The FX Hustle described, or “kids, do not try this at home”
To all my aspiring, smart, pip-hungry newbie forex traders out there: READ THIS ARTICLE posted in the Financial Times this week. It describes a point by point IPO offering by GAIN Capital, or forex.com, a prominent market maker in the world of forex brokers, and just how they make money from the thousands, the tens of thousands of new investor/traders that are entering the forex trading world month after month. There are two very important points to take away from this article. First, GAIN Capital is a dealing desk broker, meaning, they take the other side of their clients’ trades, creating a very obvious conflict of interest. Compare to an ECN (electronic communication network) which is like an interbank broker, simply matching up trades immediately with other banks on their network. Most profitable traders that I know prefer ECNs to dealing desk brokers because they just do not trust a broker that is basically trading against you. The second and maybe the most important takeaway from this article is this: “Our customer base is primarily comprised of individual retail customers who generally trade in the forex market with us for short periods…” and “…If we are unable to maintain or increase our customer retention rates or generate a substantial number of new customers in a cost-effective manner, our business, financial condition and results of operations and cash flows would likely be adversely affected. For the year ended December 31, 2008, we incurred sales and marketing expenses of $29.3 million.” So, these brokers, all brokers, are willing to spend $30 million dollars on sales and advertising in order to get the newbie retail customers, the ones who are likely to jump into the market and under capitalize while over leveraging their trading accounts, and then quickly and quietly over trade and lose their entire account in a matter of months. This is why we see so many advertisements for “Low spreads, $50 to open an account, START TRADING NOW”. They depend on these type of newbie traders for their bread and butter. This is precisely why it is so important to start your trading account with at least $5,000, but $10,000 is much better. Otherwise the volatility in this market will eat your account alive. Do not be a broker’s delight, do not over leverage, give yourself the advantage by allowing plenty of room for the volatility to work IN YOUR FAVOR. The brokers will hate you, and you will love it. Cheers.
Recession proof: Trading the foreign exchange market
As unemployment soars in the US and elsewhere some are looking in unconventional places for income. Since the recession began over one year ago more than 6 million jobs have been lost in the US alone. With more and more people looking for work, its becoming increasingly difficult to land one of the fewer jobs that are available. Competition is fierce. But some individuals are looking beyond the want ads and have found the foreign exchange market, a seemingly recession-proof means of income, if you know how to trade it. After all, you would be your own boss. But trading the markets is not for everyone, and the foreign exchange market (forex) is the biggest and fastest moving market on the planet. Over $2 trillion is exchanged on this market every day. It can be just as easy to lose your investment as it is to win gains.
How do you know forex trading is for you? Online trading in any market is really not for the faint of heart. But it is also not for gamblers. Trading should be treated just like any business that you would consider entering. Here’s some things to consider before jumping into the forex market:
1. You need an investment of at least $2000 for your trading account if you expect monthly returns that you can apply to your living expenses. You can certainly open a forex trading account with much less, even $25 in some cases. But it will take many months to build your account up to something substantial. Realistic monthly profit is typically 5% - 30%.
2. Learning to trade the forex market yourself takes time and money. You need a minimum of 3 months to really get a grasp of what the forex market is all about. There are many training and education firms out there that specialize in intensive forex training.
3. If you do not want to trade your own account, you can have a professional do it for you, but you need bigger bucks in order to do this. Typically professional traders require at least $10,000 initial investment to open an account with them. There is a fairly new option in the managed account arena, check out zulutrade.com. You can open an account with only $1000, then you choose from over 1500 different available expert forex traders to “follow” their trades, the ZuluTrade software automatically will trade your account with the experts’ buy and sell trades.
4. Watch out for scammers. Unfortunately the foreign exchange market is really not that regulated worldwide. Be very skeptical of buying “100% winning forex trading systems” over the internet. Also be skeptical of “money managers” that will trade your account for you. Get references.
5. Choose a forex broker carefully. There are literally hundreds of them. For US citizens I recommend picking one that is a registered member of the National Futures Association (NFA). Also check the Commodity Futures Trading Commission (CFTC) website for broker account liquidity. Brokers with at least $20 million in capital are a good choice.
Not everyone who is looking for a job these days can afford to become a forex trader much less expect to start making millions right away. The initial investment can be difficult. But if you have the money and the time and the will power, the sky is the limit when it comes to profits in this market.
This is posted from my newest writing endeavor: NY Markets Examiner 
Get free money in a live micro trading account
Have you been trading a demo account and your trading strategy is making you a more confident trader? It may be time to up the ante by trying out a live trading account. FXCM is currently promoting their micro trading account by giving new account holders $25 credit to trade live just for opening the account. This is a great way for new forex traders to try out live trading without putting up any funds. Micro trading accounts are a fairly new offering from forex brokers to allow the smallest of investors into the big market of forex trading. A micro account can be opened with as little as $25, each lot is equal to trading 1000 units of currency. So one pip is $0.10. The standard trading account, typically with a minimum of $2000 capital to start, has been the standard account size for years. The mini account was introduced some years ago which lets traders open accounts with $200-500, and each pip is worth about $1. But the micro trading account is a great way to graduate from demo trading to live trading but still with minimal investment, minimal risk. Prove your trading strategy in a micro account then add to your investment to move up to a mini or standard account to really start making the serious forex bucks. It is unclear how long FXCM will be giving away this $25, so you better sign up before the promo expires. Visit http://www.forexmicrolot.com/tradeshow.jsp?CMP=SFS-70160000000DckT&keyword=036017.
Your broker platform may be skimming your pips
There is alot of talk in the retail forex trader world that some brokers are scam artists, stealing pips from their trader clients during each trade entry and exit that they make. How can they do this exactly and how can you know if your broker is doing this to you? I suggest you trade with a second price feed open on your desktop so that you can casually watch to see the difference in spread at any given moment during your trading day. I like to use Alpari’s mt4 free demo charts. So I have the Alpari open and also my broker’s trading platform seperately. Most of the time the two match pip for pip but there are times when there may be a 1 to 3 pip difference between the two price feeds. I have also tried other brokers’ platforms, with live trading accounts and truthfully, I have seen occasional small or even large pip differences (more than 15 pips) in price spread. Tt will make a difference whether you are trading with a fixed spread broker or a variable spread broker. With a variable spread you can often see huge differences in what one broker can offer vs. another broker’s price. So there are times when you the trader are in a trade position and attempting to close your trade in profit but as you are clicking the EXIT button you may see your broker’s price 1 or 2 pips different than what your other price feed says, and this very well may be in your broker’s favor. So not only did your broker just make the usual spread of, say, 3 pips for your trade you just exited but maybe an extra 1 pip occasionally will find its way into their pocket. Isn’t this unfair? Not really, and let me explain why. ALL brokers except for some true ECN brokers with variable spreads and true pass through ability have the ability to manipulate the spread that they offer at any given time. It is a fact. It is part of their business model. It is not illegal. Read your broker’s terms and conditions and you will find a line that discusses this. Afterall, brokers are in the market in order to make money, while providing you, the trader, with a good and easy service and trading platform that allows you to also make profit in the forex market online. But here is the trick: some brokers do this much more than others. So it is important for you to pay attention, have a second price feed going while you trade, so that you can be AWARE that your broker is doing it and how often they do it. It is your duty to act in your best interest when you trade which means, dear trader, that you should report to your broker that you noticed 2 times this week that their price was manipulated. It would be interesting to know how your broker responds to this kind of call or email. But as you and your broker know, there are many good forex brokers out there that will be happy to get a new trading client, if your broker is really a good one, they will not want to let you go.
Jennifer Shotts
Casey Stubbs has been trading for 14 years. He started trading in the stock market and moved to Forex. 
Richard draws from his extensive experience trading to write insightful trading articles for both fundamental and technical analysis.
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