Finexo Review

I had heard some really good things about Saxo Bank and had been looking at opening an account when i came across Finexo. Finexo is a white-label partner of Saxo, and as such I didn't really expect to get anything from them that I couldn't already get at Saxo. To my surprise though, I found that Finexo offers up tighter spreads on EUR/USD (because they give up a bit of their commission, as I found out later). They offer a few other advantages over Saxo, most of which translate into better trading conditions for many retail traders. For those of you who have traded Saxo, you know that there is a learning curve to the platform. It is powerful, but difficult - with great power come great headaches. Finexo gives you a much easier-to-use platform, and it's browser based so even you Mac guys out there can play. The downside is that it doesn't offer all the reliability of SaxoTrader.

Along with all that they also accept more payment methods for those of you who use PayPal instead of a private bank in the Cayman Islands. I found the trading conditions to be quite good since they tap Saxo's liquidity. Overall, it feels like a small brokerage but with the backing of a large institution when it comes to liquidity and financial stability.

NOTE: Although I had some doubts in my mind about their connection to the British Virgin Islands, the fact that they are backed by a well-known broker alleviated most of my concerns. My hunch was correct, and all my deposits and withdrawals went without a hitch.

PROS:
Wide variety of deposit/withdrawal methods;
Decent spreads;
Scalping is allowed;
Easy to use platform;
Mac-compatible platform;
Deep liquidity (Goldman Sachs, Dresdner Kleinwort Wasserstein, Deutsche Bank, Marex Financial);
and UBS.;
Orders are processed through an automated dealing desk according to the "Best Execution Policy";
Server-side trailing stops;
OCO and if/then orders available;

CONS:
Platform reliability is questionable;
No automated trading;
Registered in the British Virgin Islands - a bit shady;
No Islamic swap-free accounts;
No oil, gold, or exotic currencies;

Quick Facts:
Finexo is a white-label partner for Saxo Bank;
Registered in British Virgin Islands and Germany;
Regulated by BaFin (Germany) with ID 108861;
In business since 2003;

For more detailed information, you can visit this Finexo Review, or visit their website here.

Oanda Review

As one of the most respected retail forex brokers out there, Oanda is certainly worth a look for most serious traders. While trading short-term with Oanda, I found that the execution was excellent during all market conditions. Having said that, however, Oanda does seem to "massage" their spreads into getting wider than most during news times. I am not particularly fond of news trading however, so this is not a big deal for me. I would not recommend Oanda to any news traders out there though. Short-term trading is also hindered by the fact that many intraday moves tend to be technical in nature, and technical analysis is made difficult by Oanda's poor charting capabilities. An external charting package is highly recommended.

Swing trading is what this broker was made for. By paying hourly swap instead of daily, and by giving smaller account holders the flexibility of trading single units, there is really not much more a swing trader could ask for. I would still recommend some external charts, but most professional traders would opt for that anyway, no matter who their broker is.

The platform itself has its ups and downs, with reliability being the main complaint. It can crash at times and become disconnected from the server more often than some more robust platforms. On the upside, it runs in your browser so it is completely Mac-compatible. Very detailed reporting is also available. Traders can easily calculate their exposure to each currency in their portfolio, for example.

PROS:
Single unit trade sizes allow for flexible position sizing and precise money management;
Browser-based platform works on any operating system;
Low spreads during normal market conditions;
Pays interest on account balance;
Server-side trailing stops;
Hourly swap payout;
Well capitalized;
NFA regulated;

CONS:
Poor charting;
Not many pairs to trade;
Very wide spreads at news times;
Questionable platform stability;

Quick Facts:
Headquarters in Toronto, Canada;
NFA member since 2003 (ID 0325821);
Over $170 million in capital as reported to the CFTC;
Target spread on EUR/USD 0.9 pips (0.00009);
Server-side trailing stops allow for them to be honored even when platform is closed;
50:1 maximum leverage (in most cases, this is not a bad thing);

For more information, please visit this full Oanda review.

eToro Review

In my last post I talked about shorting the carry trade with a swap-free broker to avoid paying the overnight swap. I was unwilling and unable to open a large account at any single dodgy broker, so I chose to spread my risk over several. The second swap-free broker I chose was eToro, located in yet another offshore location (Cyprus). They have a US-based arm called eToro USA which is regulated by the NFA, but eToro proper is only regulated by its Cyprian counterpart CySEC - again, not exactly confidence inspiring. This outfit was started up by an Israeli group coming over from the gambling industry (the business model is remarkably similar), and it is quite obvious: the trading platform looks and feels like a game. When I first opened it up I thought it was a joke. They have a "visual mode", and no words can do it justice - you have to see it for yourself - if you buy say USD/JPY, you will see a fat cowboy racing a sumo wrestler down a track. While certainly amusing, any serious trader will shudder at the mere thought of turning the serious business of trading into a game. In all fairness however, these guys are serious about their business, just like they were in the gambling industry, and they do also offer an "expert mode" without the gimmicks. They are in it for the long haul, which is always a good sign that differentiates a legitimate business from the cut-and-run scammers that are running rampant in the industry.

PROS:
Chat feature right in the platform so you can interact with other traders and customer support;
Excellent customer support available for chat even on weekends (for real account holders);
Wide range of transaction methods (listed below under "Quick Facts");
Fixed spreads;
Multi-language platform;
Some great promotions, such as $500 free when you deposit $1,000+;
Segregated accounts;

CONS:
Relatively high spreads;
Mediocre execution;
Weak platform that relies more on gimmicks than functionality or reliability.
Trade sizes are in 10,000 units, not leaving many money management options to smaller accounts, which they specifically target. This is a predatory practice;

Quick Facts:
Headquarters in Cyprus, regulated by CySEC
In business since 2004
Client accounts segrated from operating capital and held at Marfin Popular Bank, Cyprus
US-based clients should visit eToro USA (NFA regulated)
Payments: Credit Card, Moneygram, NETeller, PayPal, Western Union and Wire Transfer
Maximum 400:1 leverage

You can visit eToro here, or get more information here. Thanks for stopping by.

Marketiva Review

When I first opened an account at Marketiva, I was fully aware of the risk I was taking. A forex broker registered in the British Virgin Islands doesn't exactly inspire confidence in a trader. They have been in business for some time however (since 2003) and have a fairly good reputation among traders. Moreover, I really wanted to short the carry trade for the long-term, and Marketiva is a swap-free broker, meaning I would save a lot of money by not having to pay negative swap on my long-term short positions in the high-yielding currencies. Marketiva also allows a maximum of 300,000 units to be traded at any one time, so I couldn't go all in anyway. As it turns out, shorting the carry trade was one of the best decisions of my trading career, and having a broker account in the Caribbean didn't hurt my cause - I was able to close my positions and withdraw my profits without any complaints from Marketiva.

It seems that, as far as market makers go, Marketiva offers a fairly decent and honest product. It is certainly not intended for highly-capitalized professionals, but more for the smaller novice retail trader. Marketiva allows trades as small as 1 unit, and offers vibrant chat community within the trading platform itself. I never found much use for it, but it can be helpful (or distracting, depending on how you look at it). In any case, I can recommend Marketiva to my readers with a clear conscience, as long as you are not looking to trade millions, and can live with the poor charting and basic functionality of the trading platform.

Quick Facts:
Headquarters in the British Virgin Islands;
FSC member (646819);
In business since 2003;
Does not accept clients from the USA;
Deposits by e-Dinar, Liberty Reserve, WebMoney, Wire Transfer;
Target spread on EUR/USD: 0.0002 (2 pips) variable;
Accounts can be held in USD, EUR, GBP, CAD, CHF, AUD, JPY

More details about Marketiva here.
Visit Marketiva

InterbankFX (IBFX) Review

To begin with, I would like to review a few brokers that I have used in the past. IBFX is a very well known and trusted broker, and is one of the first brokers I trusted with my money. I don't have many complaints. Here is a summary of some of my more interesting experiences with IBFX:

A few months ago (September 2008 to be exact) they introduced a number of new currency pairs to trade and were offering extremely high overnight interest rates on those pairs (namely USD/ZAR $140/lot/day, EUR/DKK $21/lot/day). After taking into account each pair's daily ATR (Average True Range) and pip value, I determined that trading EUR/DKK would be the way to go if I am only going after the swap. DKK is a part of ERM2, and is required to stay within a 2.25% band of a pre-determined rate against EUR. The Danish central bank will defend those levels. Moreover, we have never come even close to the edges of the band since it was imposed. This gave me the extra assurance that this pair was not going to move much and that it would yield some profits as a result, since I could open large positions without worrying about the pair running off with my money. I still couldn't figure out why IBFX was offering such ridiculous swap rates though so I spoke to their customer support and they assured me that these rates were real, although they couldn't explain exactly how the rates were determined. So I traded huge positions, particularly on Wednesdays when they triple the swap. Even one day's worth of interest would make up for the spread paid so it was easy to open a position a few minutes before swap time and then close it soon after. This was free money.

A month later though, they announced a "Significant Change to the Swap Rates" and the window was closed, but they never reversed any of my trades and I got to keep all that free money. To this day I don't know what they were thinking, but they left a huge gaping hole in their risk profile for an entire month. Still, they were fair enough to suck it up and take the losses in stride (I'm sure I'm not the only one that took advantage of this opportunity).

Another point for them is the fact that they fill resting orders at the desired price, if the price trades, or even if we gap over the price. This happened to me only once, so I can't say it is their policy per se, but I had an open position over the weekend a few months ago, and price was getting near my stop loss on Friday close. Sure enough, when trading opened the following week, price gapped over my stop loss by quite a margin. I don't remember the exact number, but it was more than 20 pips. Despite that, IBFX closed my trade at the exact stop out price I wanted, even though, technically, that price never traded. I was obviously not happy about my trade getting stopped out, but I gained an extra layer of trust for IBFX that day, because 99% of other brokers would have filled my order at the "next best price" and I would have sustained a much larger loss.

Quick Facts:
Headquarters in Utah, USA;
NFA member (0326091);
In business since 2001;
$40,892,161 in capital as of November 30, 2008, as reported to the CFTC;
Deposits by Check, Discover, Visa, MasterCard, Wire Transfer;
All orders passed straight through to liquidity providers BofA, JP Morgan, Citigroup and Goldman Sachs;
Metatrader 4 (MT4) platform;
Target spread on EUR/USD: 0.0002 (2 pips) variable;
Credit/Debit cards available to US-based clients;

More details about IBFX available here.

What this Blog is about

First of all I would like to introduce myself and my experience as a forex trader. I started dabbling in forex in early 2006 and was immediately enamoured with the idea. Before that I had absolutely no experience in any financial market and to be quite honest, had no real idea about how the world's financial markets even functioned. I had no idea how prices were set or what traders were really buying or selling. I had a vague recollection of someone telling me about options and futures contracts, but had no knowledge about them other than the fact that they existed. I certainly didn't know what margin and leverage were, and even less idea of what hedging was. The year 2006 changed all that. I was earning a fair amount from my business and was looking for something to do with my savings. I quickly became passionate about financial markets in general, and the forex in particular. I traded a demo account for a little while and became confident that I had a good strategy. I opened a real account, and sure enough, I had tripled it within a few weeks. Easy as pie. Then things quickly turned around and within a few days I was down to half of my original deposit. Something wasn't right. I had to figure out what went wrong.

So over the past few years I have been studying, and studying, and studying everything I could get my hands on. One thing I discovered is that choosing the right forex broker is prerequisite to success in trading. It is not the key. It is not the holy grail. It is certainly not the only thing you need, but it IS prerequisite. Unless you know exactly what's happening in the background, how your broker functions, what you can and cannot reasonably expect from your broker, you are shooting in the dark regardless of how sound your actual trading strategy is.

The reason I'm starting this blog in part, is to try and shed some light on how brokers work, but it is mostly to evaluate the many forex brokers out there using small, real accounts, and to publish my results here. This is something I am doing for myself first and foremost, but if you find the information beneficial, then please help yourself to it. I find that most brokers, beyond the obvious scammers, have something to offer that is unique and attractive to some sub-section of the forex trading group as a whole. Choosing the right one can be difficult for new traders who are not sure what to look for, but it can be so for experienced traders as well because until you have traded a real account, there is no way to know exactly how things will go. This is the missing piece of the puzzle I am trying to connect with this blog.

Please note that this is a hobby blog. Its purpose is NOT TO GENERATE REVENUE. You will never be asked to buy anything, to sign up to any services, or to open accounts with any particular broker (for which I just happen to be an IB). I want this blog to be completely bias-free.