Every forex broker is evil?!

Discussion in 'Forex Brokers' started by WmWaster, Apr 1, 2006.

  1. Hi. I'm just new to (cash) Forex trading.
    After some information gathering, I have a feeling every forex broker is evil since we have conflicting interests. They trade against us. They wish us to lose. They make many fabrications in order to deceive you, and so on.

    Now I'm going to list all the reasons why the claim is valid.

    False Advertising & Fabrications

    - "No commissions" is plainly deceiving
    Brokers deceive you about there being no commissions. $30 minimum/round turn (called the spread) is in reality a commission that eats up your capital at an astonishing rate. Even winning traders lose money and end up with negative results because of this outlandish overhead. Trading futures, you should never have to pay a broker more than $10/round turn, and usually quite a bit less than that.

    - The truth about guaranteed fills
    True but¡K 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.

    Defraud of your money

    - 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 of being ripped off for a total of 10 pips.

    - 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. This is one of their biggest and boldest fabrications. The truth is there is far more stop running in forex than in futures, and possibly as much stop running as in the stock market. I have friends who work in forex as well as many traders who of necessity have to trade forex. One of my students is a market maker in forex. These are people who should know, but in case you don't want to believe me or them, simple observation of forex trading will reveal the vast amount of stop running that takes place there. Who is it that runs the stops? Why it is your friendly 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. The fact that it is true is just another proof that when you trade forex you are trading at a bucket shop. 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 are regularly beating the socks off the broker, he will ban you from trading at his firm.

    Potential Danger about Forex Brokerage Firms

    - Unregulated
    Forex may sound like an exchange but it isn't. It exists entirely in cyberspace with every broker and every bank having different prices for any particular currency. There is little or no regulation, even for brokers who register with the CFTC and the NFA. Forex brokers do not have to mark to market each day as do futures brokers. If your forex broker files for bankruptcy or absconds with your money you have zero recourse.

    - No guarantee
    If a forex broker does go out of business, you could lose all your money. There are no guarantees and no one standing behind it. Futures brokers are required to mark to market at the end of every session every day. They have to put up cash to cover every open trade on their books. Futures brokers have gone broke, but no futures customer has ever lost one cent of the money in his trading account because of a failed broker. Nor have they had to wait for their money. It is immediately available.

    Forex futures is a wise choice

    You can get exactly the same action in the Euro forex futures as you get in the "Euro" cash forex. Commissions are as low as one tenth per round turn depending on volume, through a regulated broker, trading electronically at an exchange where you know the true price of the currency. All the problems/risks above don't exist in forex futures.

    But when to trade cash forex?

    We do not advocate forex trading unless you have a particular reason:

    Special needs on time
    You may wish to trade forex if, for some reasons, you need to trade during the middle of the night (U.S. Central Time), but if you are able to trade during U.S. market hours (7:20am-2:00pm U.S. Central Time) you are much better off trading currencies in the Chicago currency futures markets.

    Special needs on currency pairs
    You need trade cash forex if you have a specific need to trade in currency pairs that do not involve the U.S. dollar.

    Another reason is liquidity of some thinly-traded U.S. dollor currency pairs. While it is true that total cash forex volume is greater than in the futures, futures' volume at the exchange is greater than the volume at your broker for the most popularly traded currencies. The only place where the liquidity differential matters is in currencies like the Mexican peso, the Brazilian real, and somebody's drachma. Those thinly traded currencies may be more liquid in forex. But if you trade anything but the few most liquid and popular currencies, you are going to be paying at least 5 pips, and often more. Unless you have a particular commercial need to deal in Polish zlotys, Indian rupees, or some other thinly traded currency, you don't need forex.

    Why not to trade (cash) forex?

    Blatant Stop Running by Fx Solutions

    The truth about FXCM
  2. If you have any idea or comment, please feel free to leave your message. :D
  3. All lies.

    Another MoneyTec slimeball spammer.

  4. Moe27


    i don't know about you man but im making damn good money trading forex yes some broker do the thing you say thats why you have to pick a broker who is a little honest.
  5. First all the information above is not from me, but rather from the reference sector. Personally I add nothing but organization.

    Second I post this because I'm in doubt whether the above claims are true, so do the complaints. They sound like real.

    As I mentioned in my first post, I'm new to (spot) forex trading, I need some advice from others.
  6. Dear Exchanges,
    All lies?!
    What a hasty conclusion.
    One misinformation does not falsify all of them. :p
    I think you should re-examine your comments, or I'm very glad to prove there MUST be at least one which is correct. :D
  7. no but there's more than 'one' misinformation / misinformed generalization in your laundry list pal, and there is already more than enough of that sort of generic bullshit flying around to try and scare people off this or that... honestly if you can be scared so easily by such stuff, might as well stay away from the markets, regulated or not... having said that, it shld be pretty obvious that regulated markets offer more security... only problem is, at true beginner level, its far easier to trade spot fx than CME eFX futures... and dont ask why, just try live trading both and come back to the board to report... have fun!
  8. Moe27


    its plain and clear if you believe in what you say then don't trade forex period. don't try to scare the rest of us because im doing good trading forex and wouldn't trade nothing else.
  9. I have made more money in Forex than I have in the regulated markets of Equities, Options and Futures combined...

    Currencies and their associated volumes make them the best instruments to trade on earth IMHO...

    but our thread authors post is still true....I just was extremely fortunate to find the right dealer/marketmaker from the get-go. This usually is not true for my other choices in life.

    life is pain, can you handle the truth? (said in Jack Nicholsons voice)

    Michael B.
  10. It all gets tired after a while. I was one of the first, maybe even the first, to start calling forex brokers bucketshops- here and on trade2win- over 2 years ago. And did some posts comparing futures with forex, recommending most traders go with futures. And I blew up FXCM several times for putting me on manual excution.

    But I still trade forex (plus futures). The brokers have improved alot, the spreads are tighter and IMO most newbies are better off in forex and trading mini accounts than risking bigger amounts. Getting obessed about relatively small pip savings is actually obscuring the fact that most traders lose even if the spread and commission were zero. If you are worried about 'stop hunting' then do what I do and open an account with two brokers(I have 5). Then you can enter a trade at one and put your stop in on the other (if you are really paranoid). Personally I have found that unneccesary over the last 6 months.

    BTW, my poker account is pretty large and I pay hundreds of dollars a month in 'commission' to partypoker (who are barely legal and are stationed 'offshore').
    #10     Apr 1, 2006