I am new to FX and still going through pip-school. I’m currently shopping around for a broker, or at least building a short-list for when it’s appropriate to open an account. I’m finding the amount of twists and turns in the industry the last 10 years dizzying. What I’ve gleaned so far is that in 2006-2009 US brokers were favored but Dodd-Frank changed everything. Now it seems pretty split between US brokers and offshore options, or maybe more simply, CFTC controlled vs CFTC independent brokers. Part of me, the free-thinking anti-establishment part, thinks offshore all the way. But the other part, the newb green-bean side, thinks play it safe with an established US institution. Though, a lot of what I’m reading would indicate that U.S. brokers aren’t the safe play they once were, there’s a solid chance Oanda and Forex.com will be around years from now. What is popular opinion among experienced traders the best way to go for a newb?
Not really sure what you mean by “offshore”. If you have money offshore eventually its washes up “onshore”
[B]The short answer to your question is: Choose the best U.S. broker[/B] — based on your research, your due diligence, and your personal preferences — and leave the whole offshore thing for some time in the future, when you will be better qualified to evaluate offshore options.
I know a bit about both — U.S. brokers and offshore brokers.
• Ten years ago, I opened my first forex acccount with a U.S. broker, back in the wild-west days when there were dozens of U.S. brokers, they all were unregulated, and they all were dealing-desk brokers (market-makers).
I can tell you from personal experience that the few U.S. brokers who remain today are more financially-sound, more ethical, and more transparent than any of the brokers available to me 10 years ago. And this is due [I][B]only in part[/B][/I] to the regulation of the forex industry which began in 2010.
Most of the improvement — the raising of standards — in the retail forex business would have occurred naturally through competition, without the heavy hand of government. Certainly, the CFTC’s prosecution of fraud in the retail forex business has been instrumental in weeding out certain bad-actors. But, their meddling in the normal workings of the business has been nothing but negative for brokers and clients alike.
• Five years ago, I got involved in the world of offshore forex brokers. Soon thereafter, I started the forum thread titled Going Offshore to Escape the CFTC, and I have shepherded that thread ever since. Basically, the theme of that thread (and its reason for being) was two-fold: B[/B] to find ways to get around the CFTC’s restrictions on leverage, hedging, and FIFO, and B[/B] to fight back in a general way against the nanny-state, and its attempt to regulate our lives.
In my opinion, item (1) is not (or should not be) a concern of yours, as a brand-new newbie. As for item (2), if you sympathize with our rebellion against the nanny-state (and your post indicates that you do), you can join that fight at an appropriate time in the future.
All that being said, you are more than welcome to visit our Offshore Broker thread, and participate in the conversations there.
Bottom line:
For now, you should take a close look at all of the U.S. forex brokers still in business (there aren’t many left). Study their websites; read their Client Agreements and their FAQ’s; give serious thought to whether you want to start out with the (generic) MT4 platform, or with one of the proprietary platforms offered; compare spreads, but don’t focus on spreads to the exclusion of all other considerations; and finally, download demo platforms from the brokers you are seriously interested in, and determine from your own hands-on experience what suits you.
All of this comes under the heading of Due Diligence, and the burden of doing it is entirely on you — nobody can do your due diligence for you.
Good luck. And welcome to Babypips.
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Thanks for your reply Clint. That is exactly what I wanted to know. In fact it was your Going
Offshore post (along with references to the idea peppered throughout the forum) that inspired me to ask. I have read a load on this site and forexfactory but the two main threads that have been most influential in my thinking have been yours and the one comparing FXCM, Oanda, and Forex.com. Based on the second thread I’m pretty much focused on Oanda, as it had an overwhelming majority of support and positive feedback, although the enthusiasm seemed to dry up the last couple years.
Two things I have picked up about Oanda: 1) As I understand it, their charting tools aren’t the greatest, and a lot of people use other tools for analysis such as other free accounts, or software like Trade Interceptor. Although, I think I will focus on price-action for now and not worry about charting as a primary focus. 2) Other than most people are happy for years with them, is that they seem to have a thing about spiking spreads, to the point of suspicion of stop-hunting. I’m wondering for those who are happy with Oanda, is there something you do in your system to work around this “feature” of theirs?
Thanks again Clint. I believe, after my preliminary research, that I agree with you in that Oanda, despite it’s DD model, is a reputable company. I do take to heart Jason’s point about having NDD as an option for a broker to switch to, should they need to, in order to avoid any conflict of interest. But I think, from what I’ve read, that Oanda is in this position in a predictable fashion (rollover, news events, etc). Subsequently, I think that answers my second question as well. To avoid this situation I need to clear my SLs or exit the position before these events occur. As well as deeper SLs on longer positions. Of course, in practice, my opinion may change. But for now… 