Interesting - 0 pip spread, Commisions returned on losing trades? | Forex Factory

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Interesting - 0 pip spread, Commisions returned on losing trades?

  • #1
  • First Post: Aug 22, 2011 4:51pm Aug 22, 2011 4:51pm
http://www.fxclub.com/land-exp-6

0 pips spread. Commisions returns on losing trades.
Hmmm...how they will live with 99% losers?
Looks to me something hidden.
Can somebody give feedback on these guys?

I heard they are instaforex.com.....
  • #2
  • Aug 22, 2011 5:57pm Aug 22, 2011 5:57pm
I just looked at their website (not the link you posted). It's actually an interesting, and probably profitable (for them), business model. In a nutshell, it's this:

They charge 4 pips flat commission on a trade, but only collect it on winning trades. Now think about how market makers get their profit.

If you go long, they go short. They can pass that through to their prime broker and get flat, if they want, or they can hold the position against you. In the first case, as long as their spread is outside the interbank spread offered by their PB, they can profit the spread difference risklessly. But for any market maker that isn't a total bucket shop with outrageous bid-ask spread, that's not very much money, generally under one pip.

In the second case, since they have no option in when you're going to close, they face risk. Now, the fxclub business model gives traders an incentive (no commission) to close trades that move against them quickly. But a trade that moves against the customer is a trade that moves for the house; incentives to get the customer to close it out inhances their profitability. Think of it as a series of small scalps, the size of which is the customer's (tight) stop.

So, it makes sense to me, at least. As a business model, that is. Four pips commission is eight off a winning trade (I assume it's four entry and exit). And that (even four, for that matter) is very hard to make up.

Not saying it's good or bad; you should think long and hard about how that cost structure would work for your particular type of trading strategy.
  • #3
  • Aug 22, 2011 6:05pm Aug 22, 2011 6:05pm
Quoting OldQuant
If you go long, they go short.
In this case I do not care.
There is no difference of where to lose money.
On the other hand, if you are winning, the house goes with you.

The only thing that bothers me what if they make frequent requotes and
this way you will go down...
  • #4
  • Aug 22, 2011 6:17pm Aug 22, 2011 6:17pm
Quoting Expert44
In this case I do not care.
There is no difference of where to lose money.
On the other hand, if you are winning, the house goes with you.

The only thing that bothers me what if they make frequent requotes and
this way you will go down...
Sir, I don't think I made myself clear for you to interpret what I was saying. Let me try again.

Say you have a strategy where you use tight stops to keep losses small, but let your profits run.

Now, for fxclub, if the market (not them) hits your stop, you close out. You lose the pips, but pay no commission. But they can and probably do gain those pips, which is why they don't have to charge you commission.

If the market goes in your favor, at some point they cover their offsetting position in the market, and then will wish the best for you. Because in this case, you will profit as much as the market gives you. But they will in this case get either four or eight pips in commission.

So all I am saying is that it is not an unprofitable way to do business for them, and, in fact, is innovative.
  • #5
  • Edited 8:38pm Aug 22, 2011 7:30pm | Edited 8:38pm
Very innovative. Smart people . I think many will follow them.
But, when we get real account then we will see real reality.
  • #6
  • Edited 11:10pm Aug 22, 2011 9:59pm | Edited 11:10pm
normal commision for an ecn is around half a pip per round turn. If you are paying 8 pips per round turn on your winners only then they have covered themselves for the commision they dont charge on the losers. Its a rip off
BTC Return This Year: na
  • #7
  • Aug 23, 2011 12:35pm Aug 23, 2011 12:35pm
So far, I do not see rip off since they charge nothing from a losing trade. The bad thing is they do not have MetaTrader platform, how outdated!
  • #8
  • Aug 23, 2011 1:51pm Aug 23, 2011 1:51pm
Quoting Expert44
So far, I do not see rip off since they charge nothing from a losing trade. The bad thing is they do not have MetaTrader platform, how outdated!
MAC and OldQuant are giving you some good insight here. I was already gone by "4 pip commission"! :|
  • #9
  • Aug 23, 2011 3:17pm Aug 23, 2011 3:17pm
I just opened demo account with unknown trading platform.
By the way they promise MetaTrader by the end of this month or middle of September.
Whenever your position is at loss, it shows amount of commission to be returned;
when the position shows profit, this amount disappears.
So far, I do not see any negatives, only positives.
So, what happened to your "4 pips commission"?
  • #10
  • Aug 23, 2011 5:11pm Aug 23, 2011 5:11pm
On demo account it shows if I trade 10 cents a pip, they take 40 cents commission for each position in case if it wins, if it has losing equity then it shows 40 cents commission payback.

So far, I see only advantage in this innovation. Nothing bad.
  • #11
  • Aug 23, 2011 5:28pm Aug 23, 2011 5:28pm
Quoting Expert44
On demo account it shows if I trade 10 cents a pip, they take 40 cents commission for each position in case if it wins, if it has losing equity then it shows 40 cents commission payback.

So far, I see only advantage in this innovation. Nothing bad.
I have a question for you. On your demo, you say it shows "40 cents commission for each position in case if it wins."

Does that mean the commission is 4 pips total for combined opening and closing of the position? As opposed to 4 pips to open and 4 pips to close.

Also, I have a favor to ask, if you would be so kind. Wait for, and then notice the price of the EUR/USD pair (there is no spread, I believe) exactly at some hour, and then post here that price and time (showing the time zone, of course). I am interested in how they are pricing their "both sides" price.

Thank you
  • #12
  • Aug 23, 2011 11:42pm Aug 23, 2011 11:42pm
Its too late now here. Am to look tomorrow.
  • #13
  • Aug 24, 2011 9:34am Aug 24, 2011 9:34am
Quoting Expert44
I just opened demo account with unknown trading platform.
By the way they promise MetaTrader by the end of this month or middle of September.
Whenever your position is at loss, it shows amount of commission to be returned;
when the position shows profit, this amount disappears.
So far, I do not see any negatives, only positives.
So, what happened to your "4 pips commission"?
Trading 10c per lot with a 40c commission works out to be 4 pips. The minimum I'll trade is $10- $20 per pip.. That works out to $40 (1 lot)- $80 (2 lot) per trade, granted that it's 4 pips in and out. Would you pay 80 dollars for a trade?
  • #14
  • Aug 24, 2011 9:35am Aug 24, 2011 9:35am
As I noticed they charge only 4 pips commission. That is all.
I do not get second question. The best way, open demo account and
test everything.

As I said before I do care about their requotes, slippage etc. when entering/exiting market. But this will be shown when having real account, especially when you trade bigger money.

As one guy traded liteforex.com and when closing his position he had like 15 requotes and lost some 6 pips. In such a case one can easy put 0 spread but you are ripped off on the other side.
  • #15
  • Aug 24, 2011 1:25pm Aug 24, 2011 1:25pm
Quoting Expert44
I do not get second question.
That's all right; don't worry about it. It was just idle curiosity on my part, wondering if they keep their price at the interbank midpoint, or if maybe they drift it around inside, depending on the order flow they're facing.

One thing that I bet you'll see is a lot of encouragement on their part for you to enter both stops and take-profit orders at the time you establish your trade.

Good luck to you.
  • #16
  • Aug 24, 2011 7:22pm Aug 24, 2011 7:22pm
Quoting OldQuant
That's all right; don't worry about it. It was just idle curiosity on my part, wondering if they keep their price at the interbank midpoint, or if maybe they drift it around inside, depending on the order flow they're facing.

One thing that I bet you'll see is a lot of encouragement on their part for you to enter both stops and take-profit orders at the time you establish your trade.

Good luck to you.
I compared them to my broker www.upfx.com and the midpoint is the same.
Also, today I talked to them and asked about requoting. They promised that their platform ActTrader does not have requotes. So far, I see they are at big advantage over other brokers except I might not see something.
  • #17
  • Aug 24, 2011 7:32pm Aug 24, 2011 7:32pm
I could be missing something too, but I think what you are missing is the cost of making money.

Sure, you can learn to trade here, or hone your skills. But what happens when you want to actually make some money doing this? You can't make money trading for pennies.

A 40c commission is nothing, but when you get to full lots, you are going to be paying a hell of a lot of money for the same ops you can get in other markets, at a fraction of the cost.
  • #18
  • Aug 24, 2011 7:50pm Aug 24, 2011 7:50pm
sounds to me like a bucket shop game.

if you don't lose anything on losing trades, but on winning trades are docked 4 pips... then really it's the same thing as being docked 2 pips on a winner or a loser, with the skewed brokers edge of clients being forced to trade slow timeframes to overcome the massive virtual spread if they intend to ever actually trade a profit. therefore, slow timeframe trading = less frequency of trades = less feedback on true trading performance... = newbies will love the no losses on losing trades and not realize they are simply churning their account into oblivion slowly but surely.

if they don't charge you on losses, but still run the setup like a normal brokerage, i.e. margin requirements etc to maintain a losing trade, then it's not like you can open random trades and simply wait it out until they finally get into profit. you still have to trade like anyone else, but you have such a higher spread to overcome than everyone else.

basically, it's a clever bucket shop mind game to skew things further in their favor while also being a great way to suck in newbies with a catchy gimmick.
Congratulations ScalaFX for coming out of the closet!
  • #19
  • Aug 24, 2011 8:02pm Aug 24, 2011 8:02pm
Quoting orderphlow
I could be missing something too, but I think what you are missing is the cost of making money.

Sure, you can learn to trade here, or hone your skills. But what happens when you want to actually make some money doing this? You can't make money trading for pennies.

A 40c commission is nothing, but when you get to full lots, you are going to be paying a hell of a lot of money for the same ops you can get in other markets, at a fraction of the cost.
If I trade 10 cents a pip, my commission is 40 cents. If I trade $1 a pip, the commission is $4. I pay the commission if I closed the position minimum $4 win otherwise I pay 0 commission.
On the other side US brokers used the fact that poor US citizens are not accepted abroad and they lifted spread up to $9 on some majors. I clearly see difference between $4 and $9. Moreover I see that fxclub.com is a US broker.
  • #20
  • Aug 24, 2011 8:08pm Aug 24, 2011 8:08pm
Quoting nubcake
sounds to me like a bucket shop game......
basically, it's a clever bucket shop mind game to skew things further in their favor while also being a great way to suck in newbies with a catchy gimmick.
Its hard to understand what you mean. I trade for many years and why I have to continue paying 10 pips on AUDCHF to get into market if I am offered to pay nothing in case of loss? In case of win I pay also nothing in order to get into market.
I know there is proverb that free is only cheese in mouse trap.
On the other side I see the broker has advantage all the time but he did better for us also.
Let us see how it works out.
Competition is what makes progress....
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