Tag Archives: forex brokers

Understanding Forex Commission Structures

Unlike most other exchange-driven markets, forex has an enticing feature that brokers take full advantage of in their continual bid to lure in investors: no exchange fees, regulatory fees, data fees, or commissions. To many first-time traders, this gives it a major advantage over other markets, but accepting such a bargain doesn’t always mean that you get the best deal available.

Read on to discover how to choose the commission structure that will work best for you…

Three Forms of Commission

Forex brokers offer three different forms of commission to their traders: fixed spread, variable spread, and commission based on a percentage of the spread. These options each have their advantages and disadvantages, which means that there’s no simple answer when it comes to choosing which of them will work best for you.

However, before you can make an informed decision, you need to understand what spread is. Spread is the difference between the price the market maker will pay you for buying the currency (the bid price) and the price at which they’re prepared to sell it to you (the ask price). It is calculated in pips. If your broker quotes you EURUSD – 1.5550 – 1.5552, the spread would be two pips, for example.

To work out how this translates into real money, it can be useful to use the trading calculators that some brokers provide.

Fixed Spreads

If you choose a broker offering a fixed spread, then the difference between the bid and ask price, and thus the spread, in the above example would always be two pips. This would not be affected by market movement, either positively or negatively. At first glance, this can seem like the best choice, as it provides you with certainty. For some people, it will be, but for others, it is worth considering the other options available to you.

Variable Spreads

For those who are not averse to risk, variable spreads can prove a wiser choice. These spreads will change in accordance with market movements. On the one hand, this could mean that they rise to as much as five pips; on the other, it can see spreads drop to as little as 1.5 pips.

Commission

There are also brokers who will earn money through charging a small amount of commission. The benefit of this type of broker is that they often have a good relationship with a large market maker who can pass tight spreads onto you.
Each type of commission will have a different effect on your trading. Of course, part of this will be influenced by your individual broker, but that doesn’t mean that it isn’t worth considering their individual merits and pitfalls. Which one do you think would work best for you?

US Department of Justice Expands Probe Into Forex Deals – Major Banks Involved

We’ve seen numerous inquiries over the last couple of years by government departments looking into the world of forex trading, and this past weekend saw the United States Department of Justice open up its own probe to include two additional banks, and those are Barclays and UBS.

Forex is an increasingly popular investment option for investors of all levels these days, and some may argue that current rules and regulations are struggling to keep up, which is one of the reasons we so often see these investigations. It’s not that the investors or smaller brokers that deal with investors, such as ThinkForex, that are doing anything wrong; it’s almost always been major banks either misleading or miss-selling products.

That is exactly the same case this time round, as the Department of Justice has reason to believe that both Barclays and UBS have been selling a variety of structured products without making it clear how much they were making on each of the forex trades. In this case, these products were not small-market; there’s reason to believe some major Swiss hedge funds bought into the products, and they may well have been the ones to alert the authorities that something was amiss.

Knock-On Effects

To the day trader, these kinds of investigations probably don’t appear all that important, but there is of course an interesting question to be raised – who is your broker’s broker? Many of these major banks are enabling the smaller brokers that you might be used to dealing with day-to-day, and they’re not invulnerable to knock-on effects. At the beginning of the year, we say major brokers including Alpari UK and LQD Markets go bust because they lost their liquidity. The situation isn’t exactly the same, but it certainly is worth bearing in mind.

As already mentioned, this isn’t exactly a new investigation. Several other banks are already under scrutiny by the Department, all with the same charge of simply not disclosing the relevant information properly to their clients involved in the forex markets.
In the coming days, we’re likely to see more information coming out, but at this stage we’re mostly in the dark in regard to specifics. The Financial Times first broke the news story on Sunday, but since then there has been no comment made by the Department of Justice, or indeed Barclays or UBS.

An innovative review of The CopyTrader feature from eToro

eToro is a Forex trading portal with a global edge that stands out from the crowd. If you are an online forex trader, you remain logged for the better part of the day for your dealings. In addition, you are bombarded with titillating invitations via newsletters from sundry online forex forums and your inbox is choc-a-bloc with such newsletters. However, you don’t know what you are missing if you’re not on eToro’s system.

The trading platform is powered by potential software that allows the trader to easy navigation through any and every aspect of forex trade-be it trading with currency pairs, securities, commodities or indices. Irrespective of wherever you are, the platform gives you immediate and peerless access to the forex markets around the world.

Nevertheless, eToro’s USP is the CopyTrader feature that allows you to imitate and emulate the trading practices of the crème-de-la-crème forex traders. Following in their footsteps allows the relatively new and hence wary trader to assess their investment ends and make optimum profits from their spread. Hence a CopyTrader review becomes imperative.

Since the site went public with its online forex trading framework in 2007, it has been creating waves and since its CopyTrader signature feature got underway, it hasn’t looked back. More than a million online traders are registered with eToro and they regularly trade on this forum after a CopyTrader review and keep referring the site to their friends and relatives. It’s time you hopped onto the bandwagon of traders on eToro.

You can make a large profit as a forex trader with CopyTrader:

If riding is one of your passions, then it goes without saying you will enjoy riding piggyback on the shoulders of experienced forex specialists and speculators who are a class apart. You can easily profit from the global FX markets by going for a CopyTrader review and thereafter, aping these traders, who trade on the premier investment network that is eToro. And getting started is simpler. You need to open an account- that is the first step. Next, you need to discover the best of the best traders. Thereafter, you opt for the one who you think would be your ideal calling card. Thereafter you assess how much you can afford to put on stake. So, you see getting started can’t be simpler.

You need to open an account with a minimum of $100 to copy traders although starting with $200 gives you more advantage and leeway. You’ll have at least 5 expert traders to choose from. The CopyTrader review relieves you from the burden of placing your bets manually. The platform will choose the best traders to trade with for you and you’ll receive email updates. In case you lose your opening balance of $100 by emulating a trader, you’ll receive a full refund. You also get a 25% bonus on your first deposit.

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Visit Intellitraders to know more about Forex copy trading feature introduced by eToro.

NFA Accuses FXDD of Differential Slippage and More

The NFA has filed complaints against FxDirectDealer LLC and James Emerson Green, who was FXDD’s Chief Compliance Officer at the time.

The case summary is…
On June 29, 2012, NFA issued a Complaint charging FXDD with using asymmetrical price  slippage settings that favored FXDD over customers; failing to supervise the trade integrity of the firm’s electronic trading systems; failing to maintain complete and accurate records; failing to review the use of promotional material; making improper price adjustments in customers’ accounts; knowingly converting customer funds; failing to implement an adequate AML program; and failing to develop and implement adequate procedures to ensure that all entities and persons that the firm does business with are registered with the CFTC and NFA Members. The Complaint also charged FXDD and Green with willfully submitting misleading information to NFA and others; failing to treat all customers equally when giving price adjustments; and failing to supervise.

The case details file shows that the NFA accuses FXDD of gaining more than 3 million dollars from this differential  slippage scheme.

What is more interesting is that FXDD is accused of unilaterally removing profits from client accounts because the customers had “manipulated” FXDD’s trading system by executing trades at “off-market” prices.

FXDD did not contact the NFA about this. When the NFA became aware, they asked FXDD for evidence. Here are some selected quotes…

Over the course of several weeks, from December 2011 to early February 2012, FXDD failed to produce any credible  support to substantiate its claim that these customers had manipulated the firm’s  trading platform or executed orders at “off-market” prices.

NFA repeatedly advised Green that these actions on the part of FXDD constituted violations of Compliance Rule 2-43…

However, NFA later learned that FXDD’s supposed return of profits it had removed from the nine customer accounts was illusory and was apparently merely a ploy to mislead the NFA and buy time for FXDD to file suit seeking a temporary restraining order and preliminary injunction against the nine customers.”

FPA member Raimundas is one of those dealing with FXDD’s refusual to comply with the NFA.

There are other issues in the complaint. You can read them by following these links…

Click here to see the NFA Case Summary

Click here to read the NFA’s complaint against FXDD. Please check paragraphs 33-50 to see more about the situation Raimundas is dealing with.

News source: Forex Peace Army

How to Find Your Broker’s Server IP

metatrader

In trading latency is important, regardless if you’re trading from your home computer of from a forex vps. Have you ever wondered how you can find out the network latency between your trading platform and your broker’s servers? Well, if you have I have the answer! All you have to do is do a quick ping test (ping command sends ICMP packets to the server and times how long it takes the server to respond), but before you can ping the server you have to know it’s IP address. But most of the times you will not know the actual IP address of your broker’s server(s). Some brokers will tell you some will not, and some will make it easy to find out and some will not. So you’re going to have to take matters into your own hands and find out the IP for yourself.

I’ll show you in this brief tutorial how you can do so.

The first thing I suggest you do is ensure that you have no other web browsing or any other internet network connections running. I’d suggest either restarting your machine and close every program that uses the internet connection, or you can just close every internet related program. Once you’ve done that run your broker’s MT4 / MT5 platform, but make sure you start ONLY that. This will ensure that later on when we search for the IP we will have more accurate results.

OK, so step:

1) Ensure that you are connected successfully to your broker’s server

2) Open up a windows “command prompt”

Click on the Start Menu and go to All Programs –> Accessories –> Command Prompt

You can also (in windows 7 and windows vista) just type in “cmd” in the search box visible once you click on the start menu.

If you’re running windows xp you can just click on the start menu, go to run, and in the run box type “cmd” and hit enter or press ok.

3) In the command prompt type the following command: “netstat -n” (make sure you leave a space after netstat and before “-n”)

4) Now you should get a listing of all the network connections currently open on your computer.The IP address of your MT4 platform should be listed underneath the “foreign address” heading. MetaTrader uses port 443 for communication so next to the IP you will see “:443”. The IP address with the “443” port listed there is the IP address of your broker’s MetaTrader server. See the example below:

Now I should qualify my previous statement about the use of port 443. Sometimes brokers WILL use other ports (for example 80, 923, 1950, etc).

Now you see why I suggested that you open only MT4 and nothing else internet related 🙂 It makes it that much more simple.

5) Now if you did not follow my advice and opened ONLY the MT4 platform and no other applications that make use of the internet connection, then there is an additional step you have to follow.

Close the MT4 platform and go back to the command prompt window and type the “netstat -n” command one more mime. Compare the result with the previous step’s result and note the IPs that are MISSING. The missing IP in this case is the one that belongs to your broker’s server. See this example:

Beware that sometimes two different brokers can have the same IP address. This most likely is due to one of the broker being what’s known as a “whitelabel” of the other one (or vice versa). This means they do not actually have their own server(s). You can think of the whitelabel broker as a sort of forex broker equivalent of a “reseller.”

I must thank the people at the ECN FX Robot website for the inspiration for the article and the images.

If you have some questions or need further clarifications on the process outlined above feel free to leave a comment on this post.

Until next time,

Happy trading.

Alan out.

Why FXDD sucks for use with Forex MegaDroid

Hmm, well, it seems I have to give up trying to use Forex MegaDroid on FXDD. This broker just plain sucks for use with Forex MegaDroid due to the constant high spread during the Asian trading session (when Forex MegaDroid does its trading). I gave it a fair try and waited a week but I constantly get safe spread limit exceeded errors. Check them out:

2011.12.11 17:53:28 MegaDroid EURUSD,H1: Strategy2: Safe spread limit normalized: spread = 28
2011.12.11 17:53:25 MegaDroid EURUSD,H1: Strategy2: Using DayDirection filter
2011.12.11 17:53:25 MegaDroid EURUSD,H1: Strategy2: Safe spread limit exceeded: spread = 45
2011.12.11 17:53:24 MegaDroid EURUSD,H1: Strategy2: Using DayDirection filter
2011.12.11 17:53:24 MegaDroid EURUSD,H1: Strategy2: Safe spread limit exceeded: spread = 41
2011.12.11 17:53:21 MegaDroid EURUSD,H1: Strategy2: Safe spread limit normalized: spread = 37
2011.12.11 17:53:20 MegaDroid EURUSD,H1: Strategy2: Using DayDirection filter
2011.12.11 17:53:20 MegaDroid EURUSD,H1: Strategy2: Safe spread limit exceeded: spread = 44
2011.12.11 17:53:11 MegaDroid EURUSD,H1: Strategy1: Safe spread limit normalized: spread = 43
2011.12.11 17:53:07 MegaDroid EURUSD,H1: Strategy2: Using DayDirection filter
2011.12.11 17:53:07 MegaDroid EURUSD,H1: Strategy2: Safe spread limit exceeded: spread = 57
2011.12.11 17:53:07 MegaDroid EURUSD,H1: Strategy1: Using DayDirection filter
2011.12.11 17:53:07 MegaDroid EURUSD,H1: Strategy1: Safe spread limit exceeded: spread = 57

So this is a heads up to all of you who are thinking of using this expert advisor on FXDD. I would suggest you look elsewhere for a better broker. I am going to close my FXDD account in a few days and look for another broker. I’m not sure which broker I will choose but I have my eyes on FinFX which has been lauded as a good broker to use with Forex MegaDroid.

I’ll keep you all up to date.

Cheers,
Alan

A Big Broker Goes Broke – MF Global Files for Bankruptcy

MFGlobal logo

Hmm, I just found out from the Forex Peace Army forum that MG Global (a very big broker) has just filed for bankruptcy this Monday.  I totally missed this one.

“Chapter 11 bankruptcy is for reorganization. The SIPC (Securities Investor Protection Corp.) is suing to force MFGlobal into liquidation. It looks like liquidation is happening.

MF Global isn’t a small company with a few thousand retail forex traders. It is a worldwide financial firm offering a broad range of trading capabilities. This is the biggest financial firm to go under since Lehman Brothers collapsed in 2008.

There are accusations of debt levels being disguised to make quarterly reports look better. There are lawsuits linking it to Ponzi schemes. There are allegations of money missing from some segregated accounts.

This story is still developing.”

MF Global’s press release for bankruptcy filing

MF Global to be liquidated

Traders accounts may face margin calls

Ponzi victims sue MF Global

Wall Street Journal reports possible hiding of debt levels

Possible insider trading of MF Global Bonds

CNBC’s advice for people who invested with MF Global

FPA Review Page for MFGlobalFx

CFTC orders a broker to pay over 14,000,000 dollars

Forex Capital Markets LLC Ordered to Pay More Than $14.2 Million to Settle CFTC Charge.

Firm also sanctioned for failing to promptly produce certain records to the CFTC’s Division of Enforcement.
Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) today issued an order filing and simultaneously settling charges that Forex Capital Markets LLC (FXCM) failed to supervise diligently its personnel’s handling of more than 57,000 customer accounts that traded on FXCM’s forex trading platforms. FXCM is a registered retail foreign exchange dealer and futures commission merchant headquartered in New York, N.Y. The order also settles charges that FXCM failed to produce certain records promptly to the CFTC’s Division of Enforcement during its investigation.

The CFTC order requires FXCM to pay a $6 million civil monetary penalty and restitution of $8,261,937 to its customers and former customers. In addition, the CFTC order requires FXCM to retain, at its own expense, a monitor to review for three years: (1) its trade execution practices and policies as they relate to the change in price between the time the customer places the order and the time the order is executed by FXCM; and (2) its compliance with its restitution obligation.

According to the CFTC order, from at least June 18, 2008 until December 17, 2010, FXCM failed to supervise diligently the handling of customer accounts traded on the FXCM platforms by its officers, employees, and agents with respect to changes in price between order placement and execution on both market orders and margin liquidation orders. The order finds that FXCM’s failure prevented its customers from receiving the benefit of price movements in customers’ favor, but allowed its customers to suffer detrimental price movements. The CFTC order finds that had FXCM diligently supervised its personnel, FXCM would have discovered these problems with its trade integrity and would have had the opportunity to correct them before its customers were deprived of, and FXCM benefitted by, approximately $8,261,937.

Further, the CFTC order finds that FXCM failed to produce certain records promptly in its capacity as a CFTC registrant and thereby required the CFTC to issue a subpoena to attempt to obtain required records from FXCM.

The CFTC thanks the National Futures Association (NFA) for its assistance. On August 12, 2011, the NFA issued a Decision imposing a $2 million monetary sanction against FXCM in settlement of an NFA action (NFA Case No. 11-BCC-016) involving some of the same practices identified in the CFTC order.

CFTC Division of Enforcement staff members responsible for this case are Charles Marvine, Christopher Reed, Rachel Hayes, Stephen Turley, Rick Glaser, and Richard Wagner.

Media Contacts
Dennis Holden
202-418-5088

EDIT: Original CFTC Press Release is here…

http://www.cftc.gov/PressRoom/PressReleases/pr6119-11

FXCM’s response can be found here:

FXCM US Reaches Settlement with the CFTC for $6 Million