Discussion in 'Forex Brokers' started by T-Bone Trader, May 25, 2009.
Anyone have any trouble with getting withdrawls from these guys?
The micro accounts are the best way to learn FX, you only need a few hundred to get started instead of a few thousand.
you shouldn't have a problem withdrawing from them...it's the brokers overseas that you have to worry about.
why is there so much hate for micro fx accounts? i learned that you should only be trading with disposable income, in which case many people only have a few hundred or thousand to start with. opening up an account with bigger lot sizes, with that kind of money, is just stupid (one bad trade and your done).
My bad -- I mean't regular FXCM -- not FXCM Micro -- I deposited more cash last week to bring it to a sizeable trading account
Micro accounts aren't hedged so the brokers are profiting from failure of these accounts.
I'm sorry - could you explain that in finer detail? I don't quite understand what you're implying?
Yes, same here. Did not understand.
By hedging he is referring to the fact that, in the micro sized accounts, FXCM states that they will take the other side of your trade and may or may not "offset" or pass through your trade to an actual bank. So if they don't offset your trade, they win when you lose and they lose when you win. And because most small traders lose, this strategy can produce a nice profit stream for them.
Yes, I withdrawal money via check from a US based standard FXCM account every month. I have never had a problem.
Hedging means to pass a customer's order onto the real market. Bucketshops such as FXCM act as a trading counter party to their customers. If 60% of their customers are short the euro for example, the company will short the euro on the real spot fx market to hedge the risk. This is to protect the company from losing money (or even becoming insolvent) if there is a drop in the value of the euro.
If the euro rises, the company will lose money from such a spot fx transaction, however all will be well since it's customers accounts will decline in value as well. And vise versa.
Now it is debatable about exactly how much hedging goes on. Some companies do not hedge at all, so if all of the sudden all of their customers became profitable they would quickly become insolvent. However I doubt that keeps the CEOs of those firms up at night.
The brokerages count on beginners with little knowledge of fx trading to open micro accounts and lose money. Every dollar lost is of course their gain. There is absolutely no hedging going on whatsoever. You are at odds with your brokerage, if you make money they lose, and vise versa.
All of these micro accounts can be funded with a credit card. As a rule of thumb if you can fund a brokerage account with a credit card stay away.
So which fx firms would you recommend then? Thanks in advance!
Also, you mention that these firms can become *insolvent* by not hedging...don't these firms have NFA-requirements or something like that to prevent that? Sorry for the weird questions - your response is freaking me out a little bit about FX.....so I could be the best fx trader...and if my firm goes belly-up - I still won't have a cent??? Even if my fx trading account is something like $85,000???
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