Forex Brokers/Gold Trading

Hello,

I’ve just took the plunge into the world of Forex, did quite a bit of demo trading for few months and now took the courage to deposit funds next week. I am now faced with a tough decision of searching for the right broker - Oanda was the first on my list, but 50:1 is the maximum leverage they offer and it seemed quite low, so tried Alpari (UK), but for spot gold they again offer the same leverage. FXCM was my third choice and they offer 200:1 leverage. Now a quick search on the Intrenet regarding FXCM (and even Oanda) shows these brokers are scams and some of the websites state people have filed court cases against them for stealing their capital. If these are the top Forex brokers, why are they a scam ? BTW I opened a live account with FXCM, but haven’t deposited funds yet.

Second question - I do understand all the risk involved in the forex market, so to start with, I wanted to trade something that is reliable - Spot Gold. And also the position will be kept open for months and expecting to close by end of this year. Is this a wise move or am I considering myself a pound foolish?

FXCM, Oanda and Alpari are not scams at all. Probably just some disgruntled people annoyed about losing their money when it was completely their own fault and not the brokers.

As for gold - it isn’t exactly a safe market to trade in. It’s been very volatile for a while now - in the month of January price dropped the equivalent of more than 1,100 pips. It’s since recovered nearly 1,000 pips. Great if you catch the move and horrific if you’re on the wrong end of it. With a leveraged position I don’t think you’d be able to survive a 1,000 pip drop even if you’re confident of a reversal at some point as gold is (probably) going to trade higher in the long run.

Not to mention it’s one of the most manipulated markets going too. There’s a bit of a battle going on between certain large financial institutions who want to suppress the price (and have been doing so for a long time) and large buyers of size who are intent on forcing the price up. This is partly what’s causing the volatility. Whenever the big banks want to shove the price down they’ll flood the spot market with completely unbacked paper shorts and they’ll (allegedly) also let some speculators know it’s coming so that the market is even more inundated with these orders. Get caught on the wrong side of one of those days and you’re position is screwed.

Anyway, it’s just my opinion but paper gold is basically for day-trading. You’ll not want to be holding these trades for long as you’re at the mercy of big players who don’t play by any rules and you’ll get your clock cleaned inevitably by them. They’ll get the margins increased to help their trades out. They’ll trade after the Globex closes when everybody else has gone home and hammer the market down $10 or more just because they can. They’ll paper short ad infinitum with paper gold that has no relation to the amount of physical gold that’s actually in existence above ground and the COMEX is completely in cahoots with these guys. If you want to buy and hold gold for a long time you probably only want to buy physical gold and keep it as a store of wealth to hedge against possible runaway inflation.

If you decide to trade spot gold watch out for the big boys beatdowns which come regularly at around 8-8:30am EST 2-3 days a week. You can catch these sometimes if you want to try but gold moves fast so have your stops ready in case you’re wrong.