Brokers

All brokers have problems and none are really fantastic. The 'Stay Away From Brokers'  are the ones which hunt stops or hold money for months or widen spreads on news releases. You will need to make your own choice on a broker as we can't  recommend any because any one of them can change...for the worse! The list may change in the future as any new legislation that comes into play may alter things. Also brokers tend to get worse the longer they're in business. They tend to be better than their rivals...at first! Then once they have clients, they then start all the usual stop hunting, platform freezing and spread widening tricks. Once this starts to happen to you, then just close your account and look for another broker preferably a new starting up one. Brokers like to let a new account win without engaging in the games and tricks....but these games and tricks start about the time a trader starts to make money in his account. As a trader becomes more confident, he'll inevitably start increasing his margin, and when that happens, the trader may suddenly find that his account has been switched from electronic to manual execution. And that's when the fun and games begin - Stop hunting, slow responses, poor fills, lack of respect for stop and limit orders, frozen platforms, disconnects, even outright blockage of IP’s, etc. start to plague the bewildered trader! It's also called “trading directly against the trader”. The biggest culprits in the Forex brokerage world are the dealing desks....but how to find an honest dealing or non-dealing desk for the small trader can be a major problem. At the present time the Spread Betting companies in the UK are not clued in to let's say certain tactics that a trader can use at highly volatile times of the day. Enough said I think!

One of the things you should know is that when you’re trading Forex, there is NO centralized pricing. For example if you have two traders sitting side by side and they’re trading the same entry and exit points, it’s conceivable that they’re going to get different results on the very same trade.

This reason for this is because they’re trading with different brokers, who invariable have different software platforms and different ‘price motives’ within the price shown on screen.

Another thing that new Forex traders think is that there is no commission. However as far as you and I are concerned, the spread is the commission. This spread can add up to a sizable amount if you are in and out of trades all day.

When you first take that trade, you’re already down the level of that spread, so you really need to trade a method which takes that into account.

Other things to consider are that you can actually trade currencies in the Futures market. For example the GBP has the symbol BP followed by the month and the year. The moves are more or less identical. The advantage is the fact that the commissions are usually quite a bit lower than the spreads on some broker platforms. So it’s worth considering as trading methods can be used exactly the same in the Future’s currency market as any other. All major currencies can be traded.

However the Futures market is traded for about seven hours a day, where as the Forex is a 24 hour market. Although there is no way anybody can trade a market for 24 hours. This is simply not possible. Neither is it possible to simply place entry orders and walk away from the trade on some kind of automated trading. This will definitely not work in Forex. One of the reasons is that your Stops will be hunted down by your broker and others. Leaving Stops in the Forex market for any prolonged length of time is definitely not a good tactic. You’ll be eaten up and spat out!

Also there seems to be a misconception that you’re always guaranteed to be filled at the price you want. And the market never slips against you, you just click your mouse and you are in at the market no matter what the market conditions are, since everything is so electronic.

The fact is that Forex brokers all have trading desks, and they’re there so that they can hedge your position and make money off of your trade.

So, you may literally be getting in but the Inter Bank might be trading five to ten pips higher than the price you just bought into, but your broker is keeping the price artificially down. The exact opposite could also be happening

When you trade with different brokers, you’re going to find a lot of variance in this area. Some brokers are good for short moves (less than 1 minute) and others for the longer moves.

You need to really very choosy on how, where and when you trade as some brokers will lock you out, especially at certain times.

If you make a market order in the Futures market, you get in at the market price, it’s not really a problem. But in Forex you can get locked out, especially in a fast moving market.

Therefore if the market is moving fast, you may find that you are not able to get out of your current position or you’re not able to get in on a position. Therefore you must way up which broker to use very carefully.

Some brokers cannot handle sudden volatile movements in the market. They suddenly widen the spreads, mess with price, their platforms may freeze or they’ll shut down entirely and blame it on the bandwidth. They’ll take advantage and fill market orders and stop loss orders at horrendously bad rates and pocket the money!

Why do they exaggerate the prices during volatile periods? It allows them to stop everyone out at the exorbitant price. The only other thing that can be done is to wait until the volatile period is over and get in when all the other traders have been stopped out as that’s when the price reverts back to normal.

Therefore if your broker widens the price too much during volatile periods, then don’t trade with that broker during that time. If most of the time you get good spreads and fills then stick with them but use a different broker for the volatile periods.

The situation was far worse a few years ago. So think yourself lucky.

But things are changing and for the better. The CME, the Chicago Mercantile Exchange, is going to launch a centralized pricing platform towards the end of the year

Therefore this is a great time start considering these markets for that very reason, a lot of the things that were happening one or two years ago will start to go away.

To Sum Up

No commissions is plainly deceiving
$30 minimum/round turn (called the spread) is in reality a commission. Trading futures, you should never have to pay a broker more than $10/round turn, and it’s usually quite a bit less than that.

The truth about guaranteed fills
The only way a broker can guarantee fills is for the broker to become the buyer or seller of last resort. That means the broker is running a bucket shop. All Forex brokers are the buyer and seller of last resort.

Lying about the volume
Brokers do not tell the truth about volume. They show the volume for all Forex trading, which doesn't even come close to the volume they truly have at their own brokerage, which is where you are trading. Volume in currency futures is considerably higher than the volume traded at any single Forex broker, often greater by a factor of ten.

Leaning
Brokers say they are charging you a 3 pip spread to trade the popular currency pairs. But in reality a broker may be making as much or more than 10 pips on your trades. He does this by skewing prices. Since you are not trading at an exchange, the broker can feed you any price he wants to feed you. He can buy at the bank for perhaps 7 pips less than he sells to you. He then charges you 3 pips for the privilege.

Skewing price quotation
What is the true price? A Forex broker can only give you the price of a currency as quoted to him by the bank through which he trades. Banks have differing prices for a currency. You never know what the real price is because there is no central exchange through which all prices flow. Besides not knowing the true price from the bank, you can also be deceived by "leaning" or "skewing" of the real price at the bank. Forex brokers commonly lean the prices.

Immoral Stop Running/Hunting
You are told by Forex brokers that there is little or no stop running. The truth is there is far more stop running in Forex than in futures, and possibly more than in the stock market.

Simple observation of Forex trading will reveal the vast amount of stop running that takes place there. Who is it that runs the stops? It’s your Forex broker. The broker has a vested interest in seeing to it that your orders are filled. Stop running is nothing more than order filling. The broker sees to it that everybody's order gets filled.

Wipe you out by "false" spike
Sometimes, there's very quick spike in candlestick on a broker's chart, but there is nothing happening on the others' chart. A stop-loss is triggered simply due to that suspicious spike.

Ban you if you can win their money
Probably you have heard that if you are winning regularly in Forex, you may be barred from trading. Is this true? Yes it is. In the book, "Reminiscences of a Stock Operator," we are told that Jesse Livermore was banned from trading at certain stock brokers because they couldn't stand him beating the house.

The same thing is true with many Forex brokers. Since they are the ones guaranteeing you a fill, they are in effect the buyer and seller of last resort. The truth is that most Forex brokers have precious little liquidity at their firms. In order to give you the impression that there is liquidity, it is the broker who gives you your fill. It is the broker who does the stop running that supposedly doesn't exist in Forex. But if you're regularly beating the socks off the broker, he will ban you from trading at his firm. Or at the very least freeze you out of the trading platform and generally make life difficult for you.

ECN - An Alternative

This is a brief overview of what an ECN is...

COESfx or Currency Order Execution System, In 2002, set out to level the Forex playing field by creating a pure ECN, (Electronic Currency Network), that enables retail and institutional Traders of Foreign Exchange to trade without the intervention of a trading desk.

Until recently, access to the forex market was only available through an intermediary platform. COESfx Level 1™ Trading Platform allows all traders, including banks, institutions, hedge funds, and retail traders to place and execute orders directly online, making it one of the most efficient and unbiased trading systems in the world.

Pricing on our system is derived directly from a number of partners on our network such as banks, Futures Commission Merchants, (FCM's), Introducing Brokers, (IB'S), fund managers, institutions and every retail participant on our ECN. The COESfx Level 1™ Trading Platform provides traders with access to best-bid/best-offer quotes directly from price providers and other traders. Trading with the COESfx Level 1™ Trading Platform allows participants the advantage of a fully compliant non-matching system.

Forex fraud

Most Forex fraud and commodity fraud is committed by either firms located in South Florida (Boca Raton was voted by CNBC the telemarketing fraud capital of the world in 2000), Southern California or outside the United States\. Russia is currently a major source of investment fraud. Never make a check or bank wire payable to ANYONE other that a FCM registered with the NFA. In the majority of cases Forex fraud is perpetrated by firms located in the United States and the principals and brokers of the firm and were at one time registered with the National Futures Association (800) 621-3570 and have had their licenses revoked.

There is a lot of fraud from boiler rooms that are telling there clients to make the check payable to a offshore FCM or in many cases a Bahamas FCM. THERE ARE NO BAHAMIAN FCM's that I am aware of PERIOD, with the exception of major World Banks. The Bahamas are the country of choice for fraud and to steal your money because the Bahamas are a half hour from South Florida (Miami, Fort Lauderdale and West Palm Beach) and one and one half hours by private boat. 100% of the money you invest in Forex in the Bahamas will be stolen and will NEVER be placed into ANY trade. If you have been victimized in this manner of fraud or contacted to invest in Forex in the Bahamas call the FBI in Miami at 305-944-9101.

Please keep in mind that most of the law enforcement agencies and regulatory agencies are fully aware of who is perpetrating investment and Forex fraud and where they are located. Due to the great burden and lack of funding placed on Law Enforcement and the Regulatory Agencies action is only taken when there is pressure from the public. Only by contacting EVERYONE that you can will get results. The paperwork you signed when opening your account means nothing in a Court of Law when there is fraud involved on the part of the broker.

In recent years there has been a sharp rise in commodity, foreign currency - Forex trading fraud and scams. Consumers should be alert to investment fraud, scams and companies that sell Forex currencies and commodity brokers based on sales pitches claiming that customers can make a lot of money with little risk. Sales solicitations appearing in newspapers, telemarketing, radio or television promotions, or attractive Internet websites, touting high-return, low-risk investment opportunities in foreign currency trading more often than not are fraud or a scam. If it sounds to good to be true it probably is.

The United States Commodity Futures Trading Commission (CFTC) is the federal agency that regulates the trading of Forex currency, commodity futures and options contracts in the United States and takes action against firms suspected of illegally or fraudulently selling Forex currency, commodity futures and options. The CFTC has jurisdiction to investigate and prosecute Forex currency fraud and scams and commodity fraud and scams occurring in its registered Forex and commodity firms and their affiliates. Off-exchange trading of Forex, foreign currency futures and options contracts with retail customers by a counterparty that is not a regulated financial entity as set forth in the CFMA is unlawful and may be a fraud or scam.