Newbie Looking For A Good US-Based Broker

Hi, folks,

As the subject implies, I’m based in the US and would like a good, secure broker, preferably based in the US. While on the learning path to forex, I’ve used an FXCM account and their trading platform. While it’s been a decent experience, I’m a little troubled to learn that US residents can’t open a live account at this time. Why is that, exactly? What happened to the folks in the US that were trading actively at the time of closure? Is this local only to FXCM users, or is this something that other brokers are suffering from when it comes to dealing with US residents?

Once I’ve proven myself at trading successfully (that is, profitable trading for at least 6+ months,) I intend to invest about $5K-$10K+ of my own capital. That being the case, I don’t want it to be lost or frozen with a broker in the event that they no longer offer services, hence why I’m reaching out to you all:

In your opinions, which broker(s) should I go with, assuming security is my top priority? If it helps at all, I’m looking to do a combination of day trading and swing trading (probably 25% and 75%, respectively, but that figure may change.)

Thanks in advance, everyone! I appreciate your help.

With the amount of capital you are prepared to deposit, you have exactly two choices:

OANDA - or - GAIN (forex.com)

Oanda or Gain. ---- That’s it. ---- Period.

Seven years ago, you would have had about 2 dozen choices.

But, the control-freaks at the CFTC put a stop to that.

So, flip a coin. ---- Oanda? or Gain? ---- Gain? or Oanda?

Forget the “offshore” option at this stage in your trading “career”. Learning the bolts and nuts of this business, learning to master a trading platform, and learning a trading strategy that preserves your capital and actually earns you a few dollars is daunting enough – without adding in the complexities of dealing with an offshore entity, moving money out of, and back into, the U.S., and reporting your offshore trading activities to the IRS.

Oanda or Gain? ---- Gain or Oanda? ---- Thanks to the nannies at the CFTC.

Regarding the demise of FXCM-US, THIS will bring you up to speed.

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Thanks, Clint, that’s very helpful!

Bummer to hear about FXCM. In your opinion, what’s risk the level with Oanda or Gain for something similar happening?

Sounds like you don’t have much of a preference between Oanda or Gain, but if you do, which would you pick?

Thanks again!
-L

Hello, Lucas

Regarding FXCM, I believe they brought themselves down by employing a gimmick: FXCM touted a stable of 16 or 17 liquidity providers (among them, some of the biggest banks in the world), and they advertised their price-quoting protocol as being based on the best available BID and ASK prices offered at any given moment by these liquidity providers. In other words, FXCM’s liquidity providers were supposedly in competition with one another for FXCM’s customer orders. But —

What FXCM did not tell their customers, or the CFTC, was that they (FXCM) owned and controlled one of the minor liquidity providers in that stable. And, a disproportionate amount of business (customer orders) was directed to this FXCM-controlled liquidity provider.

How much harm (if any) this self-dealing arrangement may have done to FXCM customers has not been revealed, and may be impossible to calculate. But, the arrangement was clearly not approved by the CFTC. When it was discovered by the CFTC, the regulator took action to terminate FXCM’s retail and institutional brokerage business in the U.S.

This was a unique situation, which I’ve never heard of before, and don’t expect will ever be repeated.

As far as Gain and Oanda are concerned, you need not worry about this sort of problem damaging or destroying either one of them.

Regarding the choice between Gain and Oanda, a case can be made for each one. In the final analysis, the choice between them will come down to the individual needs and personal preferences of each trader.

The process of studying, questioning and vetting brokers, to determine whether they meet your needs, is a process we call due diligence. And it’s a process you must do for yourself. Nobody else can do your due diligence for you.

Due diligence usually begins with asking, “What type of broker is this – market-maker, STP, or ECN?” But, Oanda and Gain are both market-makers, so there’s no due diligence to be done regarding type.

Likewise regarding leverage, which is limited to 50:1 at both Oanda and Gain, thanks to the CFTC’s war on retail forex, which began in 2010.

Other things to investigate in your due diligence: required initial deposit, minimum position size *, typical (or average) spreads, currency pairs offered, other instruments offered (crude oil, metals, etc.), as well as records of regulatory actions against the broker, history of growth, market share, etc.

Regarding market share (if size matters to you), forex.com (the retail division of Gain Capital) is now the 600-lb gorilla in the U.S. forex market (having acquired the entire retail customer book of FXCM). Oanda is the 300-lb gorilla, being about half the size of forex.com.

So, have at it. And good luck with your due diligence. And welcome to this forum, by the way.

* Note: Oanda has the distinction of offering position sizes as small as ONE UNIT of base currency. This feature is very rare in the forex world.
The smallest position size available at forex.com (Gain), by contrast, is 1,000 units of base currency (1 micro-lot, in other words).

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