What to Trade
Before I get back into work on building a trading system, I need to explore some of my feelings the past few days regarding a decision of what markets/instruments to trade.
My initial ambition was to trade retail Forex. I also wanted to develop a system which could eventually be programmed and automated. MetaTrader 4 was going to be the platform on which I would program and trade. In doing research on MT4 for system automation, I discovered that the broker I wanted to use OANDA, does not support MT4 as a platform, but rather charges a hefty fee for access to their programming API for automated system development. So doing further research, I discovered a program called FXSpyder that lets you automate a system that would work with OANDA to make trades. The problem there is that FXSpyder charges a hefty fee to trade with OANDA. FXSpyder also supports FXCM to automate trades and that is free. Free is good, except that once I did reviews of FXCM, I found a lot of complaints about stop hunting, bad slippage, among other negatives. To be fair, I've read a lot of negative reviews about OANDA as well, but in the brief time I attempted to trade previously, I had no problems.
There are other brokers out there who support MT4 as a trading platform and don't have fees related to it, but I was really trying to avoid opening another account somewhere. I didn't want to go through opening another account and passing my personal information yet again out into the ether of the Internet. Plus, in further research I've learned more about just what retail Forex trading with a broker really is.
When you trade with a Forex broker, you are not interacting with an entire network of traders. Because there is no central clearing for retail Forex, there is no absolutely correct price for currency. Each broker gets feeds from banks and those become the prices, which won't always reflect what the broker is actually quoting to you. Brokers claim there is no commission and that they make their money through the spread, but really they can inflate the price they quote to you above and beyond what they get on their feeds from the banks. As a result there really is no transparent price when dealing with brokers.
In addition, when you trade with a broker, they are not matching your order with a buyer/seller on the other side. The broker itself is taking the other side of your trade, so they actually have an incentive to see you lose money. Your loss is their gain, hence the stop hunting, ridiculous widening of spreads during market volatility, or the delay in getting your orders through, etc. No wonder there are complaints about almost every Forex broker!
Initially I thought maybe these were disgruntled, losing traders attempting to place blame for their mistakes. However, the volume of grievances and their similarity give me pause. There must be some truth to this; would this many people complain otherwise?
There are people who make money trading retail Forex, so I guess the brokers can't be completely crooked. But as a rookie trader, do I really want to start out with the possible handicap of a less than scrupulous broker? Of course not.
So if all or most retail Forex brokers are potentially cheating me, what should I do?
My initial ambition was to trade retail Forex. I also wanted to develop a system which could eventually be programmed and automated. MetaTrader 4 was going to be the platform on which I would program and trade. In doing research on MT4 for system automation, I discovered that the broker I wanted to use OANDA, does not support MT4 as a platform, but rather charges a hefty fee for access to their programming API for automated system development. So doing further research, I discovered a program called FXSpyder that lets you automate a system that would work with OANDA to make trades. The problem there is that FXSpyder charges a hefty fee to trade with OANDA. FXSpyder also supports FXCM to automate trades and that is free. Free is good, except that once I did reviews of FXCM, I found a lot of complaints about stop hunting, bad slippage, among other negatives. To be fair, I've read a lot of negative reviews about OANDA as well, but in the brief time I attempted to trade previously, I had no problems.
There are other brokers out there who support MT4 as a trading platform and don't have fees related to it, but I was really trying to avoid opening another account somewhere. I didn't want to go through opening another account and passing my personal information yet again out into the ether of the Internet. Plus, in further research I've learned more about just what retail Forex trading with a broker really is.
When you trade with a Forex broker, you are not interacting with an entire network of traders. Because there is no central clearing for retail Forex, there is no absolutely correct price for currency. Each broker gets feeds from banks and those become the prices, which won't always reflect what the broker is actually quoting to you. Brokers claim there is no commission and that they make their money through the spread, but really they can inflate the price they quote to you above and beyond what they get on their feeds from the banks. As a result there really is no transparent price when dealing with brokers.
In addition, when you trade with a broker, they are not matching your order with a buyer/seller on the other side. The broker itself is taking the other side of your trade, so they actually have an incentive to see you lose money. Your loss is their gain, hence the stop hunting, ridiculous widening of spreads during market volatility, or the delay in getting your orders through, etc. No wonder there are complaints about almost every Forex broker!
Initially I thought maybe these were disgruntled, losing traders attempting to place blame for their mistakes. However, the volume of grievances and their similarity give me pause. There must be some truth to this; would this many people complain otherwise?
There are people who make money trading retail Forex, so I guess the brokers can't be completely crooked. But as a rookie trader, do I really want to start out with the possible handicap of a less than scrupulous broker? Of course not.
So if all or most retail Forex brokers are potentially cheating me, what should I do?
posted by Young Pip at 1:43 PM
1 Comments:
A professional forex broker has a strong work ethics and is knowledgeable in the forex business. Make a background check before hiring to avoid costs that may harm your investments.
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