Complete Newbie, not even sure I want to learn Forex yet:
What is the advantage for a forex trader to have a larger investment base, more capital?
And at what point is it too large or doesn’t scale (if there is such a point)?
thx!
The one that springs immediately to mind is the facility to use a genuine broker rather than a counterparty market-maker who’s pretending to be a broker (it [U]doesn’t[/U] involve having a huge amount of capital at all - $25,000 is enough, but it makes an [I]enormous[/I] difference to one’s trading, dealing-costs, entire relationship with one’s broker, security, and so on.)
I suppose there is such a point, at least in theory, but it’s going to be far, far beyond the account-level of any retail/independent trader. It isn’t an issue to people trading with “only” 7-figure accounts.
I find your answer thought provoking, thanks!
Can you give a few examples of genuine brokers and counterparty market-maker’s?
Where does a company like www dot tradersway dot com fall? I have no special interest
other than that it came up in a discussion, thanks!
[I]Almost[/I] every broker ever mentioned in this forum is a counterparty market-maker, and (athough this isn’t true of [U]all[/U] the members) the overwhelming majority of them are using one.
An example would be Oanda (I happen to think it’s one of the best ones: I said more, here.)
An example of a genuine broker would be Interactive Brokers (again, I happen to think it’s a very good one: I use it, myself.)
In practice, the difference between the various different genuine brokers tends to be less important, in my opinion, because they’re generally well-regulated and honest, and their business model predicates that serious disputes with their clients are comparatively rare. The difference between the various different counterparty market-making brokers, on the other hand, can be hugely important, and their underlying business model is that they’re intrinsically “holding the other side of their clients’ trades”, in other words they are effectively [U]the market[/U] as well as/instead of the broker, for the purposes of the “transactions” their clients do. Obviously enough, this can lead to problems. Some of those brokers lay off some of their own [U]net[/U] liabilities in the real underlying market (i.e. the interbank market) and are therefore not particularly incentivised to behave badly towards any individual clients, but the extent of that varies hugely, and selecting a counterparty broker is - in my opinion - both more difficult and more important (i.e. for those who need one).
It’s a big and complicated subject, and not a widely well-understood one, to be frank.
Sorry, I know very little about Tradersway, but they’re a counterparty market-maker, and quite a few things I’ve heard/seen about the way they do business and the way they promote themselves have certainly left me with some suspicion about them. It’s not a brokerage I’d dream of using, myself. [I]Please note that this last point is purely personal opinion, and not even very well-informed personal opinion.[/I]
The are brokers that offer good deals with bonuses. Nonetheless, not many with quality. Good examples were given above and actually use some of them for a decade. FXCM, Oanda are good for various reasons. The great thing for new traders to get the introductionary offers and decent broker. Kind of hard to suggest more as pretty limited on what type of trader you are.
Those are [I]definitely[/I] brokers to stay [B]well[/B] away from - that part, at least, effectively does some of your “due diligence” for you: brokers who are offering “bonuses” [B]don’t[/B] have a business model that predicates that you should be doing business with them. That’s a [U]big[/U] red flag, and [I]excluding[/I] those people from any sensible considerations is the easy part.
Hi, goldencookie. Yes, it’s a big advantage if you have a larger investment base but it can quickly turn into a disadvantage if you don’t have enough experience and a good risk management as you can easily blow your account. And of course as Lexys said, if you trade with a market maker. Before going live, you could open several demo accounts with different brokers so you can explore and test their conditions. The amount can be the same as your investment for a live account so you can see what kind of sum will fit your goals. But make sure to have enough experience as otherwise you could suffer big losses.