New Videos Thoroughly Document Why Traders Should Avoid Using Metatrader Like the Plague

My readers have known for some time that I'm not a big proponent of Metatrader, a forex trading platform that I have contended for some time was originally designed for the benefit of the forex dealer, not the trader. It's by far the most popular trading platform in the forex dealer community and for one very good reason. The plaform provides dealers the means to skew markets to their own advantage.

If there was any doubt about that, an insider has produced two videos showing exactly how the Metatrader platform can be used by dealers and brokers to trade against the unsophisticated trader. The producer of these videos has come up with another plug-in to circumvent the problem, but there is a far better solution folks. It's FxSpyder, an independently controlled, API driven platform that was introduced to the marketplace two years ago.

When traders use FxSpyder, facilitating dealers can't manipulate the market using pending take profit and stop loss orders because they don't have access to the trading platform let alone a plug-in designed to enable them to manipulate pending orders to their advantage.

FxSpyder's platform interfaces directly with the accommodating dealer's API and resides on the individual trader's computer. Stop loss and take profit orders, therefore, do not reside on the dealer's server where they can be used by dealers to leverage their trading positions.

Those who think I'm blowing smoke here might want to watch the following videos produced by Metatraderlibrary.com.

Video 1
Video 2

Once you've done that, I suggest you do two things.

1. Check out FxSpyder. It's the only trader controlled trading platform in existence and you don't need a silly "plug-in" to hide your stop loss and take profit orders. The platform was originally designed to do just that.

2. Visit Forexfactory's forum and get the moderators to reactivate the thread that originally brought the dealer plug-in issue to the attention of Metatrader users. The thread was deactivated some time ago.

Good luck.

A Must Read for Traders: The Black Swan

Regardless of the asset class traded, there are basically two types of traders - technical and fundamental - and neither group predicted the financial collapse, let alone its aftermath last Fall. The reason they didn't can be attributed to a shared lack of awareness. They failed to take into consideration a phenomenon Hassim refers to as "The Black Swan".

If you are a trader and aren't familiar with the concept of randomness and its affect on trading, you may very well find yourself suffering huge, unanticipated losses and it doesn't make any difference whether you're trading forex, stocks, bonds, or options.

Click on the black swan book cover in the right hand column to learn more. At 63 I'm not just a little over the hill, but there's little doubt this is the most enlightening book ever written about the inherent value of a conservative trading style.

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Fxspyder Puts an End to Targeted Stop Hunting

As most of my readers know, my blog and the NDD Forum have been inactive the past few months largely because I came to the conclusion several months ago that they had pretty much outlived their central purpose - to educate traders and help bring about much needed industry reform.

In the past year and a half we’ve witnessed a great deal of change. A number of forex dealers have moved to at lease claim that they offer non-dealing desk trading, reorders have been virtually eliminated though I’m not sure that’s really in the trader’s best interests, slippage has been reduced, the NFA is now monitoring pricing exceptions, and, of course, the industry has undergone much needed consolidation.

One problem, however, still haunts the retail trader – stop hunting – and until recently, I’d pretty much resigned myself to think that the problem was an insurmountable one. The good news is that it appears that soon that may no longer be the case.

Several months ago it was brought to my attention that historically traders hands have been tied when it comes to addressing that problem because as long as traders use the dealer’s resident trading platform, stop losses will forever be displayed on the dealer’s computer screen. Obviously, this puts the dealer at a distinct advantage because he can use that advanced knowledge to trade against you. After all is said and done, who can really compete if one of the rules of the game requires you to tell your opponent what you’re going to do before you do it?

So what is the solution? API Trading.

I believe the solution may well lie in the introduction and use of API trading platforms like FxSpyder, an independent trading platform specifically designed for traders, not brokers. The first platform of its type, it is certainly a step in the right direction. .

The concept is simple enough.

The trading platform itself is maintained on an independent server so stop loss orders are not revealed to the participating broker until the price the trader has specified has been reached. Masking the trader’s intentions and, thereby, depriving the broker advanced notice of pending orders, the platform goes a long way then in leveling the playing field. The broker obviously cannot target an individual trader’s stops for takeout because he cannot target what he cannot see.

If you're like me, you'll probably have a bizillion questions. A visit to Fxspyder's online helpdesk will answer most of them.

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Were ‘Learn Forex’ Fund Investors Blind or Just Stupid?

Not surprisingly, a federal judge finally got around to sentencing a forex scam artist to nine years in prison yesterday. In doing so he rejected the defendent's request for home detention so he could try to pay $11 million in restitution by speculating in the foreign currency market. If you aren’t aware of it, the defendant, Garland E. Burrell, Jr., was the brains behind Learn: Forex, Inc., an outfit that touted the notion that it’s easy for anyone to make millions betting on the fluctuating value of world currencies.

A scam in its own right, ‘Learn: Forex’ wasn’t why Burrel found himself sitting in the hot seat before the U.S. District Court. No, his downfall came as a result of a scam he perpetrated against 100 odd investors who subscribed to his services as a trader. Burrell took in $15 million, traded $2 million of that losing all but a few thousand dollars in the process.

What happened to the remaining $13 million, you ask? He apparently invested that a number of failing business ventures and converted the rest to personal use.

Just how successful was Ward as a trader/trading mentor? A finance professor hired by the Commodity Futures Trading Commission to analyze Ward's accounts concluded that he and the traders he hired lost $1.84 million of the $2 million they actually invested in the forex. Of those managed accounts, Ward managed two that over a three year period showed a profit of less than $1,000.

And is it any wonder? Ward ran his forex fund out of an office on West Monte Vista Avenue in Turlock, California, not exactly the center of the world's financial markets. Rumor has it traders there still have to rely on dial up. What's more, he had little or no formal financial training beyond a high school education and a brief stint as an estate planner. The bulk of his work experience was in the construction industry.

Frankly, I don’t feel sorry for the investors. Anyone who buys into the idea that he/she can turn $50,000 into a million in a matter of a few short years trading the forex obviously has eggs for brains. Reminds me of the idiot homeowners who bought into interest only mortgages in the US knowing full well that sooner or later they’d lose their homes because they’d never earn enough to make the fully amortized payment. Tough tooties!

In the end Ward's conviction should be a lesson to everyone. Trade the forex for fun. Trade it to make a modest but consistent profit. But don’t be silly enough to believe that it’s going to lead to an early and prosperous retirement.

Ain't going to happen.

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FXLQ Down, Almost Out, But Won't Say 'Uncle'

I can't help but wonder if the Commodity Futures Trading Commission (CFTC) will pursue the principals at FXLQ, a forex dealer that was put into receivership early this year, for fraud. I’m no lawyer, but in reading The Report on Temporary Receiver’s Activities, there certainly appears to be a case for fraud because it appears the principals repeatedly misrepresented the company’s financial condition in its required financial filings.

Whether you one of FXLQ's 3,100+ trader clients or not, the receiver's report makes fascinating reading because it paints a very dark and unattractive picture of Robert Gray, a forex insider whose shady business practices and dealings include a number of well known FDMs and FCMs.

A final decision regarding FXLQ's fate in the civil action taken by the CFTC, originally scheduled for March 31, 2008, apparently won't be rendered until June at the very earliest. In a late March court filing, the company's principals were given a 60 day extension to respond to the CFTC's complaints.

Stay tuned.

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Refco's Ex-President Found Guilty on All Charges

The jury is in.

While of little consequence to the thousands of traders bilked by the principals at Refco, all of their trader clients must be getting some solace from the knowledge that Tone Grant was finally convicted on all charges at the U.S. District Court in Manhattan this week. After months of testimony, it only took two days for the jury to return a verdict that found him guilty of conspiracy, securities fraud, wire fraud, bank fraud, and money laundering. His conviction comes just two months after former Refco Chief Executive Phillip Bennett and Robert C. Trosten, the company’s ex-chief financial officer, pleaded guilty to criminal charges stemming from Refco’s collapse in late 2005.

As most traders know, the charges stemmed from the trio’s collaborative effort to hide the broker’s true financial health form participating banks, auditors, and investors. Ten years in the making, the firm’s troubles included hundreds of millions of dollars in trading losses sustained by the broker and customers trading through its accounts.

The company filed for bankruptcy protection in October 2005 shortly after the company announced that it had “discovered” a $430 million debt to a private entity owned by none other than the then CEO, Phillip Bennett.

The general consensus appears to be that Grant who is to be sentenced on August 7 will likely to spend the rest of his natural life in prison.

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Divine Justice: What Goes Around, Comes Around

As conspiracy theories go, the one you’re about to read about could provide one of the screen writers I talk with on an irregular basis fodder for a real thriller. In this story a geek develops a fool proof and virtually undetectable way to skim profits from his clients. Whether you are a forex trader, knowledgeable programmer, or devotee of creative conspiracy theories, you’ve got to love the imagination that went into this.

I doubt there is a movie goer who has not seen at least one film glamorizing the inner workings of organized crime. One of those films came to mind during the course of a recent conversation with a self-proclaimed forex insider - a 40ish, ill shaven and shady character straight out of central casting that we’ll call Dimitri. The movie? “Casino” starring Robert DeNiro.

Why did recollections of that movie come to mind? What’s more, what has this got to do with foreign exchange trading? Here’s the long and short of it. Dimitri contends that the developer behind of one of the industry’s most popular trading platforms is actively involved in skimming dealer bank accounts.

The image that came to mind as he talked was that of a faceless “family member” walking past the casino cashier’s cage to the counting room where he fills a black suitcase with wads of money sitting in neat little stacks on a large table located in the center of the room. If Dimitri’s story is to be believed, couriers are no longer needed. Collections are done electronically.

So what’s the bottom line? Dimitri is convinced that one of the world’s most popular trading platforms was purposely designed to enable its developers the means to pick the pockets of their dealer clients. Having access to virtually every component of the transaction process, the developer is free to [and, if Dimitri is to be believed, actually does] manipulate pricing to pick the dealer’s pocket.

Imagine that - the suggestion that someone in this industry is manipulating pricing to make undisclosed profits. What is this world coming to?

I didn’t really catch on at first (I’d already had three beers and a plate of Hooter’s medium, breaded chicken wings - my contribution to the rapid extinction of human kind) but as the evening progressed, I began to get the picture and what a picture he paints.

A group of savvy software engineers, knowing that forex dealers really don’t have a clue when it comes to programming, develop a cutting edge foreign exchange trading platform that saves dealers the headache and expense of creating and managing platforms of their own design. Among other things, the package offers full service capabilities from order entry to the internal management of accounts and [most importantly] the delivery of pricing.

Imagine the implications here.

The developer sells and/or licenses the platform to scores of dealers. Having access to the entire process, the developer and his minions open multiple trading accounts with each and every one.

Now here’s the intrigue. Instead of opening positions accompanied by stop losses, the developer’s positions are accompanied by take profit orders. He spikes the dealer’s rates and collects artificially generated profits.

Got the picture? Classic example of skimming, wouldn’t you say?

Real or imagined, I asked how a dealer might go about protecting himself and, according to Dimitri, it is virtually impossible to document skimming activities using the program itself because, as he contends, it was purposefully designed to prevent that.

So what is a dealer to do? Apart from the obvious choice of using a different platform, the only recourse the dealer has is to close the accounts of those traders exhibiting one or more of the following characteristics and/or behaviors.

1. Any trader who opens a large account, makes a quick and sizable profit, and then either proceeds to quickly close the account or ceases to trade the account. The reasoning behind this, of course, is that few traders would close an account or cease to trade an account that shows a sizable profit over a short period of time.

2. Any trader who always enters take profit orders and seldom, if ever, stop loss orders.

3. Traders who have multiple accounts all of which are abnormally profitable.

4. Traders with IP addresses originating from the same geographic location as the developer.

5. Traders whose accounts seldom, if ever, show losses.

6. Consistently profitable traders whose trading habits don’t reflect some sort of recognizable trading strategy.

7. Accounts showing trades of short duration that show either consistent or inordinate profits.

Asked how he came to the conclusion that dealers using the software are just as susceptible to manipulation as traders, he responded. “I spent six months investigating suspicious trading activities with ‘XXX’ [dealer name withheld by request].

Real or imagined, you’ve got to admit that this is a great story.

To my screenwriter friends.

If you’re going to use this as the basis for your next spec, I can envision the movie beginning with an investigation of the deaths of a half dozen computer geeks who are found in a heavily wooded area south of Moscow. No doubt the fact that none of the bodies sport fingernails, eliminates the initial thought they were rubbed out by an underground collective dedicated to the pursuit of men who neglect to pay child support.

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FXCM Makes a Clever Attempt to Distance Itself from the Brotherhood of Market Makers but Fails Miserably

FXCM (Forex Capital Markets) on July 3, 2007 issued a press release to announce that 99% of all their clients are now trading with “No Dealing Desk” execution (not to be confused with non-dealing desk trading). I'm guessing the shift didn’t happen because traders necessarily wanted it, but because FXCM decided that it was in FXCM’s best interests to put everyone on it. Up until a few weeks ago the company had a disclosure that intimated as much saying that FXCM reserved the right to put anyone and everyone on it. Well, now it appears they've gone and done it.

According to FXCM’s spokesman, “The No Dealing Desk model eliminates the potential conflict of interest between broker and client” and goes on to say that that’s because “prices are provided by six of the world’s largest banks.”

Guess what. Most market makers (brokers) have multiple banks feeding them prices so how does this magically eliminate the potential conflict of interest? Well, it doesn’t. And the suggestion that "prices are provided by six of the world's largest banks" is total rubbish. Yes, FXCM may get quotes from six banks but the trader never sees them.

FXCM still has its thumb on the pricing scale, otherwise, they would offer an Electronic Communications Network (ECN) platform where traders could see for themselves the depth of the market and all that wonderful pricing they brag about. Instead, what the trader sees is what FXCM wants them to see - a single bid and ask price for each currency pair - which I seriously doubt is going to be at the best available price as the company's spokesman intimates.

If FXCM’s claim to offer best available pricing were legitimate, FXCM would undoubtedly post a verifiable guarantee on their site that traders will get the best quote from participating banks. They haven't done that and I'm guessing for good reason. If they did, not only would their business model collapse, they'd have to allow the NFA to verify the claim and that's a visit I'm sure they wouldn't want to invite.

FXCM’s spokesman goes on to say that the move to automated trading will lead to consistently lower spreads, claiming that “spreads have already decreased in 13 currency pairs since the introduction of No Dealing Desk execution.”

Give me a break. If FXCM were to lift its thumb from the pricing scale, traders would see spreads occasionally dropping to zero and that’s simply not going to happen because FXCM’s profits are in large measure imputed in the spreads they quote. The competition may, indeed, lead to lower spreads but I find it hard to believe the trader will ever see the best of them because it will deprive FXCM the opportunity to trade against the lower spreads themselves.

In the final analysis, FXCM’s move to “No Dealing Desk execution” is nothing more than a marketing ploy, a play off the non-dealing desk trading paradigm I’ve been writing about for almost a year now and I’m guessing that savvy traders aren’t going to buy into it any more than I do. Anyone who thinks their move to fully automated trading somehow changes anything, needs to think again. A frog by any name remains a frog.

FXCM’s spokesman closes with the following statement. “In effect, we have now ended our dealing desk trading system, thereby removing any possible conflict of interest. With many other forex brokers, a client’s losses might be linked to a broker’s gains. FXCM hopes others follow our example to put the client’s interest first.”

Makes ya kinda wonder what FXCM was doing before they changed into this cheap blue suit and tie, doesn’t it?

If you think I'm being unfair, feel free to read the text of the original press release. If you don't come away with the same feeling I did that the company is suggesting that traders will see the best price participating banks have to offer, feel free to drop me an email.

Update: It "appears" that someone at FXCM has taken exception to this post and in an apparent response has attempted to discredit their smaller competitors, suggesting that traders should abandon any FCM that doesn't show at least $5M in the bank. The discussion that ensued on The NDD Forum is most instructive. It's also interesting to note that the day after the source of fear campaign was traced to an IP address just 5.4 miles from FXCM's main office in Manhattan, someone flagged this blog hoping that Google would shut it down.

Desperate times, desperate measures?

Check their latest Alexa traffic stats. If you select the five year chart, you'll see that FXCM has been losing market share big time. Alexa ratings have to be taken with a grain of salt because they're derived only from those who use their tool bar, but in microcosm it sure looks like they're in trouble. Alexa has been discounted by many because at one time the stats could be easily manipulated but that's only on the positive side.

I am not suggesting here that FXCM is about to go out of business. What I am suggesting is that there are a lot of traders who are fed up with the games they play. The company's loss of market share started at the beginning of the year just after the NFA filed its second complaint about the company's promotional materials and practices. The first complaint resulted in a $110,000 fine. The second complaint, as serious as the first, has yet to be closed.

Automated trade execution doesn't mean the trader will get more competitive pricing. Just compare the spreads you see from FXCM to those offered by MBTrading and/or Oanda. FXCM could have 20 banks feeding them rates but as long as they have their thumb on the scale, the only market the trader will see is the one FXCM wants him to see and their spreads aren't the least bit competitive.

Hypothesis: The bulk of this post appeared before I stumbled on the Alexa charts which makes me think that they moved to automated execution because they can no longer afford to pay account reps to "manage" trader accounts. A step in the right direction but for all the wrong reasons.

Recommended Additional Reading Advantages and Disadvantages of Non-Dealing Desk Trading

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Think You've Been Trading the Forex? Think Again

"Forex traders” who “trade” the Forex through a dealing desk broker have no more access to the market than travelers who use the currency exchange counter at the airport to convert their country's currency to the currency of the country they are visiting or vice versa.

The currency dealer manning an exchange counter displays a set of exchange rates for various currency pairs to complement the undisclosed spreads he intends to take as profit. The Forex dealing desk broker operates in much the same manner when he trades his clients' orders against his own in-house, off-exchange account. Like the transactions between traveler and currency dealer, transactions between the dealing desk broker and his clients never make it to the interbank "trading floor" and the pricing offered is just as biased.

Now I doubt seriously if anyone using the services of a currency exchange dealer would characterize himself as a Forex trader. Afterall, he has the sense to recognize that he isn't trading the Forex, he's only trading currencies with a person standing behind a counter.

To my way of thinking, it's equally ludicrous for an individual to characterize himself as a Forex trader when in fact his orders never leave the hard drive in the computer sitting in the dealing desk broker's office. The only real difference between the two is that in the first instance you're dealing with a human being, in the second a computer. Of course, there's an even more important distinction - travelers haven't bought into an illusion.

If you want to trade the Forex, you really only have two options: become a Futures Commission Merchant (FCM) or start trading with a registered FCM that processes all of its clients trades through a non-dealing desk.

Recommended Additional Reading

The Latest

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Sharing An Advisory from an Experienced Forex Trader

I received an email today from an experienced trader who made me realize that a lot of what I’ve been writing about lately probably goes over the head of the prospective and/or inexperienced trader. I thought I’d share it in hopes that it will encourage you do to stick around a while.

Dear Phil,

A fellow trader sent me an email the other day talking about Forex non-dealing desk brokerage and cited an article that appeared on your blog. Well, I just spent the better part of two hours reading through your posts and was frankly blown away.

I’ve been trading for six years and I can tell you that the perspective you offer along with the research and reporting you’ve done is a real eye opener. Had your blog been in existence when I first started trading, I’m confident I would have approached the business far more cautiously. In the process I probably would have saved myself $10,000 in losses that probably were more attributable to broker malfeasance than my own ineptitude.

I do, however, have a recommendation and that is that you find a way to get your visitors to read through your blog’s archives, especially the earliest ones, because they really bring to light many of the dangers of Forex trading. I did that and found myself reading every entry. Your blog is not only informative, it’s intoxicating.

Keep up the good work.

Jason
Miami

Upon reflection, I have to admit that most of the posts I’ve written lately probably go over the heads of all but the most experienced traders. When I first started this blog, it was my intention to reach out to the prospective and inexperienced trader. Based on his email and a close examination of my server logs, it’s apparent to me that I have lost sight of that focus.

As a result, I hope you’ll take this invitation to stick around. To view the blog’s archives, all you have to do is scroll down the left hand side of the page. When you've completed your reading, I'd love to hear from you as well.

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Complaint Registered with National Futures Association

The following is a complaint I registered with the National Futures Association last week in hopes it will take action to require Forex brokers to provide a full and accurate disclosure when they offer "commission free" trading. As it stands today, their disclosures are misleading if not wholly inaccurate. A broker's source of income is not limited to the quoted spreads traders see on their computer screens.

The Complaint

A recent thread on The NDD Forum has brought an issue to the forefront where an FCM has, in fact, admitted that offers of commission free trading accompanied by a simple statement implying that the broker’s profits are limited to displayed spreads is not only misleading but an outright misrepresentation.

The facts as I know them.

1. On August 19, 2004, NFA's Directors made the following ruling: “Any Member or Associate is prohibited from representing that its services are commission free without prominently disclosing how it is compensated in near proximity to that representation.”

2. Peregrine Financial Group Inc. (PGF) (NFA 0232217) is a registered Futures Commission Merchant.

3. Peregrine Financial Group offers commission free trading.

4. While Peregrine Financial Group not only does meet the NFA’s minimum disclosure requirement regarding compensation “in near proximity to that representation”, it does explain on an unrelated page and in considerable detail why typical broker disclosures related to "commission free trading" are misleading.

Update:This complaint was submitted to the NFA the last week of October. As of November 6, 2006, Peregrine has deleted all offers of commission free trading on its website.

5. There are a number of FCMs who use the terminology “commission free trading” on their websites to attract traders who provide a footnote that would lead traders to think that their compensation is limited to quoted spreads which, if Peregrine’s acknowledgement is to be taken seriously, it is clearly not the case.

It is my hope that in bringing Peregrine's "confession" to your attention that you will not only require Peregrine but all other brokers offering "commission free trading" to provide a thorough and accurate disclosure explaining exactly how they are compensated and in immediate proximity to the offer.

The ball's in the NFA's court. If they ever respond or take action, I'll be sure to post the results. Until then, make sure you take offers of commission free trading as they were intended to be. A hook to encourage the unwary to enter the snake pit without boots.

Update:As of November 6, 2006, the NFA has yet to take action to require broker offering commission free trading to clarify misleading claims that their profits are restricted to quoted spreads.

Recommended Additional Reading

Think You've Been Trading the Forex? Think Again

Advantages and Disadvantages of Non-Dealing Desk Trading

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Just How Safe Are the Funds Traders Have on Deposit?

An on-going discussion on the forum has highlighted an issue that I’m sure is close to every trader’s heart. Just how secure are the funds the trader has on deposit with a Futures Commission Merchant (FCM) here in the United States? Here’s a summary I hope will not only be informative but put this concern in its proper perspective.

With respect to the security of one’s funds, there are at least three issues that need to be taken into consideration – bankruptcy, fraud, and severe market fluctuations the latter of which should probably be paired with the individual’s trading habits.

It’s a matter of fact that in the United States when an FCM declares bankruptcy trader funds are at risk. The National Futures Association’s “Retail Forex Transactions: A Regulatory Guide”, makes that very clear: “[Forex Dealer Members] may not represent that forex funds deposited with a Member are ‘segregated’ or given special protection under the bankruptcy laws.”

If you have been led to believe or have been assuming that in the event of a US based FCM bankruptcy proceeding you’re going to be in a position to reclaim the funds you have on deposit, think again. Your funds become the FCM's funds for all intent and purpose and, judging from the experience traders have been having trying to recoup their funds from Refco, you’ll be lucky after a year of litigation to get more back than a few cents on the dollar. The over riding factor here is that off-exchange traders are not afforded special protections under current US Bankruptcy law.

When it comes to fraud, most brokerage firms carry a fidelity bond to protect both themselves and their trader clients, but the coverage is not without limitation. While the coverage offered varies from one broker to the next, there’s no fidelity bond in existence that could have covered the massive losses experienced by traders when Refco was forced into bankruptcy last October. Are trader funds at risk? Yes, but only if the extent of the fraud exceeds the face value of FCM’s fidelity bond and this, historically, has been a rarity.

With regard to the final category, it may come as a surprise to many that a trader’s risk may not be limited to the amount of money deposited in his/her account. In a volatile market, the inexperienced trader who jumps into a highly leveraged news trade with or without the entry of a stop loss, can find himself putting not only his/her entire account at risk but be required to make additional deposits to cover losses.

So what’s one to do?

1. Avoid maintaining an account balance that exceeds your trading needs.

2. Accept the fact that bankruptcy and fraud are a fact of life and that there’s no guarantee that the FCM you deposit your funds with won’t eventually become insolvent or be defrauded and it really doesn’t make a bit of difference how much money they report having to meet capitalization requirements if massive fraud is involved. When Refco filed for bankruptcy last October it reported to the CFTC that same month that it had $284,858,885 in excess net capital. Didn't mean much then. Doesn't mean much now.

3. Don’t’ trade the news unless you know what you’re doing and, if even if you do know what you’re doing, make sure you enter a stop loss. The stop loss itself, won’t guarantee a fill if the market goes ballistic, but it affords you the means to avoid unlimited losses that may go well beyond meeting a simple margin requirement.

4. Lastly and most importantly, make sure you read and understand your trading agreement so you know exactly what is at risk if the market goes south on you. If after reading that portion of your agreement you don’t have a clear understanding of the FCM’s policies in regard to extraordinary losses, call the FCM and make sure you understand the full extent of your obligation. With some FCM’s it’s possible you could be required to make an additional deposit to cover your losses.

Note: A word of thanks to the members of the forum who contributed to the discussion this past week. It has been extremely informative.

Recommended Additional Reading

Think You've Been Trading the Forex? Think Again

Advantages and Disadvantages of Non-Dealing Desk Trading

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Perspective on FXCM's Involvement in Refco Litigation

The following story by Laura du Preez appearing on a South African financial services website, Personal Finance, published just yesterday makes interesting reading in light of FXCM's recent initiative to help Refco traders recover their losses. Was (Is) the Leaderguard Recovery Unit interested in assisting defrauded traders or just protecting their own bippies?

October 14, 2006 - Personal Finance - The Leaderguard Recovery Unit was a loose affiliation of brokers who represented investors in the failed foreign currency trader, Leaderguard Spot Forex, and these brokers were funding the unit's efforts to recover money for investors.

Following the appointment of a liquidator for Leaderguard Spot Forex, the unit essentially ceased operating at the end of last year, André Matthews, the chairman of the Leaderguard Recovery Unit, who is also the chief executive officer of the Avocado Group of companies, says.

The Avocado Group consist of an asset manager, Avocado Investment Managers, and a distribution arm, Avocado Distribution Services. The company also sold investments into Leaderguard.

In recent rulings against brokers who assisted investors to invest in Leaderguard Spot Forex, the Ombud for Financial Services Providers, Charles Pillai, questioned the legal status of the Leaderguard Recovery Unit. He noted with "alarm and discomfort" that the unit had written to investors in the failed foreign-currency scheme warning them to contribute to the unit's costs.

Pillai first questioned the status of the Leaderguard Recovery Unit in his ruling against Wilma Willemse in August. In a ruling this week against Durant van Zyl, Pillai again questioned the role of the unit.

Matthews says although the Leaderguard Recovery Unit is no longer playing an active role, he has been appointed to represent more than 70 percent of the investors who invested in Leaderguard Spot Forex.

Matthews says the Leaderguard Recovery Unit had no legal status and was a group of brokers who had decided to pool both their efforts and resources to ensure the recovery of their clients' investments.

The brokers who advised clients to invest in Leaderguard Spot Forex were conned by the foreign currency trader, Matthews says, but, out of self-respect, they accepted responsibility to assist in the recovery of the lost funds and were contributing to efforts to recover investors' lost funds.

The letter Pillai referred to in his ruling was more than a year old and Leaderguard investors have, in fact, never been directly called on to contribute to the recovery unit's activities, Matthews says.

Before a liquidator, who had investors' interests at heart, was appointed for Leaderguard Spot Forex, the brokers funded both a legal team and forensic auditors in Mauritius, he says.

"At a point in time, a number of brokers had failed to contribute to this endeavour and a letter was written, as a 'shock instrument', to the investors advising them of this fact. In addition, they were advised that in the event of their broker/s not contributing, then ... the investors were to be asked whether they would be willing to contribute. This, however never materialised, given the fact that the brokers then provided the necessary funding," Matthews says.

If the initiative taken by the referring brokers was to protect their bippies, it has was apparently a futile effort. The Ombud for Financial Services Providers has ordered yet another broker to repay a couple who followed his advice to invest more than R870 000 in the now-collapsed Mauritius-based foreign currency trader Leaderguard Spot Forex. See Laura du Preez's follow up article. It was also published yesterday.

For the complete text of the first article see Broker 'Unit' Claims It Was Looking Out for Investors. To read about FXCM's involvement in the Refco case read Is FXCM Trying to Avoid a Silver Bullet?.

A special thanks goes out to Longfellow, one of The NDD Forum's more prolific contributors for bringing this story to my attention.

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TowerGroup Predicts Forex Trading Volume to Exceed $3 Trillion by 2007, Creating A New Business Model

The following story appearing on Bobsguide today paints an interesting picture. Apparently, not only is the foreign exchange on its way to becoming a legitimate asset class all on its own, Towergroup believes that Electronic Communications Network (ECN) platforms are going to inevitably replace the "take it or leave it" platforms offered by traditional dealing desk brokers.

Bobsguide - October 2006: FX trading is still dominated by the large dealing banks, yet exchange-like models fueling a bid-and-offer market are challenging the traditional request for quotes. With the appearance of new execution venues, it has become easier for traders to enter the FX market and reduce the risks associated with these transactions. “The types of players that engage in FX trading range from national central banks and dealer banks all the way down to day traders in an arcade,” said Tom Price, a senior analyst in the Securities & Capital Markets research service at TowerGroup. “These myriad players have many different reasons for participating in the FX marketplace, and their individual motivations determine their specific methods and venues for trading.”

Highlights of the research include:

· Technology, culture, and methodology have shifted FX trading from the telephone to the desktop keyboard. Whether the marketplace is a single-bank portal or a vendor platform, e-FX has increasingly become the method of choice for market participants.

· Hedge funds have had a considerable impact on all asset classes, and TowerGroup expects they will continue to be the driving force for technology innovation in the FX marketplace.

· TowerGroup expects consolidation of FX execution venues to occur over the next two to three years. Multibank portals will be the most affected by venue consolidation, and TowerGroup estimates that only two or three will remain once the consolidation dust settles.

· FX electronic communication networks (ECNs) represent the next stage in the evolution of the FX markets and will become the platform of choice for traders that treat FX as an asset class.

Price continued, “FX markets have matured and offer great potential as an asset class. Rather than being a disruptive force, e-FX has enabled both innovation and growth in the space. The players who adapt to the new FX model will be the ones who ultimately succeed.”

For those unfamiliar with ECN trading platforms, instead of offering a single quote per currency pair, traders see depth of market. Not only do they display multiple quotes from multiple liquidity providers, traders can actually post their own terms and, thereby, become mini marketmakers themselves.

If ECN trading is, indeed, the wave of the future, traders might well want to consider narrowing their search for a broker to those offering an ECN platform and get ahead of the game.

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Is FXCM Trying to Avoid a Silver Bullet?

A recent Associated Press (AP) story reveals that Refco Inc.'s retail foreign-exchange customers have teamed up with Forex Trading LLC (FXCM) in a new lawsuit that seeks the return of at least $10 million from the company, which declared bankruptcy on October 17, 2005.

What makes this interesting to me is that trader plaintiffs were joined in the lawsuit by FXCM, a former business partner of Refco's foreign-exchange subsidiary. According to the AP story, Forex Trading has served as trading manager since 2002 of at least 15,000 retail Refco foreign-exchange accounts.

Always concerned about motivations, I’m wondering why FXCM would feel the necessity to get involved. After all, they’re not on the hook ….. or are they?

In early June I related a story about a legal decision in South Africa that held referring brokers responsible for the misdeeds of those they refer clients to. Altogether, 1,850 investors lost 95 percent of their investments when Mauritius-based Leaderguard Spot Forex collapsed last year, resulting in South Africa's largest foreign-currency trading scandal. Investor losses totaled R350 million.

One has to wonder then if FXCM’s involvement is a diversionary tactic. I’m not an attorney and, therefore, don’t have a clue when it comes to the inner workings of our legal system so I am not in a position to offer legal advice, but if victimized traders connect the dots, FXCM could find itself in bind. Surely it’s not inconceivable that they could be held to the same standard and that would prove to be a catastrophic development for not only FXCM but its current trader clients.

If it were me and I had an FXCM account, I wouldn't be waiting around for the hammer to drop. I'd be closing my account immediately. Why? In FXCM’s latest financial report to the Commodity Futures Trade Commission, it reported that it only had $605,007 in Adjusted Net Capital which probably wouldn’t even cover legal expenses should Refco’s traders decide to go after them instead of trying to rewrite U.S. bankruptcy law.

I'm guessing most Refco traders would agree that it's better to be safe than sorry.

Postscript: I've received two emails from traders who pointed out that the financials I reported in my commentary were inaccurate because they didn't include Forex Capital Markets LLC's most recent report that it has $20+ million on the books, $5+ above their regulatory requirement. When I posted the article I was aware of that fact but did not include their financials because they're probably not on the hook. As I understand it, they didn't have a business relationship with Refco; their independent subsidiary (FXCM) did.

If someone can show me that there was some formal business agreement between Forex Capital Markets LLC and Refco, I'll be more than happy to correct the figures and note that it's conceivable they might both be held accountable as Refco's referral source. Until then, I think it's best they be treated as separate LLCs having distinct business interests and obligations.

As an additional footnote, I received a follow-up email from one those watchdogs that raises a more interesting question. In January 2006, Forex Capital Markets LLC reported that it had $35,131,671 in Adjusted Net Capital. At the end of July that number dropped to $20,224,347. Makes one wonder what's going on. A little profit taking before the end of the calendar year or might they be on the hook after all?

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CME/Reuters Update: A Wolf in Sheep’s Clothing?

When the Chicago Mercantile Exchange (CME) and Reuters announced they were putting their heads together to provide a standardized, anonymous and transparent Forex trading platform, I was excited by the prospect because, at least conceptually, such a platform would eliminate a lot of the game playing that goes on at the broker level. I was somewhat taken aback, therefore, when I came across the following information on regarding Globex, the CME’s electronic trading system. It’s an eye opener.

Watching a Globex Forex Feed during off peak times where the market-maker is almost the only participant, continuously populating both sides of the queue with tease-orders. Being mesmerised how the market-maker is able to move out of the way of an incoming order execution.

A trading platform is a software process with data inputs and outputs. A "box" with data inputs entering on the left and data outputs exiting on the right. The processes are performed inside the box, based on the requirements of the incoming data stream (orders)

Example: Incoming order - sell 20 lots at market
Status of market depth bid queue prior to order transmission.

Before............................................1 Second After

Market Maker 10 @ 5006....................Market Maker 10 @ 4990
Market Maker 10 @ 5005....................Market Maker 10 @ 4988
Natural Buyer 20 @ 5002.................Market Maker 10 @ 4995
Market Maker 10 @ 5000

The market maker miraculously disappears in nano-seconds. The trade is executed at 5002.

Such behavior is clear evidence the market-maker has access to the incoming order stream, and is able to remove the front orders, allowing the natural buyer to be hit. It's a question of the location of the market. During market hours, exchange and market-maker are separated. During non-pit hours they merge. Market-Making is electronic. The market-maker not only operates the market, they are the market.

If you decide to hit a market-maker sitting in the market, there is nothing to guarantee the order will be there when your transaction arrives. The market-maker can see your order coming. It can simply move out of the way and not be there when your order arrives. If your order is an "at market" order you will be dismayed at the result. You will hit the nearest natural buyer/seller

Ask the question - what question? “What happens when a "participating broker", who is a market-maker, also owns the market (exchange) [which is the case, of course, with every dealing desk broker]?.”

It’s apparent that with CME’s current trading platform, what you see isn’t necessarily what you get which makes me wonder if we aren’t going to see exactly the same thing when the joint CME/Reuter’s trading platform hits the street. Perhaps their unwillingness to commit to allow FCMs to offer the platform is a blessing in disguise.

To see the original posting and more, visit Camron.com.

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Confessions of a Marketmaker (Dealing Desk Broker)

Pupkinus, a member of The NDD Forum, sure is making my work a lot easier. He posted a commentary today about a post by an Australian dealing desk broker who gave Forexfactory members a look into the inner workings of the brokerage community. It's a real eye-opener and well worth republishing.

Broker: We also were a marketmaker with our clients. In fact most major Investment Banks are. Contrary, to people's beliefs that banks are straight through processing, which they are - but also dealt clients prices and matched them with other clients.

We would take positions against our clients, quite frequently - as our division was not only a broker to our clients, but a trading house too. You don't understand the amount of losing volume that came from clients everyday.....millions!

Pupkinus:If someone believes that the "Big Cool Reputable Banks" are STPs and will not deal against its clients this post helps put a label of "myth busted" on this belief.

Broker: Although we were a large investment bank, we hated scalpers and often tried to deter them from using us. This is probably why brokers like FXCM place scalpers on manual execution - because scalpers would take arbitrage opportunities from the real marketplace and play them against the price the broker is giving them.

Pupkinus: Now that's a direct hit. People from the inside KNOW that traders are discriminated against (placed on manual execution) because of their trading style.

Broker: The foreign exchange market is not regulated to an extent - but if pricing can not be confirmed as being executed at market prices for that time (market prices means that there must be a record of prices from anywhere in the world being at that quote at that time), it cannot be done, legally.

Pupkinus: Cannot be done legally in Australia. So, maybe a grassroots campaign for CFTC to enforce similar rules on FCM's may help clean the industry?

Personal Observation: I don't think the CFTC has been empowered to deal with this. Any initiative addressing this issue in the United States will have to come from Congress.

Broker: To the idea of chasing stops - yes, this did occur, quite often. During news times mostly. We would see where stops were with our clients, we also had a good idea where market depth was, and we would send through volumes of trades to take them out, in order to make money for the bank.

Pupkinus: Explicit confession of a stop phisher. They hunted for stops the knew were there. Immoral to say the least.

Personal Observation: Seems to me this is a pretty strong indicaton that one should stay away from news trading because stop hunting can be easily obscured.

Broker: If you are a good trader - and know the ins and outs of the market (not placing in house stop losses. etc), you will not need to worry, cause you can play the game - then your sweet!

Pupkinus: Placing stops inhouse = sure way to get in trouble. We have confirmation "from the source".

Broker: For everyone who deals with American brokers go to CFTC - and then go to 'financial reports for FCM's'. Here you can check out the Capital of all the brokerage houses, try to stick to the retail brokerage houses with the highest amount of capital - cause this ultimately means more clients, a better relationship with more banks in the interbank market, cause they can guarantee volumes, and also a better level of service.

Pupkinus: Most brokers have capitalization under $1 mio. A major market move can wipe them out. But capitalization is just one of the traits of a good broker.

Personal Observation: I don't agree with Pupkinus on this one. What value is there to quick executions and oodles of liquidity when the broker acknowledges that they rip traders off to the tune of millions a day? A dealing desk is still a dealing desk and it doesn't matter how much money they have in the bank.

Broker: Brokers aren't bad, they aren't there to be against you. But they may not, in terms of cooperation in the market itself, work with you. Most brokers who are large and service respectible numbers of clients will tend to try to help their clients become profitbale as much as they can but once your order is placed, its every man for [himself]...

Pupkinus: That's the best expression of the conflict of interest that plagues even the well intended brokers. Even if they want to play nice it will always be "but once your order is placed, its every man for himself..." - that describes the very biased nature of the dealing desk business.

Those wishing to learn more about non-dealing desk trading are invited to visit the forum and join in the discussion.

Thank you, Pupkinus.

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Trading Tips & Tricks from an NDD Forum Member

The following was posted by Pupkinus, one of The NDD Forum's more active members. I'm reposting it on the blog because it offers a lot of useful advice to prospect traders. If you would like to comment, you'll find the original post in the Dealing Desk Broker forum.

Thought some tips & tricks derived from my personal experience and experience of other traders may help somebody. I promised earlier to post some kind of survival guide and, now, I'm trying to honour the promise.

Tip 1: Do not trade with a dealing desk broker. Couldn't resist that one.

Tip 2: If you have to trade with a dealing desk broker (usually because you're undercapitalized), do not daytrade.

Tip 3: If you have to trade with a dealing desk broker and have to daytrade (usually because you're severely undercapitalized), do not place explicit stop orders, use mental stops. a spike will trigger your explicit stop in a split second while your mental stop takes at least several seconds to be "activated". so, mental stops protect you from spikes, to a certain extent.

Tip 4: If you think that you have to daytrade, think again. maybe you could use a longer time frame on a less volatile and, therefore, "cheaper" and more "friendly" pair like EUR/CHF.

Tip 5: Chose a broker that has over-the-phone dealing. you may need this.

Tip 6: Always place a "disaster stop" i.e. an explicit stop far away from the current price in order to protect your equity.

Tip 7: Have a program that takes screenshots available at all times. Or become proficient with the "PrtSc" button. Screenshots will be required if you have disputes with your broker.

Tip 8: Your broker's software must allow you to see order ID's and must allow you to see the time the orders were introduced. It is really difficult to complain about an order without knowing this info.

Tip 9: If English is not a language you are proficient in, become proficient in English. This is a general piece of advice to any trader. Before the time you become proficient in English, chose a broker that has support available in your native language. Do not trust the advertizing on the broker's website, write them a letter and see how they respond. I've heard about many cases when a lot of communication between brokers and clients was "lost in translation".

Tip 10: Be extremely sceptical about education provided by your broker. More often than not it is very dangerous to trade using the methods the brokers "feed" to their clients.

Tip 11: If you feel you've been subject to an unfair practice, write your broker. Many issues can be solved in a friendly and peaceful manner. Remember that your objective is to get you money and not to prove to you broker that his company is bad. Try to be constructive but hardnosed. Most likely you will be treated better from that moment on. if not, leave.

Tip 12: Do not scalp. Scalping requires tight spreads and lightning-fast execution. Dealing desks have none of the above, at least most of them. And all of the DDB's strongly dislike scalpers. You can be switched to manual execution, be subjected to multiple requotes and some brokers may even take away your hard earned profit.

Tip 13: Always read the fine print. Always read the fine print twice. If you do not understand something in the fine print or find it suspicious, find another broker.

Tip 14: Chose a broker with a good reputation. Reputation of a broker can be judged by postings on independent forums like this one. Look for informative postings that describe in detail why a certain broker is good or bad.

Tip 15: That's a hard one: Do not blame your failure on the broker. Or on the software. Or on the internet connection failure. Or on the BoJ intervention. Or on the moon eclipse. Trading is about responsibility. Accept it.

To prove my point I can bring forth the following real-life example.

Imagine: It's late 90's. A third world country. Forex is available only for over-the-phone dealing. A trader has to pay platform fees and data feed fees (he sees the quotes and charts but in order to trade he has to talk to a dealer). Data is available only through a modem over an unreliable phone line. Spreads - 6 points or more.

In these extreme conditions there were traders who were and, today, still are profitable. This is because they had a well-defined system that gave them tatistical advantage with good money management rules and iron discipline in following the system. I admire them. I strongly believe that chosing the right broker is important but the most important part is the trader himself.

Disclaimer: This post does not mean to offend any dealing desk broker in particular and should be taken with a grain of salt.

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Global vs Targeted Stop Hunting (Stop Phishing)

For those unfamiliar with the practice of stop hunting, I thought it might be helpful to distinguish between global stop hunting and targeted ones. One is a function of the free market, the other constitutes unadulterated manipulation.

Banks who feed quotes to FCMs don't target specific trader positions unless the trader has signed up to trade through the bank's dealing desk. For the most part when they had a need to fill, they boost/cut rates on a global basis and the spike seen is going to be normally tied to a predetermined point above and/or below a calculated support or resistance point. That's the very nature of programmed trading and a function of the free market.

When it comes to the dealing desk, however, stop hunting is an entirely different matter. If a broker routinely spiked traders using a global tactic, they'd quickly put themselves out of business because everyone would know they're doing it. What they do, instead, is target particular trading behaviors - highly leveraged accounts, small or large lots, and news and non-news trading periods to name just a few. Targeting enables them to use the tactic without a great deal of concern for discovery. When confronted by an inexperienced trader, they can frequently blow enough smoke to convince him/her (the trader) that the spike was caused by a temporary computer glitch beyond their control. However, a savvy trader raising the same concern is issued an immediate refund and, I'm guessing, his/her account is flagged so it doesn't get targeted for future takeout.

My FCM programmer acquaintance pointed out the other day that only the really foolish brokers spike quotes more than 10 pips - anything greater is too easily documented. There are, however, occasions when stop hunting goes well beyond that as illustrated by the experience of one of the NDD forum's members. The incident is recounted at the bottom of page two of the thread. If you wish to see it at the top, just select the Hybrid display option in the Display Modes tab on the right hand side of the menu bar below and to the right of the “Post Reply” button. Otherwise, go to the bottom of the thread on page two.

Since the squeaky wheel gets the grease, I highly recommend traders raise the roof when they catch or even think they've caught a broker stop hunting them. More important, I hope everyone will document any incident and post it on the forum so other traders can make a more informed decision when it comes to broker selection.

Tired of the BS? Join the Debate.

The NDD forum

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The Primary Advantage to Non-Dealing Desk Trading

This morning I published a post to the NDD forum this morning and I think it bears repeating so I’m republishing it on the blog this afternoon. I hope visitors find it useful and informative.

Non-Dealing Desk Trading: The Primary Advantage

After reading a number of posts to the forum and a recent article in the Wall Street Journal (WSJ) I’m having to step back to re-examine the advantages / disadvantages of non-dealing desk trading. The result is that I'm coming to the conclusion that as it stands today the greatest benefit to trading through a NND broker may lie in the fact that the trader's positions are not known to the counterparties the trader is trading against. The article appearing in the WSJ, points to the importance of truly anonymous trading.

The headline of the article reads "CBOT (Chicago Board of Trade) Gets Flak Over Online Trades". The subheadline reads "Critics Fault Exchange for Falling Short in Effort to Fully Shield User Data". The exerpts to follow provide a glimpse at a problem spot traders face when they trade with dealing desk brokers who, seeing all of their positions, are free to actively trade against them.

"Big brokerages can still see key information about who is on the other side of supposedly anonymous electronic traes by looking at data the Chicago Board of Trade prints on each transcation, according to exchange docuemnts and interviews with market participants.

"The lack of anonymity has persisted despite rules passed this summer by CBOT, the country's major makret for futures contracts linked to Treasury bonds, grains, and other assets."

"CBOT critics say that clearing information is enough for firms using powerful computers and mathematical forumlas known as algorithjms to figure out the individual counterparty information that the CBOT does obscure - and potentially use that information to their advantage.

"The exchange's approach also differs from that of the neighboring Chicao Mercantile Exchange, which eliminated all information about individual traders and their clearing firms from its system about six weeks ago."

Reading this article, emphasizing the need for trading anonymity, I can't help but think that forex spot traders are inevitably going to get the short end of the stick when trading against brokers who not only create but control their respective markets. Their positions are known to the broker counterparty and, therefore, traders can be easily targeted for take out.

Perhaps we could get those who purport to offer a non-dealing desk trading platform to discuss this issue in greater detail. Specifically, they might explain how ECN/STP orders are processed. What do participating counterparties really know about the trader's positions?

I would have posted a hyperlink to the WSJ article but, unfortunately, one has to be a subscriber to access it.

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An Action Plan to Put an End to Broker Stop Hunting

Visit any Forex forum and you’ll see a thread or two about stop hunting (stop fishing) but little or nothing ever gets done about it. Why? First, most traders wouldn’t recognize a stop hunt if they saw one. More importantly, when individual traders do recognize they’ve been stopped out they do little or nothing to call the broker to account for its actions beyond making a demand for personal restitution. Should it be any wonder, then, that the practice of stop hunting continues unabated.

As I pointed out in a recent post to the blog, while the National Futures Association (NFA), the self-regulating arm of the retail forex industry, talks a good game, it has never taken a broker to task for failing to meet the organization’s stated guidelines regarding unfair trade practices which include a specific reference to stop fishing. If nothing else, this is certainly an indication that the chartered self-regulatory agency doesn’t take its responsibilities seriously at least when it comes to protecting traders from unscrupulous dealers.

The question, of course, is what can be done. Well, it’s really quite simple. Traders need to know that there’s a way to call not only the broker to task, but to force the NFA to do its job and that’s by getting involved. I know making reference to the following quote is trite but it’s all too poignant: “For evil to prevail, all that need happen is for good people to do nothing.”

So exactly what can you do to put an end to the practice? If you’re a trader who thinks he’s been burned, do the following:

1. Take screen shots whenever you see a pricing anomaly.

2. Post an accounting of your experience to The NDD Forum, and ask for answers. If nothing else, this will put brokers on notice that they're being watched.

3. Drop an email off to the broker with a hyperlink to the forum thread you think ripped you off and ask for an explanation.

4. Forward your observations and complaints to both the CFTC and NFA and ask them to look into the incident. Going one step further, I don’t think it would be unreasonable to demand that a) the broker account for the pricing aberration, b) account for the number of traders affected, c) make restitution to all those affected, d) pay a fine, and e) acknowledge that they did, indeed, spike rates, and f) agree to not do it again. (Sounds a little like the kind of discipline one might exact on a three-year-old doesn’t it?)

If you weren’t personally affected by the broker’s actions, all you have to do is take a few seconds to bring the post to the attention of the CFTC and NFA. Drop them an email, complete their online complaint forms, and demand answers and regulatory action.

An idealist, I don’t realistically expect either the NFA or CFTC to levy all of the aforementioned requirements, but I should think that this course of action will force brokers and regulatory agencies to deal with this issue on a global basis which, I would hope, will put an end to stop fishing once and for all. Maybe all brokers don’t steal money from their clients in this manner but those who do need to be called on the proverbial carpet.

Now you might be asking yourself how this course of action differs from the action traders when they think they’ve gotten the shaft. It’s simple. If every member of The NDD Forum dropped the CFTC and NFA an “I am concerned” email or completed their online complaint forms, regulatory agencies would have a difficult time ignoring the issue.

One trader, incidentally, has already stepped up to the plate. It’s up to you to help him (and, thereby, help every yourself and every other trader). Let's put an end to this practice once and for all. If you want to see the trader's original post at the top of the thread, under "Display Modes" click on "Hybrid".

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Forex Training: A Ripoff by Any Name Is Still a Ripoff

I woke up this morning to a half hour infomercial hyping a “new” Forex trading program and I couldn’t help shake my head and smile when I realized that it’s really 4xMadeEasy in drag - a new name (Premier Trade), a slick summer dress and a new pair of shiny shoes.

How do I know this?

1. The company’s spokesman is none other than James Dicks, the “founder” of 4xMadeEasy. Be sure to read the Wikipedia entry on this guy.

2. On the surface the programs are essentially the same. When Dicks talks about Premier Trade, however, he doesn’t talk about “big lights”. Nope. He talks about colored red, yellow, and green charts. No doubt Dicks has had to dumb the program down because too many clients are having difficulty understanding signals designed to mimmick street lights. You know - green for go (buy), yellow for caution (sit on your fanny), red for stop (sell).

Now, here's the inside poop on the programming behind Premier Trade. Open a demo account with any dealer and draw a jagged diagonal line from the lower left corner to the upper right. Color the space above this line green and the space below the line red. Now imagine a 5-10 pip space on both sides of the trading line that's colored yellow. Buy when the currency goes into the green. Sell when it goes into the red. That's the entire program in a nutshell.

3. Both programs make Forex trading sound like something you can do standing on your head. If you believe that, well, you'd be better off getting back on the turnip truck.

4. Both make appeals to retirees who are the ones who stand to lose the most because most can't afford to lose money.

5. Their products and services are grossly overpriced.

If you want to know about Premier Trade, you only need to know about 4xMadeEasy. A ripoff by any other name is still a ripoff. In this case, it might be more appropriate to say 4xMadeEasy by any name is still 4xMadeEasy.

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