Is this true?

Post #3:

http://www.forexfactory.com/forexfor...ead.php?t=5919

Dane

What we are seeing here is a conflict of interest. FXCM has NO interest in seeing us traders make money because since they take the other side of the trade, they will lose money if we win. Winners are put on manual execution, then end up leaving FXCM and are replaced by a crowd of losers. That's FXCM business model. They don't care what we think of it since they are profitable. And arrogant too.

Don't get fooled by their slick sales reps.Once you start trading and have to deal with their dealing desk, its a completely different story. Yes, you may have had one or two issued resolved to your satisfaction but they know that in the long run, they'll wear your account down.

Best of luck.

Retail Forex Brokers

Retail forex brokers or market makers handle a minute fraction of the total volume of the foreign exchange market. According to CNN, one retail broker estimates retail volume at $25-50 billion daily, [2]which is about 2% of the whole market. CNN also quotes an official of the National Futures Association "Retail forex trading has increased dramatically over the past few years. Unfortunately, the amount of forex fraud has also increased dramatically."

All firms offering foreign exchange trading online are either market makers or facilitate the placing of trades with market makers.

In the retail forex industry market makers often have two separate trading desks- one that actually trades foreign exchange (which determines the firm's own net position in the market, serving as both a proprietary trading desk and a means of offsetting client trades on the interbank market) and one used for off-exchange trading with retail customers (called the "dealing desk" or "trading desk").

Many retail FX market makers claim to "offset" clients' trades on the interbank market (that is, with other larger market makers), e.g. after buying from the client, they sell to a bank. Nevertheless, the large majority of retail currency speculators are novices and who lose money [3], so that the market makers would be giving up large profits by offsetting. Offsetting does occur, but only when the market maker judges its clients' net position as being very risky.

The dealing desk operates much like the currency exchange counter at a bank. Interbank exchange rates, which are displayed at the dealing desk, are adjusted to incorporate spreads (so that the market maker will make a profit) before they are displayed to retail customers. Prices shown by the market maker do not neccesarily reflect interbank market rates. Arbitrage opportunities may exist, but retail market makers are efficient at removing arbitrageurs from their systems or limiting their trades.

A limited number of retail forex brokers offer consumers direct access to the interbank forex market. But most do not because of the limited number of clearing banks willing to process small orders. More importantly, the dealing desk model can be far more profitable, as a large portion of retail traders' losses are directly turned into market maker profits. While the income of a marketmaker that offsets trades or a broker that facilitates transactions is limited to transaction fees (commissions), dealing desk brokers can generate income in a variety of ways because they not only control the trading process, they also control pricing which they can skew at any time to maximize profits.

The rules of the game in trading FX are highly disadvantageous for retail speculators. Most retail speculators in FX lack trading experience and and capital (account minimums at some firms are as low as 250-500 USD). Large minimum position sizes, which on most retail platforms ranges from $10,000 to $100,000, force small traders to take imprudently large positions using extremely high leverage. Professional forex traders rarely use more than 10:1 leverage, yet many retail Forex firms default client accounts to 100:1 or even 200:1, without disclosing that this is highly unusual for currency traders. This drastically increases the risk of a margin call (which, if the speculator's trade is not offset, is pure profit for the market maker).

According to the Wall Street Journal (Currency Markets Draw Speculation, Fraud July 26, 2005) "Even people running the trading shops warn clients against trying to time the market. 'If 15% of day traders are profitable,' says Drew Niv, chief executive of FXCM, 'I'd be surprised.' " [4]

In the US, "it is unlawful to offer foreign currency futures and option contracts to retail customers unless the offeror is a regulated financial entity" according to the Commodity Futures Trading Commission [5]. Legitimate retail brokers serving traders in the U.S. are most often registered with the CFTC as "futures commission merchants" (FCMs) and are members of the National Futures Association (NFA). Potential clients can check the broker's FCM status at the NFA. Retail forex brokers are much less regulated than stock brokers and there is no protection similar to that from the Securities Investor Protection Corporation. The CFTC has noted an increase in forex scams [6].

Moe,

Good info and about what I expected.

Sterling,

I'm definitely not promoting the use of Retail Forex at all...I'm promoting the use of good decision making.

There aren't very many advantages of going through a retail broker, but obviously there ARE some:

1) first and foremost is that you CAN open an account with very little money. The reason I find this important is because a lot of the "dues" you pay to learning the market have to do with REAL WORLD trading experience. If I can do that with a $250 micro-mini account at FXSol, I can learn a lot using real world trading conditions. As many of you have noted, I'm a HUGE proponent of using real money to learn how to trade. You need to learn how to operate within the forex system in order to become profitable and if you're blowing out your demo accounts on "theories" and "hopes" you don't really learn anything...at least not what you're supposed to learn, like money management and mind management.

2) ECN trading technology (and by that I mean the actual systems you use to trade) are often cumbersome and not user friendly. Obviously, you can build your own, but I find that it's SOMETIMES (not all the times) very frustrating to try and enter orders. I often like to use things like touch screens and simple mouse clicks in order to enter orders...ECN trade stations (at least the ones that I've seen and demoed) are NOT easy to use. Obviously to reduce their costs and maximize their profits, ECNs spend a lot less time on R&D for their systems...and it shows. This, of course can be overcome if you're ambitious enough...

3) In rare cases, higher leverage offered by retail brokers is actually advantageous. If you're confidence is high and your money management skills are in peak form, you can take advantage of lower risk trades with maximum profitabiliy. For example, if all models point to a decent size run-up (200 pips or so) with neglible risk (50 pip mistake), being able to leverage does have advantages. Obviously it's easy to make mistakes in this scenario, but I'm sure a lot of you have experienced that feeling shortly after a semi-volatile news release that you absolutely new in your heart of hearts that the market mood was so one-sided that jumping in was just so little risk...in other words, you absolutely knew that you would make money just by getting in. In those particular cases (which I find are few...but not necessarily far between), leverage can be used to your advantage. Some systems take advantage of the low margin requirement to offset risk in both directions.

Again, the biggest problem with all of this has to do with the decision to trade NFP at all. Even with ECN platforms, exact entries and exits are difficult and pre-existing limit orders work the same (for the most part) on both platforms. Everyone here will agree that trading NFP is a lot like gambling...not necessarily because you can't have a strategy to trade, but some strategies aren't compatible with the technology available. So for example, trying to jump in and jump out during NFP (quick scalp)...not exactly compatible with existing technology (especially on retail brokers...and ECN prices "jump" a lot during high volatility...I was watching NFP at MBT and the prices bid would jump up 20 pips then down 30 then up 15 all in a matter of a half a second). I'm sure it's not what a lot of you guys want to hear, but seriously, it's easy to see why people lose their shirts (or blow out demo and live accounts) in forex and that's because of decisions to try trade NFP....why do it?

And I know there's probably a philosophical debate raging about whether or not you SHOULD BE ABLE to do it...but that's really not the point. Obviously, everyone here is free to jump off a cliff, but honestly, I wouldn't recommend it. Even from a stand point of whether or not you should, honestly, for most people, I would try to prevent them from physically being able to do it if I could. Whether or not they would really want to, there is something to be said for valuing the well being of others, and in this particular case, trading super high volatility is the forex equivalent...and while I know there are some extreme sport lovers who would love nothing more than to base jump cliffs all the live-long day...I dunno...I think I'd be ok with taking away some priviledges for the safety of others...just my opinion.

i have 2 retail accounts and one ecn fxdd,fxsol,mbt. all or very good brokers. you can make money with retail brokers you just have to find the right one like you said before your broker will be stupid to trade against you if your on the right side.

There are so many oppurtunities to make good high probability gains during the rest of the month. I don't see why anyone would need to play around with NFP.

With the exception of screwing up my dates on Friday, I've been heeding Vegas's advice and staying away from trading during NFP Fridays. Simple.