Just when one would think the industry is starting to wise up, along comes another FCM with an offer to supposedly “bailout” the unfortunate traders who took it in the shorts when Refco went belly up. The offer, of course, is no more inviting than the one offered by Gain Capital Group, an offer that collapsed a few days ago. And it’s not one that’s restricted to Refco traders either. It’s available to anyone meeting the unstated but simple requirement that he/she be incredibly gullible.Before I go into any detail about the latest dealer shenanigan, perhaps it would be helpful to draw an analogy between the latest Forex come-on and the frequent flyer programs offered by so many airlines.
The Question
Would you be motivated to book all your travel through an airline that offered the following incentive program?
An Overview
Frequent flyer miles will awarded but only to those who fulfill three basic requirements. (1) You must pay for a minimum of 25 round trips; (2) You must spend a minimum of $100 per ticket; and (3) all travel must be completed within 60 calendar days.
The Incentive
If you meet the minimum requirements, your frequent flyer incentive is $62.50, considerably less than the cost of an equivalent round trip ticket to anywhere.
Unstated
1. While the airline guarantees a seat, it does not guarantee you’ll arrive at any one of your destinations.
2. A good share of the time, you’ll be dropped off at some remote location where there are no return flights so you’ll have to rent a car to return home.
3. The names of 85% of all previous “travelers” have ended up on a secret but growing list of “fatalities”.
Conclusion
Interesting to note that this isn’t a program designed exclusively for the unfortunates who got the short end of the stick when Refco went under. It’s available to anyone who opens a new account. So Refco traders would be well advised not to think that the offering singles them out as something special. This is a marketing program designed for the sole purpose of attracting new accounts, pure and simple. The notion, therefore, that this is an overture to Refco traders is ludicrous.
Wouldn’t it be interesting to find out how many of the traders who buy into this program end up being credited with the incentives being offered? Of those, wouldn’t it be even more interesting to find out how many after their “long journey” end up being profitable. Well, don’t get your hopes up. Given the program’s parameters, it’s not designed to actually pay off and even if it does on occasion, the phantom reward doesn’t justify the risk.
Am I suggesting that traders can’t win at the Forex game? Certainly not. But anyone who would be so gullible as to see value in this kind of offering needs to do some more homework before they open an account with anyone.
Oh, the company? InterbankFx. Check out their latest press release.
Think you're not gullible? Take this free, online gullibility test.
Additional Reading
Think You've Been Trading the Forex? Think Again
Advantages and Disadvantages of Non-Dealing Desk Trading
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