outofphase
Private
- Messages
- 37
Q1: After the recent scandal and banning of FXCM and its CEO and criminal accomplices from ever doing business in the USA, I believe that it should be self-evident at this point why you should avoid FXCM. Butif you insist on giving your money away, then please give it to me. End result for you will be the same. ;-)
Q2: No cost and less than 48 hours for most retail brokers.
Q2: If you are asking how much time will it take to grow 2.5K into 50K with the lack of knowledge you currently have, then the only answer I can give you is: FORGET IT! YOU ARE DREAMING. I know how it feels--you may be hurting for money, but in this case, I am sorry to say, it can't be done IF you have neither the knowledge nor experience. You would need a lot of both and if you are excellent, then in 6 months you could turn 2.5K into 50K BUT that means knowing how to manage your risk and knowing your market price patterns like the back of your hand, and have Lady Luck on your side most of the time. And most importantly, have the right broker. (more on that later)
Q3: Your daily trading plan will fall into place once you have deep knowledge and experience, which is the only way you will know on an instinctive level what can and cannot be achieved by you. Only you can be the judge of that. But to judge it correctly, you need the knowledge, the experience, and have developed your instincts. Different people do it differently. There is no one size fits all. But in my experience, it requires at least 4 to 8 hours of screen time in the beginning. At least enough screen time to understand what and how different pairs move during the Asian, European and US sessions.
Forget about trading index and metals CFDs for the moment.
I would even say: DO NOT TOUCH any CFD that is a derivative of an instrument that you could trade on exchange as in these cases you absolutely need to have a clear and accurate picture of volume to spot algo spoofing and other manipulations--technical analysis only in these markets does not always give the same results as in SPOT FX, so any additional tools you can use, the better.
Example: Bookmap X-Ray for the Futures market is an awesome app that gives this edge and is not available on SPOT FX since there is no central volume data available as there is not central limit order book as on an exchange. This does not mean that exchange trading is safer or not prone to scams, because it is unfortunately, but the scams need to be more sophisticated and thus harder to pull off because if they get caught, they usually go to jail. Then again, with the exception of the systematic internalizers buying retail client order flow from stock brokerages (read the latest news re why Interactive Brokers decided to stop offering Options trading to its clients, the HFT crowd and their colluding partners in crime such as exchanges like BATS (read the story of how the company of algo trader Haim Bodek went out of business because of the collusion between BATS and some of its HFT customers. A good source for the latter is to go to the site of Nanex and read the research papers there. Alternatively, you can watch an excellent documentary produced by vpro, a Dutch production house, on the whole sordid affair called: The Wall St Code, here on Youtube: ).
To go back to your question: As a rule of thumb:
1/ conservative approach: 100K in the account == trade no more than 1 standard lot.
2/ very risky approach: 10K in the account == 1 standard lot trade --> lose 100 pips and you just lost 1K, that is, 10% of your account. Pros will tell you to never risk losing more than 2 or 2.5% in 1 day. If you reach that loss limit, you need to stop trading, and reboot your brain until you get your shlte together again. So in case you trade 1 standard lot or 100K notional in the market, then a 2% loss == $200 or 20 pips.
You can see now that if you trade 1 standard lot or more with only 2.5K in the account as a beginner, well, you are asking to lose it all very quickly.
2.5K and no more than 2% risk means that if you open a position of 1 mini-lot or 10K notional in the market, then you cannot lose more than 50 pips since each pip value is now $1, so 50 pips == $50, which is 2% of 2.5K.
So you do the math to answer your Q3 question.
Q4: Since there just was yet another scandal involving FXCM and definitely proving they were lying to their customers and shareholders (there is now a class-action lawsuit underway against defunct FXCM), yes, it's to attract more clients in the hope of replacing the lost revenue from the 50,000 US clients they just lost and the potential clients who will now close their accounts in light of the unethical and illegal behavior on the part of FXCM. And yes, to get more profit since statistics favor the House, not the client. Just look at the increased regulatory action in Europe against Binary Options brokers, and now CFD brokers as their customers are just being fleeced outright, the House (in these cases read 'the Casino') always wins.
Q5: If you are a US resident, very few. Let's examine what is available to you in the US.
If you insist on trading only SPOT FX, and by your questions I will assume you do not have $250K available to open a prime account with GAIN GTX to trade on their institutional ECN, then, and since you are a beginner, I would recommend the only SPOT FX broker that has a clean record and still remains standing: OANDA. Yes, it is a market maker. But when you look at all the other brokers in the US, they all B-book their clients, that is, operate as a market maker. And in the rest of the world, you are lucky if they don't try to B-book you first, then put you on the A-book once they see you win more often than you lose. This also applies all the way up even with so-called institutional brokers such as INTL FCStone who, by using Integral as their technology provider for SPOT FX, do get the choice to setup both A- and B-books.
That being said, execution is not going to be amazing in terms of best price you can get when compared to brokers such as LMAX or CFH Clearing in the UK (not talking about execution speed here). And even though they just launched their Raw Spreads offering (http://financefeeds.com/oanda-launches-raw-spreads-plus-commission-pricing-us-clients/), they still B-book you, not giving people a chance to trade on an ECN against other clients of the ECN. BUT that is ok, especially if you are a beginner.
What OANDA offers that I think is very positive for people who are beginners and trade small (<= 10M notional or 100 standard lots per ticket):
- no execution delay since you trade on the internal or synthetic market OANDA creates for you, in other words, as long as they remain properly capitalized, they can always match your trade against their own liquidity, not the real market liquidity, and so when you want to sell, you will always find a buyer--OANDA, and when you want to buy, you will always find a seller--OANDA, so you can always get out of a trade; but this also means, they can execute it on whatever price they want, not the real market price, IFF they are dishonest, which is not possible on an exchange or real ECN environment;
- the corollary to the above is that you also get so-called 'guaranteed' stop-losses because if their automated risk management engine works as it should, in case of a market melt-down they can get all the small trades closed without problems since they do not depend on an external counterparty to match those trades;
- in spite of what I just wrote, if they do not assume client risk at all, meaning they aggregate all the client trades and offload them onto an external liquidity provider or counterparty no matter what (but still internally they are the counterparty to all client trades and thus make money when you lose, and lose money when you win (this remains true regardless of how they handle client risk)), then they can neither guarantee your stop-loss nor that you will be able to get out of the market in time (refer back to what happened in January 2015 with the SNB liquidity event) because now they if it is total chaos on their external counterparty side, they will have to manage to get out of those trades first before they can get you out, and in January 2015 when the SNB removed the EURCHF peg, that's exactly what happened, not only with them, but with FXCM, which lost almost 300M/USD and literally would have gone bankrupt overnight were it not for the emergency fund injection from Leucadia.
- based on my conversations with them, I believe they operate a hybrid model: if the statistics they keep on clients show the client loses more than he wins, they systematically B-book the client to keep the profit instead of passing the profit on to an external counterparty; if the statistics shows the opposite, they hedge your trade in the external, real, market, even though they B-booked you; and since they told me that they don't want to take on more than 10M in risk per client (this is the reason why you cannot create a trade > 10M per ticket or per mouse-click) but still allow a client to open multiple tickets in the size of 10M (you could open 10 trading positions each 10M in size if you wanted, controlling thus 100M in the market), these kind of trades they flip over to their liquidity providers.
I only mention it to be exhaustive as this does not matter when you can only trade small sizes. When you can trade large, then you would go to a broker that is setup to get you the best possible price and spread for such large orders--OANDA is not setup for that so even though you might get better prices on LMAX even for small ticket sizes, it doesn't matter much if you consistently lose. Even if you consistently win, you are trading so small that a 1 pip or even a 2 pip improvement only gets $10 or $20 more in profit. Not a big deal.
- next: they offer great 3rd party trading tools such as MotiveWave, MultiCharts, PFSoft's ProTrader, and SEERS for algo development, and Beeks VPS;
- an ethical business as evidenced by the lack of regulatory action against OANDA worldwide shows that until now they have refrained from scamming or cheating their customers--they don't have to since statistics is on their side.
What I don't like about OANDA is:
- 50:1 leverage (in the USA), but that's the fault of the regulator and the lack of power retail traders have in this industry to exert pressure where pressure should be exerted;
- no ECN environment;
- for large trade tickets, say >= 10M all the way up to 1B, you will get better execution (speed and price) on institutional ECNs such as HotSpotFX, FXAll, Currenex, FastMatch;
- no correct segregation of funds;
- they are sticklers for the rules, meaning they won't onboard new clients if they are outside the particular jurisdiction where the OANDA subsidiary happens to operate in, that is: OANDA (US) will not accept a Japanese client as he would have to go through OANDA (Japan).
NOW, the other option you have is to forget about the OTC SPOT FX market, and concentrate on the Futures market and use brokers such as tradovate.com, Stage5, TopStepTrader.com. The latter is your more traditional style Futures brokerage. One of its principal is a trader that goes by the name of futurestrader71 and posts on his site and youtube channel free training and tips for everybody to learn how to trade the futures market. Great guys, great customer service. With them, you would need to download a standalone app or more to access the market and your fee structure would be different than tradovate.
What I like about tradovate and why I recommend them to a beginner is because:
- you pay only a modest monthly fee no matter your trading activity;
- even though you have the option of downloading their trading platform as a standalone app, you get it as a web app as well, with everything in the cloud, so should you lose connectivity or your PC melts down, your trades, triggers, algos, alerts, everything is still running safely in the cloud;
- their trading app is awesome; I can't praise it enough: it has got everything you need, is absolutely superbly designed (best UI/UX across the board IMHO), integrates with 3rd party solutions such as OFA/AlgoX, Jigsaw, and Bookmap X-Ray;
- has an embedded Javascript editor so you can code your own indicators and strategies--no more coding in Pine--if you are using tradingview.com, then you know how bad that language is;
- their standalone app is exactly the same as the web app, so not sure why people prefer downloading an extra app when they could just open Chrome and benefit from all the extra security features built into Chrome. Perhaps they did this because Chrome uses a lot more resources;
- you are trading a real market on exchange with all the benefits that come from having the CME as the central counterparty! no more worrying about the broker or 'B-book this, B-book that'.
- and of course, even though you don't have all the currency pair a SPOT FX broker would offer, you can trade so many other instruments that have decent enough liquidity to be able to get in/out at the prices you want, so multiple stream of money making opportunity as well: trade 5 currency pairs at the same time (not recommended) or trade 5 Futures instruments (Euro, SP500 mini, Oil, Live Cattle, Lean Hogs).
Now, for the cons:
- Futures instrument (other than the major currencies) tend to be a lot more volatile than SPOT FX majors, so riskier;
- the technical analysis approach needs to be adapted accordingly, but if you never experienced SPOT FX, you don't have to make this transition, you could start from the right foot without having to unlearn anything;
- you need to learn how to read the DOM and understand how to use volume information, which is an added layer of complexity compared to the volume-less analysis done in SPOT FX.
- if trading with traditional brokers such as Stage5 or AMP, I believe the total fees are higher (but don't take my word for it, I haven't checked properly).
- the market is not open 24hrs/day, so if you keep positions open beyond the official close time, there's a bunch of additional risk and cost factors you will need to be able to handle, as well as when you roll your position over at expiry into the next contract period.
And if you want to trade without using any of your money, then you can pay TopStepTrader a small monthly fee. They have great resources to help your learn this market. The way it works, they want to find people who can be consistently profitable to give them their money to manage later on. For the privilege, you pay a monthly fee to take part in trading competitions, and those who emerge on top, get funded by the company to start trading real money as prop traders. A brilliant concept and no time pressure. And a great way to learn.
Finally, read this:
https://www.forexpeacearmy.com/comm...a-b-c-book-business-models.49239/#post-275366
https://www.forexpeacearmy.com/community/threads/leverage-and-margin-question.48704/#post-274677
https://www.forexpeacearmy.com/community/threads/globalprime-com-au.20037/#post-261180
https://www.forexpeacearmy.com/comm...dy-read-this-otc-fx-moving-to-exchange.49536/
Also, I just posted 1 more today in Beginner's forum or General FX discussions--can't remember which--to explain how brokers need to get credit lines from institutions and if they don't get them, what the implications are for their clients in terms of execution venue.
OK, that's about it. I know, it's a lot to ingest in one sitting. Nonetheless, it's all about information asymmetry, so the more you know, the better armed you are.
PS: for the experts out there, if I wrote something erroneous, then please correct me.
