Hi, I have hard so many horror stories about FX trading. Brokers ripping clients off, unrgulated, retail guy can't make legit. money etc. Is it a legit method to trade or are the stories correct? Thank you
Yes.....and unfortunately yes. Stay away from unregulated "bucket shops" and you'll avoid most of the horror.
I believe so, when choosing a broker â search for the most reputable one or a list of the top 5. And as mentioned â donât trust unregulated cowboys.
There are a few trustworthy FX brokers. One of them is Oanda. Although I suspect my stops were taken out a couple of times in a fishy way, but in overall it's good. Once there was a fat-finger incident during NFP Friday, where they usually rise GBP/USD spread to 20 pips, someone messed up and made it 200 pips and all hell broke lose. But then I wrote to the support and asked to refund day's losses due to their screw up and they refunded it without asking any questions. And I know a few other people who got their money back too.
There are 2 types of brokers in retail fx: ECN's and dealing desks: ECN's are considered "straight-thru-processing" in that the prices you see are the prices being quoted in the open market, similar to your stock quotes. Your trades are executed with people from a variety of fx brokers or even banks and hedgies. It's more complicated than that, but that's the simple explanation. This type of broker makes his money on the commission he charges you. Spread prices vary depending on the bid/ask action. A dealing desk broker off-sets your trades with other orders on his book. Sometimes he goes out into the "interbank market" to cover a trade, but rarely. He is always taking the other side of your trades. he makes his commission on the spread between the bid and ask on the prices and these spreads tend to be constant. These are simplistic explanations of the 2 types of brokers. Most of the horror stories you hear are about people getting hosed using these dealing desk brokers. There are a few reputable ones, including Oanda and GFT. Most are scum. The preferred model for most traders is the ECN model as that more closely represents true market prices and is more similar to other types of assets trading. The only problem is there are a limited number of these type of brokers. The reason why fx trading so shifty is because unlike other assets, there is no central clearing exchange that all trades go thru, like the CME or NYSE. It is basically agreements between trading partners in which the agreements can change from partner to partner. There are many resources on the web to help steer you if you want to trade it. And yes, there are plenty of retail guys who make money trading it. There are just many, many more who lose.
One interesting thing I noticed about Forex brokers in general is that they allow you to deposit funds via Credit/Debit cards, something I have never seen in a stocks/futures broker. This one "option" can potentially get people addicted and max out their credit cards.
I just read a book about a guy who says his daily goal is to make 5%..PER DAY. Hmmm......not saying you can't do that sometimes but consistently? If you use proper money management. Keeps the losses small. Is it a good way to make money? (obviously you need to know how to trade)