Since then I never really gave Dukascopy a second glance, however, as I soon found out a lot can happen in a space of a couple of years and I was impressed by what I saw when I checked out their forex platform the other day.

Probably the most prominent feature that blew me away was the Level II market depth screen! You could see quantities (in millions) of people who had placed limit entry orders.

Who cares? some of you may be thinking, HotspotFX has had Level II type screens since inception.

And that’s true, but the liquidity Dukascopy had far surpassed that of HotspotFX.

In fact, liquidity was so good that the spreads of the major currencies were often 1 pip (in fact I saw instances of 0.5 pip spreads on the EUR/USD)! Yeah, that’s right, that includes 1 pip spreads for the volatile GBP/USD!

Other things I enjoyed were:

• One click trading

• Economic, Event, and Equity Announcement Calendars (oh, and holiday calendars too)
• Swiss based – now I don’t really feel too much at ease with Swiss brokers (just look at some of the complaints I get about ACM here!), but I will give them (and Switzerland) the benefit of the doubt and add it as a positive.

Unfortunately though there were a couple of things I thought could’ve been better.

For one, they only allow accounts to be denominated in either USD, EUR, GBP, CHF, or JPY – if you live those countries you’ll think this to be fantastic, but for those living in countries such as New Zealand, Australia, and Canada we’re not too overly pleased. Also I haven’t opened

The charting was standard. I’ve seen worse (such as the charting plugin from FXCM), and I’ve seen much better (such as MetaTrader), but it’s good that they’ve at least provided something.

I also noticed that they charged commission on their trades. My initial reaction was “how dare they” (as it has always been with forex brokers that charge commissions), but considering they offered such a great platform and such awesome spreads I really didn’t mind. The commission rates they charge can range from anywhere between US$10 per 1 million traded, to US$30 per 1 million traded – it all depends on how much trading you do throughout the month.

After salivating so much on everything Dukascopy had to offer I was keen to fill out some forms and begin a live trading account.

It was then that it hit me.

Upon clicking on the open a live account I saw at the bottom that you needed a minimum of US$50,000 (or its equivalent in another currency) to open an account.

*sigh*

Oh well, at least there demo account was free and fun to play with. If you would like to have a play of Dukascopy’s demo click here.

Tags: Dukascopy, Dukascopy Broker, Dukascopy Forex, Forex Broker

Now Hans correctly added an insightful comment on that article, by stating that I am acting on the assumption that spiking was done on a global basis – which is correct – and would therefore beg the question: can forex brokers manipulate price on an individual basis?

This is definitely a valid point, and one that I’d to think out loudly on…

Ok, let us assume that we are trading with a forex broker that has spiked us either into or out of a trade.

How would I be able to prove that the spike occurred on my account only?

Just look at a forex chart, right? Well… which one? You wouldn’t be able to check the chart your forex broker offers as they could very well be providing you with data that shows the spike so you wouldn’t be able to use that as proof. To prove individual account manipulation you’d need to check either someone else’s account with the same broker, or a reliable third party forex chart.

The easiest way in proving forex broker manipulation would be to find someone who had a trade that didn’t get transacted when it should’ve where you did. Using a third party chart as verification doesn’t really offer that much in the way of proof. I mean, everybody knows that all forex charts are different and can vary by as much as 5-10 pips during volatile periods… and what would happen if you did find that your broker was manipulating price by using a third party forex data vendor and your forex broker used another third party forex data vendor proving their case too?

Ah, it’s a difficult thing to prove dear friends, and I’m not saying that it doesn’t happen it’s just where does one start when they think they’ve had it happen to them?

And don’t forget one other important aspect dear folks: the forex brokers would need to know what is likely to happen in the future if they are to successfully spike you and take your money. The only time I’d think forex brokers would know of what direction a currency pair is likely to head would be receiving economic information prior to its release – and I do remember reading somewhere that central banks do contact other banks letting them know prior to the announcement what interest rate decisions have been made!

So, in my mind, I’d think that if the central bank is likely to disclose the figures to third parties prior to its announcement, would other organizations do the same? I mean, a human still needs to write up the report do they not? And people talk, do they not? Hmm…

Anyway, I resurrected this topic again after reading through Phil Davis’ The Forex Non-Dealing Desk Trader blog where he provides some insightful commentary on the importance (and differences) between standard dealing desk forex brokers, and a non-dealing desk brokers – with non-dealing desk forex brokers being the preferred.

He also has a forum where forex traders provide stories on their forex trading woes.

Manipulation is a difficult thing to prove, however I don’t doubt that spiking can happen, but the only solution to eradicating this problem would be to centralise the forex market at a transparent exchange – and the undertaking of such an endeavour would be momentous to say the least!!

Tags: Forex Broker, Forex Forex Forum

#6 read…

Broker demo accounts are a shill game of sorts; they’re not as time sensitive as real accounts and therefore give the impression that time sensitive trading systems, such as short-term moving average crossovers can be consistently profitably traded; once you start dealing with real money reality is quick to set in.

And do know what?

I agree with him.

After having personally sampled many forex demo accounts I would definitely agree with Jimmy. In fact, it’s no real secret to everyone who has been around the forex game for some time that most demo accounts operate on a slower server – and there’s equally good reason for why forex brokers do this: to save money.

So what would be the purpose of trading a demo account?

I believe the sole purpose for trading a demo account should be to acquaint yourself with the platform. Place a few trades, know what buttons are responsible for doing what, and structure the platform in a way that is suitable to your trading needs. But as for relying on a demo accounts results on the profitability of a system I would personally be very suspect. You would gain much greater insight into the real performance of your forex system if you opened up a live account, deposited the minimum amount and then traded the smallest lot size possible.

Several brokers around the place are beginning to offer micro mini positions and minimum account opening balances of around US$200-300. Forex brokers such as Oanda offer $1 lot position sizes.

So be careful when trading forex broker demo accounts – especially if you are testing short-term economic announcement breakout systems.

Tags: Account Demo Forex, Demo Forex, Forex Broker, Forex Demo, Forex Demo Account, Forex Trading Demo

Several years ago when GFT Forex was relatively new on the block, I read on the MoneyTec forums about one guy who claimed he made a large amount of money which GFT Forex weren’t honouring.

I never knew what happened to that case, but it made me steer clear of GFT, although I did sign up for a demo account and trial their platform.

Regardless, several things of note that I liked about GFT were:

• Their Dealbook platform was quite good (things may have changed since I last tested it – for better or worse)
• 400:1 leverage available

If anyone would like to share their experiences on GFT Forex please add your comments below.

Tags: Forex Broker, Forex GFT, GFT, GFT Dealbook, GFT FX, GFT Forex, GFT Forex com

Some of the benefits of CMC Forex include:

• Small spreads (as compared to larger forex firms such as FXCM)
• No need to trade in specific lot sizes
• 100:1 leverage
• One click trading
• No commissions
• If-Done and OCO orders

Some of their disadvantages include:

• $2,000 opening balance
• Minimum trade size US$10,000

If you have used CMC Forex in the past before let us know about your experiences by adding a comment below. By sharing your experiences we can be a small yet powerful force in finding out which forex brokers a better than others (as I can only do so much whereas if we have everyone adding detailed comments we can all help each other).

Tags: CMC Forex, CMC Forex Trading, CMC plc FX, CMC plc Forex, Forex Broker, Forex CMC Plc

Some of these new features include:

• You can select chart views (basic or advanced). The advanced chart view allows you to see the bid/ask/average price of the currency being displayed.
• There is now a quote panel similar to that seen in FXCM
• By placing your mouse cursor over the quote list you can bring up a sell or buy order according to which side of the quote list you click on
• There’s BUY and SELL buttons in the lower left hand corner of the chart
• They’ve seem to got rid of their annoying news ticker and replaced it with a much better news platform (I isn’t real time… yet… coming soon)
• Changed the format of the user preferences section – a bit cleaner and easier to navigate now

The most exciting change is the news!! I can’t wait until it becomes real time!!

Apart from that I can’t see any other changes, if there are other great ones please post them into the comment section below.

Tags: FX Oanda, FXTrade Oanda, Forex Broker, Oanda, Oanda com

Here’s the email I received…

I have been looking at Dukascopy, I like their site because the charts are fast and they offer market depth data.

Do you know anything about this?

Okay, let’s individually answer each question…

What Is Market Depth Data?

Market depth data is the collation of all limit-based orders available from your forex broker’s clientele and the spreads of their market makers (such as banks, brokers or pure market makers).

How Do I Profit From Market Depth Data?

I’m going to assume that ALL forex brokers offering Level II screens present the same STRUCTURE (obviously they’ll have different prices and quantities inside their market depth screens), so if this assumption is incorrect then ignore my answer.

I think it would be terribly difficult to profit from analyzing market depth data alone.

Here’s why I think this is so:

• The spreads offered by the forex broker’s market makers will take up the majority of the quantities seen in the market depth screen and they will likely present BOTH a bid AND ask price EACH with the same quantities. Therefore, because bid and ask quantities are the same we have no real gauge on which side of the market is the strongest (or weakest) – EACH QUANTITY IS THE SAME!!
• As the forex market is not fixed to one central exchange the forex brokers who offer “Level II” screens will not present what the ENTIRE market is doing – because they can’t! Conducting any form of analysis with only a fraction of what is really going on can lead to faulty analysis. Now this wouldn’t matter with say analyzing your forex broker’s charts as most charts very rarely differ by much (only during extreme volatility), but as market depth can differ greatly amongst Level II brokers AND based on the fact that market depth analysis relies HEAVILY on ANTICIPATING what it likely to happen in the short-term it can lead to erroneous analysis as you simply don’t have all the data.

Hopefully that can enlighten you on forex broker’s market depth screens and why using it as a tool for analyzing where the market is likely to go is probably useless.

If anyone uses it to profitably trade the forex market I, and no doubt many others, are all ears!

I don’t understand the interbank system… do you know anything about this?

The interbank system represents the largest portion of the currency market. It’s where the banks offset, regulate and speculate with their positions against other major banks.

Generally most forex brokers protect their positions by hedging their positions opened by their clientele in the interbank market.

The interbank market is not open to the retail currency trader – hence the term “interbank” (inter- being the prefix meaning “between” and hopefully you know what a bank is… therefore we have a definition of “between bank(s)”).

To trade in the interbank market one would need to trade with a broker that automatically offsets their position in the interbank market (i.e. doesn’t trade against the trader) and provides a small spread.

One such currency broker that offers this facility is Oanda (chart on this page shows the process).

When a company says that you can trade on the interbank market they generally mean that they MAY offset their position in the interbank market.

Hopefully these answers have helped, if anyone has any further details please add a comment below.

Tags: Dukascopy, Forex Broker

Why?

Well, as far as I know – and correct me if I’m wrong dear friends – Oanda are the only forex broker that allow you to trade 24/7. Most forex brokers, especially the main players that I’ve reviewed, only operate between Sunday 1700 NY EST and Friday 1700 NY EST.

What happens if something happens over the weekend?

That’s two days of NO trading activity – nearly 30% of the week is taken up during the weekends… but does that mean that because the forex broker’s are closed the world closes too?!

Of course not.

If something occurs over the weekend, by having instant access to a market quote you can amend existing orders or enter new ones… and even if you don’t use Oanda you’ll at least be able to enter into trades that will hedge existing open trades from your closed forex brokers.

Think about it.

Tags: FX Oanda, Forex Broker, Oanda, Oanda com

Here is the breakdown of what is now being offered compared to what was offered before:

Currency Old New
EUR/USD 5 3
EUR/GBP 5 3
USD/JPY 5 4
EUR/JPY 5 4
AUD/USD 5 4

Tags: FOREX.com, Forex Broker

One interesting inclusion into their platform is a “Volume Value“.

I noticed when I first used some forex data vendors that some did provide what seems like a volume value in their forex data history, but upon further investigation I realized that the volume bar represented the quantity of ticks in the bar!

Having come from the stock market where volume meant something completely different I was confused. However, I’m glad I knew.

Here’s how you can check to see whether the volume value provided by your forex data vendor is indeed “volume” (in the general sense of the word), or whether it represents “tick” quantity – all you have to do is plot a tick chart with the volume indicator shown and see if the “volume” indicator changes, or has a greater value than 1 on each bar.

Here is an attached chart of CMS’ tick chart of the EURUSD…

Hence CMS’ volume indicator is tick quantity.

Tags: CMS Forex, Forex Broker

They will be offering the following spreads on these currency pairs (the number in brackets is what they are currently offering):

EURUSD 3 pips (3?)
EURGBP 3 pips (5)
USDJPY 4 pips (5)
AUDUSD 4 pips (5)
EURJPY 4 pips (5)
NZDUSD 4 pips (5)
GBPJPY ? pips (10)
CHFJPY ? pips (10)

Tags: FXCM, FXCM Station Trading, FXCM Trading, FXCM Trading Station, FXCM com, Forex Broker, Forex Capital Markets, Forex Capital Markets LLC, Forex Capital Markets Ltd

What characteristics will the perfect broker have?

Here is what our 10/10 broker would have:

• Mini contracts, standard contracts or own contract size available
• Small account opening deposit (~US$500)
• Accounts denominated in different currencies, not just USD
• Windows and web based platforms
• 3 pip spreads (or less) on majors
• No commissions, or, if commission is charged ensure a 1 pip move after the spread has been made should result in a profit for the customer (even if it is negligible), therefore commissions round turn should be less than US$1 per mini contract, or, less than US$10 per standard contract
• Stop & limit orders can be placed anywhere – even inside the spread
• Leverage customizable – starting from 100:1
• Demo trading should accurately reflect actual trading
• Orders are placed into the interbank market and clients funds are not traded against
• NFA member
• Deposited funds are FDIC insured
• Interest payable on positions that are interest bearing regardless of position size

Here are some other great advantages that the perfect forex broker could offer that would be the icing on the cake:

• Great charting and news package included – for free
• Historical intraday data going back at least 2-3 years
• API (for any account size)

If anybody knows of such a forex broker TELL US!!!!

Anything we overlooked?

Tags: Forex Broker

Let us assume that we BUY EURUSD @ 1.2056 and place our stop loss @ 1.2006 (a 50 pip stop – this is important). When we click on the “Advanced >>” tab in the order screen and tick the box labelled “Trailing Stop” and then enter in the box labelled “Rate Min.Move” 30 pips this is what FXCM will do…

Once the currency has moved 30 pips in our direction (i.e. the BID side is at 1.2086) our stop will move up 30 pips, and it will keep the distance of our original stop loss (i.e. 50 pips) from the current high.

To continue with our example, if the EURUSD BID were to hit 1.2087 then my stop loss would move to 1.2036 (which is the 1.2086 – 50). Again, if the EURUSD BID were to keep moving up to a high of 1.2143 then my stop would have moved to 1.2066. How The way we work out the last part is by obtaining how many 30 pip moves occurred between my entry price and the current high – well, 2 lots of 30 pip moves occurred (87 pips). So, from the 2 lots of 30 pips (= 60 pips), we then add that to our entry price and subtract our initial stop loss distance!

Clear as mud? Read it again and you will understand.

Unfortunately FXCM only allow a minimum move of 30 pips (and a max of 500) for the trailing stop to kick in. I don’t know why they have chosen 30 pips, but, them’s the rules.

And, if you having a trading background you would have noticed that this “trailing stop” rule is VERY limited. Why don’t they just trail your stop for every pip above your entry price (the standard practice??). Lastly, if you ever change your stop the trailing stop will reset once you have OK’d your stop change. So, if you are 1 pip away from the 30 pip barrier it will reset back to 30 pips once you have clicked the ok button on your stop order screen (beware!).

Tags: Capital Forex Market, FXCM, FXCM Station Trading, FXCM Trading, FXCM Trading Station, FXCM com, Forex Broker, Forex Capital Markets, Forex Capital Markets LLC, Forex Capital Markets Ltd

Generally speaking the only time you would be concerned about the execution of your stop loss would be during major economic announcements (such as Unemployment Rates, Monetary Policy Announcements etc) or surprise announcements (such as terrorist attacks).

All FXCM clients should have received a copy of this email today. Unfortunately I could not find a link to their web site showing this claim allowing others to read. However, if anybody finds the news item on their web site please let me know so that I can add it into this blog.

You may wish to read FXCM’s other restrictions that you may or may not be aware of.

Tags: Capital Forex Market, FXCM, FXCM Station Trading, FXCM Trading, FXCM Trading Station, FXCM com, Forex Broker, Forex Capital Markets, Forex Capital Markets LLC, Forex Capital Markets Ltd

FXCM’s restrictions seem too restrictive.

I know I know.

But… them’s the breaks.

If you want to go elsewhere then by all means do so. No one is holding you back, and there are far better forex brokers than FXCM, just check out the forex broker page.

Firstly let’s start with what FXCM’s restrictions are:

Restriction #1: Entry Stops

The first major restrictive rule is that FXCM will not enter you in at your entry stop price if the forex market never trades at your entry stop price. This mainly occurs around volatile announcements and throws into chaos forex traders who have a system designed around these volatile announcements. Would FXCM have entered them in their trades, if not which ones would have been missed? As you can see it now brings in a huge question mark over your system’s results.

So is there anything that you can do to get around this issue?

What I’m about to share may not necessarily guarantee entry into your forex trades *every time*, but it will increase your chances of getting in. The solution to this problem is to ensure that you place your entry stop orders at round numbers, or at pivotal turning points in the past (even things like the previous day’s high/low).

Why?

If you have traded any other market (especially the stock market) you will notice that there are times where a stock will hit a nice round number, like $10.00 and will become “stuck” around this area. The reason for this is due to the fact that when people place their orders onto the market they generally just tell their broker to buy at $10.00, instead of $9.98, as it is easier and quicker.

The same thing occurs on the forex market. I have noticed that whenever a currency pair hits a round number that it might take awhile before it moves on. This indicates that there are many transactions occurring round these numbers. The most common round numbers are numbers ending in 00, such as 1.2400. After that we have the next most common round number at 50, such as 1.2450. Then we have round numbers at the 10s, such as 1.2410, 1.2420, 1.2430, 1.2440 (etc). Then lastly we have the 5s, such as 1.2405, 1.2415, 1.2425 (etc).

To reiterate an earlier point again: this is not guarantee that you will actually enter into your desired entry point, but it will increase the chances of being hit. If you find that your entry stop point is close to a round number, rather than placing your entry stop at a non-round number, place it *at* the round number. Lastly, whenever possible try and place your order at a figure ending in
00 or 50.

Restriction #2: Major Announcements

The second major restrictive rule imposed by FXCM has to do with trading around announcement time. It has been stated that FXCM will not allow placement of entry orders around these times.

Unfortunately FXCM do not warn traders which announcement is major until the trader tries to place an entry order on.

Now there is no method that I know that can side-step this rule, however there is a resource that can let you see in advance when FXCM are likely to impose this restrictive rule.

What you need do is hop on over to Daily FX and click on the “Calendar” section (seen on the left hand side of the page). When this
loads you will notice that some announcements are bolded. These announcements are ones that Daily FX have indicated as being announcements to watch as movement could occur during this time.

As a result FXCM is *more than likely* (not 100% on every highlighted announcement) to impose this restriction. I have found that around monetary policy announcements (where the central banks of a G7 country announces a change in their interest rates), and unemployment rate announcements are the two most important announcements where FXCM has been known to not allow entry orders 5 minutes prior to their announcement.

Having stated all that strangely enough FXCM has allowed entry orders around some of the major announcements. When FXCM was quizzed about this they stated that there was sufficient liquidity around the time of the announcement, ensuring that those who placed their entry orders on would indeed likely be filled.

So, maybe it could be an idea to place your entry stop orders 6 minutes prior to an announcement, but when you are in the “red zone” (5 minutes prior to a major announcement), try placing orders anyway (if your orders are not at your desired point) as you never know when liquidity may exist.

In summary then, FXCM’s restrictions can be a hindrance, but it could be a sign of further restrictions to come from other brokers. I know for a fact that other brokers will allow you to get in at your entry stop price, but they impose slippage on the order – thereby not necessarily guaranteeing your exit stop price! So it’s a catch 22 situation: do you go with a broker that guarantee’s exit stops, but
has restrictions, or do you go with another broker that doesn’t guarantee stops and allows you to trade without those restrictions, but imposes slippage on your orders? Think it through wisely as sometimes we are talking as much as 30-50 pip slippage if you have stops of 10-15 pips with some brokers!

Tags: Capital Forex Market, FXCM, FXCM Station Trading, FXCM Trading, FXCM Trading Station, FXCM com, Forex Broker, Forex Capital Markets, Forex Capital Markets LLC, Forex Capital Markets Ltd

If you do not know what an “option” is may I suggest that you skip this article as it assumes the reader has some prior knowledge in this instrument (there are plenty of free resources on the internet that can help you learn).

Having come from a stock options background we were quite excited with the prospect of forex options, however upon further investigation our hopes did not live up to expectations.

Forex Option Characteristics

Forex options have several unique advantages that normal conventional stock/future options do not. Here is quick list of some of the characteristics of forex options:

• You can determine your own exercise price
• Options can expire at two different times of the day

Apart from those two characteristics every other aspect of the forex option is similar to its stock/future option counterpart.

Unfortunately these characteristics can more be a disadvantage to the average trader than would otherwise seem. Besides the obvious question of: Which strike price should you use? There is another more subtle enemy that most new options traders will not know about.

If you have some experience with options in the stocks and commodities industries you will well know that there are certains entities responsible for creating the bid/ask spread of the option. These entities are generally labelled as market makers. Now market makers aren’t renowned for being nice and giving away money (don’t forget they need to make money too, otherwise they’re just not in business), so when you trade with a market maker in the options market you are probably best to use round number strike prices. If you use obscure strike prices it will probably just be between you and the market maker – and have a guess who will not want to lose in this deal?

Still don’t quite understand? That’s alright. Listen carefully: a market maker provides the bid/ask spread of the option you are wanting to deal in. As you may or may not know there is no market depth with the forex option – you don’t even know if other people are out there purchasing/writing the same option you are about to transact in. So, if no “market” exists bar the one that your “friendly” forex option broker is quoting, how do you know if they are not inflating/deflating price?

Well firstly they’ll need to know what you’re doing? If they inflate price then you can write the option and wait for the option to fall back to “fair” price and collect the premium. If they deflate price you can buy the option and wait for the price to rise back up “fair” price and collect the profit.

Excellent!

You’re understanding so much faster than I thought! Keep reading… the clincher is just around the corner.

Let’s say that they quote a “fair” price with your transaction, not knowing if you are going to buy or write. Once you are in, they now know what your transaction is. Now who is to say whether or not they should start quoting an unfair price according to your position?

There’s no regulated forex options exchange to check your options price against, and who’s to say that the price you have on your monitor is the same that other people are receiving too??

You’re now at their mercy.

No thanks – not for me.

Who offers forex options?

Saxobank is one of two forex brokers that enable forex options trading on their platform. They offer bid/ask spreads on their forex options and their only trade restriction is that you must deal in forex options that have no less than 7 days prior them expiring (they all expire at 1400 GMT on the day of expiry) and no later than 7 months. The multiplier for their forex options ranges from 250k to 50million.

Quacks Like a Forex Option, But Is It?

But the second of two forex option brokers that we reviewed had us a little concerned about whether the instruments should really be termed “forex options”! This forex option broker being Refco Spot.

Refco Spot seem to make forex options trading much more easier for those new to options trading. All you need do on their browser-based platform is input:

• The amount of money you would like to make…
• On the currency pair you wish to speculate on…
• To hit (or not hit) a certain price…
• In the amount of time you set

When your requests have been entered Refco will then display a cost to complete your trade. Depending on the type of trade you have requested the cost can range from US$10 to as much as the amount of money you wish to make (which will leave you with zero net profit of course). However, the benefits of this type of trading is that you know what your worst possible loss can be if you happen
to get it totally wrong.

BUT, nothing is as rosy at it seems, upon further investigation we found quite a few imposing restrictions, here are some of them:

• Trades can only be placed no less than 12 hours prior to expiry and no more than 1 month away (options expire at 10AM or 10PM NYEST each trading day)
• The smallest amount that you can place to make is US$100, the largest US$10,000
• You cannot reverse or exit an open trade (you will just need to enter into a new one)
• Barriers (price targets) for the options can only be set to as low as ~60 pips away from the current price and as far away as ~300 pips
• Be mindful that the barrier price is Refco’s bid price – if the bid price hits your barrier then the trade is completed
• All pay-outs are made at expiration

To us, Refco’s options platform seems more like a gambling/spread-betting platform. Although they might derive their cost using an options calculator, the ability to not be able to exit out of positions seems to give the feel that we have more of a gambling facility than a trading facility. Take it whichever way you will.

Whinge Whinge Whinge

Well so far we’ve done nothing but complain, what changes would we like to see before we would even consider looking at forex options again?

Here are our recommendations for Saxobank-style forex option brokers (we don’t care to comment any further on Refco style option brokers):

1. A global regulated exchange of the forex options market (market makers generally don’t have our best interests at heart so we need to make sure that we are receiving a “fair” price!)
2. Volume and Open Interest data of option contracts (we want to see that others are involved with the option we are dealing with – i.e. there’s not just a market provided by the market makers)
3. Guaranteed stops (although not really a prerequisite, but something that would be favorably looked upon)
4. Trades can be placed right up to the day and time of expiration

Are forex options all that they are cracked up to be?

We don’t think so, not yet anyway.

Maybe when more market makers enter this area we could see better improvements, but for the time being I would encourage others to continue trading the spot market.

Tags: Forex Broker, Forex Trading

How Does A Broker Quote Prices?

A broker quotes prices according to three sources:
1. Their banks;
2. Their customers; and/or
3. Themselves.

We will explore each in a little more detail.

Bank Quotes

There are two large institutional groups that make up the currency market: the banks and the market makers (brokers). The banks are the institutions that make up the interbank market (hence the term “interbank”) and the market makers (brokers) offset their positions by trading with the banks.

Depending upon the number of banks that a market maker is listed with, a market maker can choose any price from the range of quotes they receive from their banks. Obviously the market maker will quote you the price that will ensure they receive the most from the transaction. This only makes common business sense – if someone offered you $10 or $5 which would you take? There’s no question, anyone would take the $10.

To help the market maker make the most out of the transaction they employ sophisticated computer programs to generate the price that their retail clients see. This program will take all quotes received from their banks and will provide you with a price according to how they can best make money offsetting your position into the interbank market.

Now that we understand how brokers receive their quotes from the banks, let us move to the next point… quoting a market due to clientele.

The Clientele

Many people complain that the prices seen on one particular brokers’ platform is different to the prices seen on another platform – sometimes by as much as 50-60 pips! One question that I generally ask in return is: could a large client of the market maker be off-loading a position? Just because a quote is different does not automatically mean that the broker is manipulating price – there can be two sides
to this story – and don’t be too quick to jump to negative conclusions, just remember:

No market maker no play

However, market makers do have the provision of seeing what their clients are doing and where their stops are set. Regardless of whether a market maker offsets their clients’ positions into the interbank market, there will come times when they will offset a clients positions with another – once again it only makes sense. It saves the market maker transaction costs and time. (One broker that does allow you
to view other participants is HotSpotFX).

Now the problem that most people claim with market makers is that by seeing the clients orders they could potentially locate where to make money by “manipulating” the price of the quote determined by their sophisticated computer programs. But that in itself is a large call.

Not only would the broker need to also take into consideration the likelihood of clients who are sitting watching the market from their computer that DON’T have positions on (but could very well do), they would also need to predict that price will do nothing during their “manipulative” spike. While I agree that spikes can take just seconds, I think it’s very difficult to underestimate the power of people sitting at the computer watching the market and knowing what *they* are going to do.

Anyhow, I am getting a little side tracked. Let us now move on to our final point on how a market maker can quote price – doing it themselves.

Themselves

I know this may sound strange, considering the nature of this article, but market makers can quote their own price. Duh? Isn’t that what we’ve been talking about throughout this entire article? Hold on. Well this price quote is a little different from their manipulating-to-skin-you-alive type of quote.

See, market makers speculate also. They may decide to open some positions and place an order from their own book that complements their view. Is this wrong?

Hardly.

Why would a market maker do this? Well, I don’t know about you, but I know when I initially started trading the forex market I was pretty shocking. I was able to burn my account in about 3 months time. If someone had been smart and speculated (not traded) against me then they would have made the amount I lost! Now what if the market maker lines up all the new accounts and analyzes them then takes a position against the majority of forex newbies? Interesting thought.

Conclusion

I hope this article was able to arouse some interesting thoughts as we all get mad when we see the spike in price on our machine only to see what would have been a very profitable trade had we been in.

This should get you thinking one step further: can spikes be traded? Is there a method that can pick out a broker spike and trade against (or with) the direction of the spike? Keep thinking, you might stumble on something.

Lastly, just be mindful that if a broker does trade against you, they will need to manipulate the price so as to exit you out of your trade and/or they will need to know where price is going, PLUS they need to assume that you will NOT change your stop loss order. To me that’s a tall order, especially if you are a large forex brokerage firm such as FXCM.

If you feel that regardless of what “I think” about forex broker manipulation then you may wish to take the following actions:

• Change your broker. It is often said that the bigger the broker the harder the manipulation, but I don’t know about that… and how big is big?
• Trade during liquid market times. If you are trading during 1700 EST and midnight EST then you are trading at the weakest time of the day
• Be wary of major announcements. During major announcements the market can dry up very quickly, therefore, spiking is easily done – watch out

Tags: Forex Broker, Forex Trading

We chose Forexite over the rest purely because they provided bid-type data. Other free forex data providers from we have seen give historical indicative data, which we don’t believe to be helpful whatsoever.

Forexite provides history spanning since January 2001. The only problems we encountered were that the time stamps were in GMT+1 (which is fine if you live in that part of the world), but difficult if you are testing the effectiveness of economic announcements that are released in NY EST! And… we found many holes in the data.

Altogether we would not recommend this data to anyone, but if you’re starting out and want a “feel” of what forex data looks like, sounds like and tastes like then we would choose this data history over the rest below.

At all costs try to get your grubby hands on FOREX.com’s free forex data.

Tags: Forex Broker, Forexite, Free Forex Data

By far the best of an average bunch is Gain Capital. However, to access this free data you would need to open up a live account and then ask them for the link to access their data.

The historical data goes as far back as 2000 and is provided as zipped tick data which you download in individual currency monthly packages. As you can no doubt imagine the collection is quite large to download! They also store a DDE program allowing users who have the ability to receive live streaming tick data.

The data received from FOREX.com seems to be bid pricing straight from their platform, and thanks to one of our newsletter members we were able to compare FOREX.com’s history to FXCM’s.

If you want good reliable FREE forex data, open up a FOREX.com account.

Tags: Forex Broker, Free Forex Data, Gain Capital

Searching For The Perfect Forex Broker

Finding the right forex broker can be an arduous task. However, you can dramatically cut the time taken to search for the right forex broker by firstly writing down what you NEED, read our reviews to see which broker best serves those needs, and then sample for yourself the forex broker’s demo platform.

The reviews that we provide are from brokers that we have tested. Please note that we do not receive any benefits of any kind from any forex broker for providing a review of their products and/or service(s). The opinions and ratings that we give are solely our own.

Other brokers that we have not yet reviewed are further below and only contain small snippets of information that we came across while demo trading their platform. If time permits we will fully review them in due time.

Again, please note that we do not have an axe to grind with any broker, nor do we receive any benefits from endorsing one over the other, we are forex traders who are providing our opinion on the top forex brokers available today. As suggested at the top of this page: we recommend everyone test the platforms out for themselves as everybody’s needs are different.

Which Broker Did We Find The Best?

In summary of the reviews conducted, our favorite platform was Oanda although they are by no means perfect.

If you agree with our views on improving Oanda you can help add you vote by going to Oanda’s Feedback Form and requesting that they include:

• Trailing stops
• Better news ticker
• Market depth
• 100:1 leverage

Our Forex Broker Reviews:

Click the broker’s hyperlink to read a more descriptive review (all marks are out of 10).

IFX Commerce Bank Review: Trade with a bank not a broker
Our rating: 4

FXCM Review: Has one of the largest clientele
Our rating: 1

Capital Market Services Review: Auto trade your own system
Our rating: 4

Oanda Review: 1.5 pip spreads on EUR/USD
Our rating: 7.5

ACM Review: 3 pip spreads on majors
Our rating: 2.5

Gain Capital Review: Trailing stops
Our rating: 4.5

HotSpot FX Review: Market Depth
Our rating: 4

MG Forex: Dynamic News Feed Inside Trading Platform
Our rating: 1

OTHER FOREX BROKERS NOT YET REVIEWED:

SAXOBANK

GFT FOREX

REALTIME FOREX AG Swiss based

REFCO FX Similar to FXCM

Tags: Forex Broker