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)

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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!).

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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!

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What’s The Attraction?

I lost my forex trading virginity with FXCM. When I had learnt the basics of the forex trading world and felt ready to open a live account I thought that by trading with the largest forex broker in the world I would no doubt be trading with the best.

Unfortunately FXCM began to wear quite thin quite quickly – the large spreads (at that point in time) were one of the largest in the business and their platform was nothing spectacular. I immediately began to wonder why they were the largest in the business as there certainly wasn’t anything that kept me attracted to it.

So, after being a client of FXCM for a couple of years I failed to see the reason for the large attraction. Maybe it was their large advertising budget… maybe it was their ability to large land clients… or maybe it’s their ability to offer such a great commission to referrers who land clients for them (FXCM pay the highest commission to referrers who open a live account and have their clients trade with them). Whatever it is though I think you too will be pleasantly surprised at why this featureless forex broker is the largest in the business.

But then again maybe that is the attraction: FXCM is just simple. I know from my personal experiences in life that the simple things are often the best! Maybe FXCM have been able to successfully apply this adage to their business!

Therefore, if you’re looking for a good reliable platform then look no further than what FXCM has to offer.

Live & Demo Differences

One of the best aspects to FXCM is that there are no differences between their demo and live accounts. What you see in the demo account is what you will get in the live account. In fact all you need once you have a live account is to simply flick the switch on your login entry screen from “demo” to “live”. That’s probably the only difference!

What We Liked About FXCM:

Once upon a time the best feature at FXCM was its ability to honor stops. Unfortunately those days of guaranteeing stops are no longer around especially around volatile announcements such as the Non Farm Payrolls.

But what we do like about FXCM is its ability to offer 18 different currency pairs with the 4 majors having 5 pip spreads bar the EURUSD which has 4 pip spreads (FXCM has changed and they now offer 3 pip spreads on the EURUSD & USDJPY) which remain fixed regardless of the underlying market conditions.

FXCM also offer mini accounts ($10k contract sizes) with leverage of 200:1 alongside their standard accounts ($100k contract sizes) with leverage of 100:1.

What We Didn’t Like About FXCM:

Some of the restrictions recently imposed by FXCM weigh on the negative side for FXCM. As FXCM seem hell bent on maintaining a no slippage policy they have resorted to these restrictive measures to help the “client”. These measures deny any stop or limit orders being placed 5-15 minutes prior to a major announcement, and deny any stop entry orders being filled if the
currency never trades at your stop entry price! This makes designing a forex system very difficult if your forex system utilizes stop entry orders, because now you have to wonder if FXCM wouls have been able to enter you into your hypothetical backtesting trades… and if they wouldn’t have then you’ll have to reanalyze your backtesting data!

Another problem we found was that you can only open an account in USD. This is fine for the majority of forex traders that live inside the US, but can be a little annoying for our international partners who have a currency that is appreciating against the USD and thereby has to lose capital while the US dollar continues to depreciate. Of course this can work the other way too. I think it would be great if FXCM could offer the ability to have multiple currency denominated accounts so that the customer can have their capital appreciate over the long-term by transferring funds into the currency that will appreciate the best in the long-term. The client receives the income from their trading activities, plus the appreciation of their capital. Other forex firms have this capability with Oanda being the smoothest.

We also particularly didn’t like FXCM’s news and charting platforms – two klunky programs that need a LOT of polishing.

Lastly, we found that mini positions do not accumulate interest during rollover. This is only a minor issue, but other forex brokers pay interest regardless of what the position is, one notable forex broker that pays rollover interest on mini positions is CMS.

In summary then…

FXCM PROS:

• One of the largest forex brokerage firms in the world (has partnered with the Refco Group)
• Excellent platform, easy to use
• 100:1 leverage
• Good 24/7 Support
• 3 pip spreads on some majors

FXCM CONS:

• FXCM’s entry order restrictions
• Charting and news packages could be better
• No rollover interest received on mini positions
• Platform fairly basic and featureless

Our Rating:

Unfortunately there really isn’t a whole lot to FXCM, which makes rating it a difficulty. I give them credit for their platform’s ease of use, but then I take away that credit because of their klunky news and charting plug-ins. With all that is left it seems that FXCM offers nothing different to what others offer and in most cases LESS or WORSE than what others offer, therefore, we decided to give FXCM a score of…

If you have a similar or differing view, click on the comments link below and add your opinion about this broker.

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