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About choosing a broker

Discussion in 'Beginners Bootcamp' started by Hisser, Jun 5, 2011.

  1. Hisser

    Hisser Recruit

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    I was reading about many broker companies reviewed here at FPA and what I found is that traders share the same problems which discourages me to make a proper decisions because of these facts which are real problems for money making:

    1. Bad connections or server fails (I guess purposely to slow your SL or TP decision)
    2. Trading the news is unacceptable because of very high PIPs
    3. Small profits are acceptable until you start making big.
    4. Problems with withdrawals
    5. Fraudulent or unethical broker behavior (profit cuts, closing accounts with no reasons, excuses about disallowed scalping methods, changing informations about PIPs by surprise in a benefit of the broker company etc.)

    This makes me feel like every broker is a SCAM on some way, but those who are true ECNs and require initial investment of $100,000 (which are hard to earn money just to invest them in FOREX). Please, I am falling in a mental trap maybe and need help to get out of it. I think that the good reviews about the broker companies are given by some infiltrators who cooperate with them, and the valid ones are the bad reviews which are always problems of the nature mentioned above.
     
  2. MichelAnge21

    MichelAnge21 Sergeant

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    It is true that fake good reviews exist, but keep in mind that some bad reviews are from people who cannot take responsibility for their own mistakes. They lost their money and they feel better if they can blame their broker for it. They are often new traders who simply dont understand the markets. There are brokers out there that are properly regulated and have a good reputation. if you are worried by possible disconnection, there is a very simple safety measure: open 2 accounts with different brokers. If you are unable to connect to one broker and the market is moving against you, simply offset your position by opening the opposite position with the other broker.

    Always remember that a broker that is duly registered in a country where Forex is properly regulated offers you much more legal protection than unregulated ones or those that are regulated in countries where the laws are not strict enough. Always verify the validity of their licence and the local laws.
     
    #2 MichelAnge21, Jun 5, 2011
    Last edited: Jun 5, 2011
  3. RahmanSL

    RahmanSL Major

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    I started a thread here at the FPA (under General Forex talk) on 11/Feb/2011 inviting broker(s) to lay claim to being "Trustworthy & Honest"....But not a single broker dare response or lay claim to being that "clean".

    So, what does that tell us about forex broker?
    They, like any business, is out here to make profits. Though we Traders do not nor should we deprive them of making money (hey! even brokers need to eat too), but brokers know that they cannot make any decent profits by being honest. They have too many expenses to pay in ways of computers start-up & maintenance, salaries, commissions, etc.

    As for choosing a broker...weellll...approach it like choosing a life long partner. It might be an expansive courtship or a pleasant experience.
    As with even what we perceived as an ideal partner, we will discover their flaws as we get to know each other more intimately. We will have problems and arguments.
    And in the event that we discover we just cannot live together any longer, we will land up in divorce...with or without a messy parting of ways.

    Then we either become a life long bachelor or find another partner and start all over again.

    Have a happy & pleasant forex journey! : )
     
  4. Hisser

    Hisser Recruit

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    Very good advice thank you. I am forward to hear more advices of this type.

    Also, I got many advices about that it is very good to check if one broker company is authorized with FSA or NFA. They give you more safety according to the license issue. Will you agree with me?
     
  5. MichelAnge21

    MichelAnge21 Sergeant

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    I agree that those 2 regulatory bodies are very good, but they are not the only ones. I trust ASIC in Australia and FINRA in Switzerland as well. CYSEC in Cyprus is seen as inferior, but they are a lot better than they used to be in the past. They had to improve to meet the EU standards under the MIFID agreements. One problem that you have is that your country is not yet in the EU and you might not get the same MIFID protection as EU citizens.

    Basically, you should study the Avafx vs Abdul Ghafoor case in the scam alerts folder. Avafx is a regulated broker in Ireland, but I found out lately that they offer 2 contracts. One is with Ava Capital Markets and is offered to EU citizens ( Ava Capital Markets is the regulated entity in Ireland ). To clients from elsewhere in the World, they offer a contract with Ava Financial that is a separate entity located in the British Virgin Islands. Clients from your country then might find out they cannot appeal to the Bank of Ireland for arbitration if they have a dispute with Avafx.

    Note also that Avafx is a market maker. You should know when you open an account with a market maker that they are trading against you. When you open a position, the broker takes the opposite side until they can hedge it in the open market ( takes only seconds or fractions of seconds of course ) But that little fact that your broker is trading against you for seconds is enough to cause some problems if they decide you violated some clause in the contract. It s better to deal with STP/ECN brokers because they dont have such monetary interest against clients.

    That example shows that understanding regulations can be tricky.
     
    #5 MichelAnge21, Jun 6, 2011
    Last edited: Jun 6, 2011
  6. Hisser

    Hisser Recruit

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    CYSEC might be good, but what I saw on this forum (I guess you already know) was a link to a FSA pdf archive posted and inside was a statement about eToro broker house, that it is not regulated with FSA and was known as it was. They marked eToro as a potential threat or scam and warned the investors. But on their site I can clearly see they are regulated with CYSEC. It might be possible that CYSEC can do tricks if you understand what I mean? (This can be very dangerous even with authorized regulatory bodies if the above assumption applies).

    Another question, do you know any Macedonian investors around who had or have experience with some foreign broker house, or simply are investing in FOREX? I asked this question in another thread as you may noticed.

    I strictly have the idea to cooperate with ECN broker if possible. Any advice on that?
     
  7. MichelAnge21

    MichelAnge21 Sergeant

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    I dont have any experience with a ECN broker, but I suspect that some unregulated brokers are just lying when they say they are ECN. My present broker is STP.
    Lately, I opened a demo account with Dukascopy to gain some experience with a ECN. I m just starting. One problem with Dukascopy is that they ask a notarized copy of my documents...it will cost me a few hundreds dollars to satisfy their conditions.
    With a true ECN, you have a window that shows market depth movement and it can be a precious piece of information. You can see the orders and where the Big Money flows.
    Many ECN take only large accounts. Dukascopy is one where you can open an account with a reasonable amount.

    Macedonian traders must be a rare breed at present.....It s even possible that some brokers refuse traders from your country. It depends how your laws were reformed since independance.
    Maybe acimacedonia.org could inform you
     
    #7 MichelAnge21, Jun 8, 2011
    Last edited: Jun 8, 2011
  8. Hisser

    Hisser Recruit

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    Thank you MichelAnge21, I will consider this. Very helpful
     
  9. SilverOne

    SilverOne Private

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    Yeah, you are right. I think you have to check all words about brokers, but there are a lot of people who write bad reviews from their mistakes. I think now even the licencies can't protect your money, so i think tere is only one way - to trade for short time with one broker, or withdraw your money after win))
     
  10. ChrisJMan

    ChrisJMan Recruit

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    You raise an important issue, which I had problem with on the beginning of the way (and still have some today) so I know how it feels. However, things have been much better over the years, especially in frauds and technology. I will answer your points in your order:
    1. Connecting issues will probably remain many years, though internet providers made huge progress on that. It really depends on your internet provider and your location, and it has nothing to do with brokers. There are some plans that give you priority in international servers, such as gamers plans (though they cost more).
    2. I agree. Trading during news is extremely risky. If you trade with a real ECN brokers and you are connected to the market- spreads can be widen by dozens. My advice to you is: DON’T TRADE NEWS.
    3. When you are a beginner you should not think about big profits. Your only goal should be acquiring the ability to constantly making profits for at least six months. Then, you can increase volumes and play for serious money. Amateurs who try to make 1000$ per day right on the start- will not survive the forex market.
    4. This issue has been discussed so many times and brokers realized in the past few years that even one withdrawal request that is not treated properly, can make them huge damage. So the serious brokers do not make problems with that anymore (ACM, Sunbird FX, FXCM etc.) .
    5. As I mentioned, these issues are becoming less common, especially when it comes to the serious brokers. Do not tempt to put your money in new brokers that “promise” you bonuses if you just open an account. Stick with the familiar ones, or with the new ones that have good reviews (forums managers know how to eliminate - and things should be fine.
    6. I also believe that trading with a real ECN broker is better (though it has both pluses and minuses). However, you don’t need 100,000 for an ENC account; you can open one with much less- about 10k.
     

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