoting howard
Hi Igrok

Please comment on Swiss banks and brokers as well , if you have any experience and as to what possibilities and facilities are available over there, with names if you don't mind.
Sorry, have no experience.
  • #32
  • Apr 9, 2007 11:21pm Apr 9, 2007 11:21pm
Quoting Igrok
It is what it is. You always have a choice either to participate or to stay away from it.
Fortunately, as a poker player I look at it slightly different than my above quote. In poker, the "house" only gets a rake of the pot in the middle in every hand, but you can still win in poker with discipline, money management and good control of your emotions.

So the dealer can still win a little from me on spreads and slippage and so forth in every trade, but in the end I know I can win as well. Discipline, time and knowledge applied correctly will be profitable..
  • #33
  • Edited 11:36pm Apr 9, 2007 11:26pm | Edited 11:36pm
Quoting Blackinc
Fortunately, as a poker player I look at it slightly different than my above quote. In poker, the "house" only gets a rake of the pot in the middle in every hand, but you can still win in poker with discipline, money management and good control of your emotions.

So the dealer can still win a little from me on spreads and slippage and so forth in every trade, but in the end I know I can win as well. Discipline, time and knowledge applied correctly will be profitable..
Dealer doesn't "win a little" from you. He either gets all your losses or pays your entire win out of his own pocket. There is no "win-win" in this game as there is no "win-win" in a slot machine. Spreads and slippages play the same role as "zeros" and "double zeros" in a casino's roulette. They just guarantee dealer statistical advantage.
  • #34
  • Edited 11:49pm Apr 9, 2007 11:48pm | Edited 11:49pm
Hmmm.. ok yes, I see what you're saying, which also shoots my illustration down in flames.. Oh well sounded good

So bottom line, with the small guys, the dealers don't make any money until these guys go below their initial capital. Because (tell me if i'm wrong)there is no commission, spreads don't mean anything when the position is kept in house. And rollover interest is either coming out of your pocket to them, or coming out of their pocket to you.

So dealers are paying you to be a customer if you're profitable? At which point what do they do next?
  • #35
  • Apr 9, 2007 11:52pm Apr 9, 2007 11:52pm

  1. Quote
    They also make customers’ profiling. They filter out those clients that could potentially beat the odds and trade profitably. So, they don’t bucket such customers and usually immediately pass their contract to a larger counterpart like the clearinghouse or another bank. Sometimes even to another dealer. The rest of the customers with lack of brains or a lack of experience and relatively small trading capital get bucketed inside the house.

This alone doesn't hurt retail trader right ? But it makes more money for the broker. Correct me if I'm wrong.

  • #36
  • Apr 9, 2007 11:57pm Apr 9, 2007 11:57pm
Quoting luqmanz
This alone doesn't hurt retail trader right ? But it makes more money for the broker. Correct me if I'm wrong.
Right.
  • #37
  • Apr 10, 2007 12:01am Apr 10, 2007 12:01am
Quoting Blackinc
Hmmm.. ok yes, I see what you're saying, which also shoots my illustration down in flames.. Oh well sounded good

So bottom line, with the small guys, the dealers don't make any money until these guys go below their initial capital. Because (tell me if i'm wrong)there is no commission, spreads don't mean anything when the position is kept in house. And rollover interest is either coming out of your pocket to them, or coming out of their pocket to you.

So dealers are paying you to be a customer if you're profitable? At which point what do they do next?
They don't need to do anything. Ideally it would be better to get rid of a constantly winning client, but because this is a game of numbers then there is nothing wrong with paying out client's wins sometimes. Casinos also don't get bankrupt despite jackpots happen.
  • #38
  • Apr 10, 2007 12:07am Apr 10, 2007 12:07am
Funny story.... I had my trading suspended by one of my brokers today. Apparently I was executing trades at "off market" prices. They said that there was a flaw in metatrader that i was exploiting. I asked if it was the ordersend and orderclose functions... adn why are you filling my orders if the prices are "off market"...

anyway mabye there is some truth to the metatrader flaw ( if so I want to knwo it so that i can exploit it in all of my EA's)

I run a very active EA. that is very profitable as well. This particular broker has had requote issues ever since the EA started trading more than 1 lot orders too. I know this because I run the same EA with the same settings at two other brokers. This account has gone from 2500 to 4200 in the past 3 weeks. the other two have gone from, 2500 to 5100 and, 5000 to 12400. much different performance... I read through the logs and noticed that I was getting roughly 20 - 40 requotes a day. ouch

Bottom line....
On our phone conversation They told me that it was going to take a few days to review and fix the problem (reactivate my account). Then I emailed them the first post from this thread and asked if there was any truth to this.... My account was re activated withing 15 mins of the email.

I am however still pissed because they forced me to close an open buy position for a loss at 23:49 on the EUR/USD which then in the next two hours rallied up more than 50 pips. Is there any recourse that can be taken against a broker for something like this ?
Keep it simple stoopid....
  • #39
  • Apr 10, 2007 12:26am Apr 10, 2007 12:26am
I think the best solution is you tell us whick is this Broker, for all the members get out of it !!!

Quoting Kurka Fund
Funny story.... I had my trading suspended by one of my brokers today. Apparently I was executing trades at "off market" prices. They said that there was a flaw in metatrader that i was exploiting. I asked if it was the ordersend and orderclose functions... adn why are you filling my orders if the prices are "off market"...

anyway mabye there is some truth to the metatrader flaw ( if so I want to knwo it so that i can exploit it in all of my EA's)

I run a very active EA. that is very profitable as well. This particular broker has had requote issues ever since the EA started trading more than 1 lot orders too. I know this because I run the same EA with the same settings at two other brokers. This account has gone from 2500 to 4200 in the past 3 weeks. the other two have gone from, 2500 to 5100 and, 5000 to 12400. much different performance... I read through the logs and noticed that I was getting roughly 20 - 40 requotes a day. ouch

Bottom line....
On our phone conversation They told me that it was going to take a few days to review and fix the problem (reactivate my account). Then I emailed them the first post from this thread and asked if there was any truth to this.... My account was re activated withing 15 mins of the email.

I am however still pissed because they forced me to close an open buy position for a loss at 23:49 on the EUR/USD which then in the next two hours rallied up more than 50 pips. Is there any recourse that can be taken against a broker for something like this ?
  • #40
  • Edited 1:19am Apr 10, 2007 12:49am | Edited 1:19am
Quoting Kurka Fund
Is there any recourse that can be taken against a broker for something like this ?
Stuff happens, but there is very little you can do about it. You can try to rape them up in court, but such litigations are very expensive in the US. In UK you can complain to FSA and they might be willing to investigate it. Once I was ripped off by a dealer for about $300K of unrealized profit in a matter of seconds because of an "honest mistake" the dealer made by giving me a quote 100 pips above the real market price which I refused to accept. It took about two weeks to settle the dispute and they eventually credited the account with a half of the amount in discussion. It happened only after my client made it clear to the dealer that a lawsuit is inevitable in this case. I think the client agreed to the settlement only because the argument was about unrealized profit and not about the principal, but from my perspective it shouldn't be making any difference at all. The bottom line is that if a trader always accepts full responsibility for his mistakes then a dealer must do the same for his own.
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