I am new to Forex and I have been doing lots of training. I am in the process of deciding which broker to use (have limited funds). Have come accross Forex club (Forexclub.com)where they give $100 to get started. They are NFA registered in NY. What got me slightly worried is a paragraph in one of their disclaimer forms as follows:
"THE TRANSACTIONS YOU ARE ENTERING INTO WITH FOREX CLUB ARE NOT TRADED ON AN EXCHANGE. THEREFORE, UNDER THE U.S. BANKRUPTCY CODE, YOUR FUNDS MAY NOT RECEIVE THE SAME PROTECTIONS AS FUNDS USED TO MARGIN OR GUARANTEE EXCHANGE-TRADED FUTURES AND OPTIONS CONTRACTS, WHICH RECEIVE A PRIORITY IN BANKRUPTCY. SINCE THAT SAME PRIORITY HAS NOT BEEN GIVEN TO FUNDS USED FOR OFF-EXCHANGE FOREX TRADING, IF FOREX CLUB BECOMES INSOLVENT AND YOU HAVE A CLAIM FOR AMOUNTS DEPOSITED OR PROFITS EARNED ON TRANSACTIONS WITH FOREX CLUB, YOUR CLAIM MAY NOT RECEIVE A PRIORITY. WITHOUT A PRIORITY, YOU ARE A GENERAL CREDITOR AND YOUR CLAIM WILL BE PAID, ALONG WITH THE CLAIMS OF OTHER GENERAL CREDITORS, FROM ANY MONIES STILL AVAILABLE AFTER PRIORITY CLAIMS ARE PAID. EVEN CUSTOMER FUNDS THAT FOREX CLUB KEEPS SEPARATE FROM ITS OWN OPERATING FUNDS MAY NOT BE SAFE FROM THE CLAIMS OF OTHER GENERAL AND PRIORITY CREDITORS.
Please comment, is this normal practice? Am slightly confused, it appears that funds are not actually going on the Market. If this is normal everything else seems ok.
NFA has become a joke. So dont count on that. All the biggest crooks are registered with NFA.
I would advice you to open an account with a much more reputable firm.
By the way there is no such a thing called free money, speacially in forex.
You will see that disclaimer with many US forex brokers. As senaka7 said, look for a reputable firm with minimal or no debt on their balance sheet and Fidelity Bond insurance. Fidelity bond insurance protects your assets from various types of fraud, theft, and embezzlement, however it does not protect against bankruptcy. This is why you want a firm with minimal or no debt. To the best of my knowledge, FXCM is the only dealer that current shows clients their balance sheet (unaudited). They have zero debt and Fidelity 14 bonds.
Regardless, I would keep minimal funds with any broker.
All advices given are great. You may want to do a quick check at the CFTC site to assess financial health of registered companies. Excel anf PDF files can be found here:
Like has been already said, many brokers have this line in their contracts.
I signed up with fxclub for the free 100 dollars last month. It’s real, and it was truly free, it didn’t cost me anything but time.
However, I had a major problem with their platform and their stream.
The platform is very slow, and constantly requotes. It’s sometimes difficult to gut a trade through because it requotes you so many times. (Forget trading the news here…)
As far as their stream goes, I compare streams from more than one company at a time on demos. At the time I was running fxclub against fxcm and ACM. While fxcm and ACM had virtually the same pip movement, fxclub was much less pronounced. During news times, a 60-70 pip movement on fxcm and ACM would be reflected by only a 40-50 pip move on fxclub.
This really bothered me, as it ‘appeared’ that they were manipulating the prices. I say ‘appeared’ because I am new to this, only been running demos for about 3 months, and just opened my first personally funded ‘real’ account with North Finance last week.
If someone has a legitimate explanation for how this could happen I would like to hear it. I didn’t complain though, as I didn’t lose any of my own money. The hundred dollars that I opened the account at fxclub with, was the hundred dollars that they gave me. Hard to beat that, although it did end up beign a waste of my time, which has some value I guess.