OANDA = OFF-exchange broker (MM) Their risk disclosure says it all: look!

Discussion in 'Forex Brokers' started by aForexMinute, Jan 26, 2010.

  1. I spent the last 2 weeks researching brokers - trying to find which ones are real or not. What I found is that many of the big names
    mentioned as being real on this site are actually off exchange brokers. Off exchange broker means: you are trading on an on line video game that they wrote, and your playing against the programmer who has the ability to adjust the program as you play.

    Doesn't matter HOW big a name they are- ALL OFF EXCHANGE brokers are running their own private online video game.

    OANDA'S RISK STATEMENT- Copied off their web site 10 minutes ago. Read all BOLD text areas.

    I will be posting the risk statement for all the big names. It's public info- just most people don't bother to read it.

    IMPORTANT -- READ CAREFULLY: OANDA believes that its customers should be aware of the
    risks involved in entering over-the-counter contracts for foreign currency (“foreign currency
    contracts”). The following is a brief summary of certain considerations that you should take into
    account when deciding whether to trade in foreign currency contracts. This Risk Disclosure
    Statement (the “Statement”) is not meant to be all-inclusive; rather it is intended to highlight certain
    more significant factors and special risks related to foreign currency contracts.
    In order to open and operate an FXTrade account with OANDA Corporation, you must indicate
    you have read and understood this Statement. Please read this Statement in its entirety. You must
    sign this Statement below in order to trade foreign currency contracts with OANDA.

    When you enter into a foreign currency contract with OANDA, you will be entering into a privately
    negotiated contract with OANDA
    , as principal. OANDA may, in turn, enter into “back-to-back”
    transactions with others. OANDA includes its mark-up in the price it quotes to you. These foreign currency
    contracts are not executed on an exchange and are not cleared on a central clearing organization. They
    obligations of OANDA and you will not be afforded the regulatory and financial protections offered by
    exchange-traded contracts
    . Both you and OANDA are obliged to perform their respective obligations under
    each transaction in accordance with its terms. The terms of each foreign currency contract are set out in
    OANDA’s Customer Agreement, which applies to every transaction you enter into with OANDA.

    In entering into foreign currency transactions you should understand that OANDA is acting solely in the
    capacity of an arm’s length contractual counterparty to you
    in connection with the transaction and not in the
    capacity of your financial advisor or fiduciary. Accordingly, you should not regard any transaction
    proposal, suggested hedging strategies or other written materials or oral communications from OANDA
    investment recommendations or advice or as expressing OANDA’s views as to whether a particular
    transaction is suitable for you or meets your financial objectives. Moreover, any market or quote that
    OANDA makes for you may be based solely on markets or quotes that are made or quoted to OANDA by
    the counterparties with which it does business. Such quotes or markets may not represent the best quotes or
    markets available to you or OANDA from other sources and OANDA undertakes no obligation to obtain
    competitive quotes
    or markets from other counterparties.

    This brief Statement does not disclose all of the risks and other significant aspects of trading in foreign
    currency contracts. In light of the risks, you should trade in foreign currency contracts only if you
    understand the contracts (and contractual relationships) into which you are entering and the extent of your
    exposure to risk. Trading in foreign currency contracts is not suitable for many members of the public. You
    should consider whether trading is appropriate for you in light of your experience, objectives, financial
    resources and other relevant circumstances. Most importantly, do not invest money that you are not in a
    position to lose.

    Transactions in foreign currency contracts carry a high degree of risk. The amount of initial margin is small
    relative to the value of the foreign currency contracts contract so that transactions are “leveraged” or
    “geared”. A small market movement will have a proportionally larger impact on your position. This may
    work against you as well as for you. The possibility exists that you could sustain a total loss of initial
    margin funds and any additional deposits made to maintain your position.

    OANDA’s trading system is designed to automatically liquidate all open positions if your margin deposit is
    in jeopardy
    so that you cannot lose more than the funds you have on deposit in your trading account. To
    limit your losses OANDA encourages you to employ such risk-reducing strategies as “stop-loss” or “stop-
    limit” orders, but you should be aware that market conditions may make it impossible to close out your
    order at the level specified.

    There are risks associated with utilizing an Internet-based trade execution software application including,
    but not limited to, the failure of hardware and software. While OANDA maintains back up systems and
    contingency plans to minimize the possibility of system failure, OANDA does not control signal power,
    reception, routing via the Internet, configuration of your equipment or the reliability of your connection to
    the Internet. The result of any failure of the foregoing may be that your order is either not executed
    according to your instructions, or is not executed at all.

    Your trading account is not insured under any state or Federal insurance program or by any other entity.
    You should therefore familiarize yourself with the protections accorded money or other property you
    deposit for foreign currency contracts. The extent to which you may recover your money or property may
    be governed by specific legislation or trading rules. Under the U.S. Bankruptcy Code, your funds may not
    receive the same protections as funds used to margin or guarantee exchange-traded futures and options
    contracts, which receive a priority in bankruptcy. Since that same priority has not been given to funds used
    for off-exchange forex trading, in the unlikely event OANDA were to become insolvent and you have a
    claim for amounts deposited or profits earned on transactions with OANDA, your claim may not receive a
    priority. Without a priority, you are a general creditor and your claim will be paid, along with the claims of
    other general creditors, from any monies still available after priority claims are paid. Even customer funds
    that OANDA keeps separate from its own operating funds may not be safe from the claims of other general
    and priority creditors. In the event OANDA should become insolvent or file for protection under the bankruptcy laws, it is possible that you would lose the entire amount in your Margin Account
  2. pma


    Only currency futures have true transperancy.Hopefully others will read your post and get something out of it.
  3. Gcapman


    All trading products have a market maker

    With futures, you have computer trading programs employed by hedge funds to do the exact same thing as the fx brokers

    If you are good with charts, keep your risk low and enter only high probability set-ups, there is no reason why you can not make money with a bucketshop
  4. Shilling for a schilling?
  5. mikasa


    your FX broker has to be ECN like IB or MB trading

    you can have fair FX trading but you have to have a real broker and not a bucketshop

    there is no need to switch to FX futures if you have an ECN broker

    there is a guy on ET called CableTrader, he traded with Oanda

    poor guy

    he defended Oanda too on so many occasions it ain't funny
  6. I was just surprised to find out that so many of the brokers that people said were ECN really aren't. After reading all these contracts I can say with confidence:

    Only trade with an ECN broker.

    ALL others are no different than playing online poker.
    They control the platform- its not connected to anyone else.
    Its designed to make you loose. Consider the financial health report I posted a few days ago- Thats all the money they have- if you win- it draws down on that amount. They are required to have 1 million. Soon to be 10 million right? That would mean you could never make more than that one million because its all they got. They got 50,000 members all trying for a piece of that pie- not going to happen.

    I'll ask this- whats the most anyone has gotten ahead over time with an off exchange broker? Chances are you lost or maybe broke even.

    ACM, PFG, CMS, Capital Gain, Easy Forex ? these are all off forex brokers.

    With an ECN broker- I can easily make 50-60 trades with no losses. Can't do that on an off exchange.
  7. mikasa


    the government is going to use Bucketshops existence

    to destroy even ECN brokers, the real deals

    all just to boost CME FX futures

    its really sad when government sticks nose into capitalism to the point where they end up destroying capitalism

    truly sad
  8. Where do I send my money? I had no idea all I had to do was switch brokers to suddenly make 50-60 trades with no losses!

    Why didn't someone tell me this long ago?
  9. l2tradr


    That's nothing. With my broker, iamnoscammeriswear.com I can make 500-1000 trades with no loses. And when I lose is because I want to and got bored with winning.
  10. Wallet


    Before people trade they need to study up on how each particular market works, specially the spot currency markets. There is NO central clearing. Climbing down the ladder from the CB's, central banks you will find Tier I's II,s down to your MM/Broker bucket shops.

    Each has a role in the puzzle and each provide liquidity, the Big Boys on top call the shots and manage through the Tiers downward.

    Unless you have the bucks to trade directly inter bank, I doubt you will like the spreads, you will have to go through a broker, call it an ECN if you like, but all manage their book in a similar fashion, though shading and price manipulation. Which is needed basically because the more you go long the more they are short till positions can be offset or squared.

    To win you need to understand the nature of the game and how to use it to your advantage. It ain't found in any public info. You need to think and trade like the broker.
    #10     Jan 26, 2010