I have done some research on different brokers. I wonder what is the pros and cons between small and big forex company? any suggestions?
Big brokers are usually regulated and have a reputation to uphold.
The smaller the broker the more likely you are to run into a bucket shop that is going to trade against you and give you problems actually winning and or withdrawing money.
If the broker is on an island or a foreign country that you are are barely familar with, don’t bother.
Myself living in the U.S. I would never go with anything outside the U.S. If there were no U.S. brokers I’d look for the best one in the U.K.
Be wary of reviews though, especially of big name brokers. There are a lot of extremely bad and stupid traders, that give sour grapes reviews because they lost money instead of becoming a millionaire off of a mini/micro account.
I have been trading with ibfx for a few years now. Great broker. But, when I was researching I noticed quite few, “sour grapes,” reviews. Many of which looking back didn’t even know how to use the different types of market order.
Thank you very much for your reply!
Could you give me an example of how small broker will “give me problems actually winning and or withdrawing money.” ? (just for curiosity…)
Also, I lived in the US as well, What about small Broker in US? and how do i know who is regulated?
I’ve never personally traded with any small brokers, but have read many horror stories.
P.S. why even go with a small broker? They have less money and have been in business for a shorter amount of time.
Generally in the U.S. you’d want to go with: Oanda, IBFX, or MB trading, IMO
In order words, you are saying that a big broker is better than a small broker, but are there any disadvantageous that you have came across with IBFX for example?
I’m live trading with Oanda right now. Prior to me opening an account, I had my doubts (mostly due to the negative reviews at FPA). I’ve had this account for about 5 months and I can’t say I’ve run into any problems. I don’t know if there are any disadvantages to large brokers simply because you’re sacrificing a ton of security when you choose a small, unregulated broker in the middle of nowhere.
Nope, good spreads, good customer service, mini and regular size accounts available and you can trade fractional lots.
When i went out looking for a live account i checked up on alot of reviews. I drew the following conclusions:
-
Nearly all the brokers’ reviews i looked at were negative with some exeption. This maybe because the people who are reviewing the brokers have lost money trading and think its the brokers fault not their inability in money management. People are more likely to give reviews of bad service than good ones.
-
Review sites are just affiliate sites who make money from you registering with a particular broker through one of their links.
-
The sites try to point you in the direction of one broker either because they are the affiliate or the review site is owned by the particular broker. I heared etoro have done this?
The best thing to do is open up a demo account first and check it out. Try contacting sales support (on FXCM i looked at their live chat system which is pretty good) and do your research in to the company/broker youre looking to open an account with.
I was wondering how they can trade against me as you have mentioned previously.
Also, if the reviews are based upon who they are affiliated with, then there is no way in trusting those sites? The only way is to try out many different demo account. But, what if you are totally new at this, then how would you know which one is best to choose from?
One should never choose a small broker in this sense?
A broker can easily be the counter-party to any trade. By nature, all trades are routed through their system. They are able to see EVERY detail of every trade you make, bar your own trading system. They can also interpolate your win/loss statistics with that information. Pragmatically, its more surprising if brokers don’t counter-trade. If there is a serial loser, I would be quick to take all of his trades. It’s free money.
Forgot to mention, there is one serious advantage big brokers have over small brokers. A big broker who works with a liquidity provider is able to barter for tighter spreads from them based on the amount of volume that broker is able to provide to the interbank market. Simply, if an NDD broker can bring more trading volume to the table, they, in turn, will receive tighter spreads which will be passed on to the retail trader. I guess you can sort of view it as a collective. Not all brokers work this way, but a few do.
Hello Phoenix
I did some research again, and I saw some small companies have STP process, which i know it means they will not trade against me. Also they all say that they have low spreads. how do i know who got the best deal? I do understand that bigger firm may have more credit and is more secure. however, from my understanding, Forex is just like a casino. Both small and big casino will make money from us eventually. if big company are not trade against me, how do they make money? and…why would you recommend those companies? (Oanda, IBFX, or MB trading, IMO) Why are they better than the others?
Thanks
They make money by padding the spread. If they are able to obtain 0.5 spread on their majors, they will pad it by 0.5 (for example), and pass a 1.0 spread to the retail trader.
May I ask what do you mean by counter-party to any trade and bar my trading? Also, is there a way of telling which brokers work this way or not really? Thank you!
Any/all brokers have the ability to be the other side of your trade. What they can see is your order details. They know where you placed your limit order, your stop loss, etc. There is no way to really tell which brokers will trade against you. It is in your best interest to keep these things in mind, though.
Is there a way of knowing who the liquidity provider is?
umm…so it seems that big and small companies will have the possibility to trade against people…so what are the main components for you to choose a company to trade with? because for me…all the companies look they same, and good. they all makes me want to start with them…
Use that to see if your broker is a member (applicable to US brokers only).
Thanks for your help…but what does it mean if they are the member? Also I know some us companies set their account oversea for avoid some of the roles in the united states…for instance: when i go to FXCM, they will transfer me to FXCM UK. in this case, are they still regulated by NFA? Also, is it the only component you use to choose a broker to trade with…?
I am sorry to ask so many questions…I am totally new to this market…and just want to know every about this market
Again Thanks for your help!!
Lee
are there some basic criteria (besides regulation) that one should look for in a forex broker? what are some typical pitfalls for traders new to forex?
The US arm of FXCM is fully compliant with the NFA. Even if a brokering corporation is international, you’re looking for national arms that are regulated by the NFA.
Forgot to mention that you should also go here:
Financial Data for FCMs - CFTC
This will give you the solvency status of the big brokers.