Convo between me and another member about a broker question
Hello Clint, I am in the market for a broker and I’m being torn between deciding between ECN or one that is regulated in the U.S (which applies to me). After hours of research I’m leaning towards going outside of the
U.S and have a few true ECN brokers in mind. The thought of doing bsuiness with a market maker makes me shiver compared to not being protected by my counties regulatory agencies.
I’ve being reading some posts in this forum and it looks like you are very active and have contributed quite a bit towards finding brokers outside of the U.S.
Would you be so kind as to share with me your preference for an ECN broker? If this is too straightforward, no worries but I figured I would at least try and ask!
Are you new to forex trading?
Yes. I spent a while doing a demo account with FXCM before it was banned from U.S trading (apparently this broker/owners had financial interest in one of their liquidity providers that had a lot of the winning side of trades) and since then I’ve been doing study because I didn’t want to rush in! This will be my first real money account. I have two brokers in mind that I am leaning towards… (I’m not sure if its apropriate to mention them). But I would appreciate the voice of someone seasoned that doesn’t have an affiliate link.
Sorry for the long delay in replying to your last post. I’ve been away from the computer.
For your first foray into live trading, do not use an offshore broker. Live trading is psychologically very different from demo trading. And offshore trading has its own set of difficulties and frustrations. Don’t combine your first attempt at live trading with the special complexities that accompany offshore trading.
Offshore opportunities will still be there, when you’re ready to tackle offshore trading — after you have proven to yourself that you can be consistently profitable trading a relatively simple US-based live account.
Start off with a very small amount of trading capital. (Only you can define what “very small” means, in terms of your net worth, your income, and your disposable funds.) Use your tiny account to trade tiny positions. Your objective in the beginning should not be to make big bucks — which probably you are not capable of doing, anyway.
Your objective initially should be to find the trading style and trading strategy that suit your personality and your time-availability. Then, your objective should be to do a long series of trades, using your preferred style and strategy, with the goal of increasing the size of your tiny account. If you accomplish this goal, you might want to add a tiny bit more capital to your tiny account. And you might want to increase the size of your tiny positions proportionally. Did you notice the emphasis on “tiny”?
If you can maintain your profitability, while trading your slightly larger account, then you might want to repeat this process over and over again, using your additions to capital plus your trading profits to build your account balance, and allow for even larger position sizes.
The best account available to U.S. beginners, in my opinion, is offered by Oanda. Their account allows you to trade any size position from one unit of currency up to multiple standard lots. This gives you total flexibility in matching your position sizes to your account size.
For example, if you demonstrate consistent profitability trading 500 units of currency, and you decide to increase your trading capital by depositing an additional 50% to your account, then you can simply increase your position sizes by 50%, to 750 units of currency. You can’t do this sort of fine-tuning of position sizes in a micro account (such as the account offered by Gain Capital, aka forex. com).
I strongly suggest that you ignore scalping and day-trading as your trading style. Teach yourself, instead, to swing trade. Basically, this means trading multi-day (or multi-week) moves in the currency pairs that you follow. If you do this, the “market maker” aspect of the Oanda account, that you are worried about, will likely not be an issue in your trading.
If you learned enough in your demo trading to now venture into live trading, then you know about controlling risk, using stop-losses, etc. Those parameters are more critical than ever, when real money is on the line.
Assume that you will lose whatever amount of money you initially begin with, and make your initial deposit to your first live account appropriately small. Even it you can easily afford to dump a lot of money into a live account, lose it all, and simply add more money — don’t do that. Keep the majority of your available trading capital in the bank, and fund your first live account with a fraction of that sum. Prove to yourself that you can manage that tiny sum, and grow it. Then, think about adding more of your available trading capital to your forex account.
Back to your concerns about market-makers. Contrary to popular myth, the internal aggregating done by Oanda, and other non-ECN / non-STP brokers, does not involve some greedy human watching for opportunities to run your stops or subject you to negative slippage. Rather, computer algorithms track the market-maker’s net position, and balance that position (as close as possible to “flat”) by trading the imbalances upstream with a liquidity provider.
The computer is not out to get you. If you can trade profitably, Oanda will be on your side and will cheer you on.
First of all, I want to thank you for taking the time to respond. It actually came just in time as I was in the middle of getting ready to fund to an offshore account (FX Choice). I will take your advice on that front in regards to offshore having its own set of difficulties, and try a U.S based one (I can always open a second one down the road).
Originally I was leaning towards US based broker forex.com, or OANDA since I think theres only roughly 5 regulated brokers US based 2 of which have high min deposits. Then I read about some rulings against forex.com from the NFA that can be seen on their “BASIC” tool they offer. Im sure you can imagine how that made me feel! (In addition I was leaning towards to basing my trading plan around scalping.)
What you said about how they try to get as close to flat as possible makes sense and I thought they must be doing something along those lines otherwise they wouldn’t be in business. On the contrary there are plenty of reviews out there of people claiming their SLs have been run over and every other possible think you can think of. At the same time you don’t know the credibility of whoever is writing the review, maybe they are very new and have lost money becoming bitter, and are trying to come up with every reason it isn’t their fault? I’m sure I could continue on back and forth like that, but the best way is probably to just experience it myself.
The advice you gave in regard to account management sounds like good advice to me. I plan on treating this more like a business rather than a casino. (Although I will admit that I have been anxious to get going considering the amount of time I’ve been waiting!) But very sound advice Clint, I look forward to contributing here at baby pips in the future! (BTW is this a new thread or a private message? I am new to writing on forums)
By the way I would like to introduce myself to this forum, I made an account a while back, never posted, but now I’m back and hope on being active. -Cory