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.
Recommended Additional Reading
Think You've Been Trading the Forex? Think Again
Advantages and Disadvantages of Non-Dealing Desk Trading
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