Baron Forex Review

I came across a unique MT4 broker about a month ago called Baron Forex. I generally like to try out places that offer something different from the standard fare. Baron Forex is headquartered in Belize, which in itself could be seen as a disadvantage from a legitimacy standpoint, but they are regulated by the IFSC. The fact that they are located in Belize also has other advantages due to its offshore location.

The two main draws that Baron Forex has is that they offer options as well as spot forex trading, and that they offer fixed spreads (under all market conditions) that are quite low compared to other market makers who keep their spreads fixed. Normally, most market makers who give their clients fixed spreads do so at the expense of a few extra pips and/or poor execution in illiquid markets. I have not noticed this while trading with Baron Forex - I even got filled without slippage on my stop loss order during the NFP release yesterday (not that I was particularly happy about it, but that's how it goes sometimes - at least my order was filled at the price I set).

I have not tried making any withdrawals yet so I can't comment on how successful that will be. I am experiencing a bit of a drawdown over the past few weeks, so chances are I won't be making a withdrawal any time soon anyway :). I don't foresee any problems, but I was a bit disappointed with the lack of withdrawal methods available and the associated fees - unless you trade high monthly volume, they will charge your for wire transfers and CC withdrawals, and those are the only 2 methods available. I would suspect that they will add a few more deposit/withdrawal methods in the near future. Baron Forex has only been around since 2008 so they probably still have a few kinks to work out in their back office.

Finally, Islamic traders can be accommodated with swap-free accounts, but again, extra charges do apply unless you trade high monthly volumes. They really do make every effort to increase clients' trading volume, which is understandable considering it's their bread and butter.

Overall, I would say that news traders should take advantage of the trading conditions on offer here: the combination of low, fixed spreads and excellent execution probably won't be around for long. Once they see the risk that exposes them to, they are bound to change some part of that deadly cocktail.

PROS:
Well-known MT4 platform;
Regulated offshore broker;
Low, fixed spreads;
News traders' and scalpers' best friend;
Great execution even in illiquid conditions (NFP!);
Trade options as well as spot FX;

CONS:
Haven't been around very long (2008);
Not many deposit/withdrawal methods;
Can't trade anything less than a mini-lot (10,000 units);

Quick Facts:
Headquarters in Belize;
Metatrader 4 (MT4) platform;
2 pip fixed spread on EUR/USD;
Established in 2008;

If you are interested in opening an account at Baron Forex, please click here.

AvaFX Review

If you are looking for an offshore forex broker, I would recommend giving AvaFX a chance. AvaFX is a recent entrant into the forex arena, but has built a solid reputation among traders. Over the past few weeks, I found out first hand why that's the case. Although the company is not regulated by any government body, it is audited by Ernst & Young, which adds a layer of legitimacy to it. It is also owned and operated by a large instituion - Clal Finance Ltd., with over $17 billion under management. This is also where the liquidity comes from.

To be quite honest, I could find no serious flaws with any aspect of AvaFX. Maybe it's because of the nightmare I had with the last broker I reviewed, but I don't think so. Everything I tried seemed to work well - even extremely fast trading is accepted, which is fairly unusual for a market maker, particularly one that fixes their spreads. There were some execution problems as a result of the fixed spreads during fast market moves, but this is to be expected.

The fact that Islamic friendly no-swap accounts are available at no extra charge, and to the general public (no need to "prove" your religion) is a bonus to those seeking this type of account. There is also a wide range of instruments at your disposal, from a few exotic spot currency pairs to quite a few commonly traded CFDs. A wide variety of deposit and withdrawal methods are available, and no administrative fees apply to any transactions (although there is a $500 minimum wire transfer withdrawal limit). All transaction methods are listed in "Quick Facts" below.

Depending on your trading preferences, you can choose between 3 platforms:

1. Ava Trader - a downloadable trading platform, which is the most stable;
2. AvaJava - a Java platform which runs in your browser and is Mac compatible;
3. AvaMobile - an i-Mode or WAP application that can run on any internet capable mobile phone;

PROS:
Stable, functional, versatile platform;
Fixed Spreads;
Loads of tradable instruments, including many common CFDs;
Swap-free "Islamic" accounts avalable with no extra charges;
Offshore location;
Financially stable ownership;
Excellent customer support;
Large bonus for first deposits (up to $1,200 in free cash);

CONS:
Unregulated broker;
Mediocre liquidity and execution;
In business only since 2006;

Quick Facts:
Offices in the British Virgin Islands (BVI) and Cyprus;
Deposits/withdrawals by Diners Club, MasterCard, Visa, Moneybookers, NETeller, PayPal, WebMoney and Wire Transfer - all with no fees;
Maximum Leverage 200:1;
Minimum trade size 5,000 units (0.5 mini lot);
Fixed spreads, EUR/USD spread 3 pips (0.0003);
AvaFX customer support available in Arabic, Chinese, Dutch, French, German, Italian, Japanese and Spanish;

If you would like to open an account at AvaFX, please click here. Thanks for stopping by!

FXCM Review

FXCM was one of the first brokers I ever opened an account with. At the time I didn't have much to compare it to, but it seemed like a decent package. Everything worked, and it was easy to learn the ropes and it was easy on the eyes. It was not until much later that I learned just how powerful FXCM's Trading Station really is, at least in comparison to a lot of the other platforms out there. Don't get me wrong, I am not saying that everything about FXCM is peachy - it isn't - but the platform itself really is one of the best out there. It has everything a professional trader would desire, such as great charting, one-click trading, many different order types and execution preferences. It has all the flexibility a trader could desire, and not much in the way of complexity. It is very easy to use, and has a distinctively short learning curve.

When it comes to actual trading conditions and customer support, FXCM does fairly well, too. I understand that when I am doing business with a big company such as this, I have to expect a certain amount "canned response" type stuff from their front line support guys. That is always the disadvantage of dealing with a big company - they simply don't care about you - there are a million other clients to think about, each being equally unimportant. FXCM was not much different, but they do get things done when you press them.

I had an experience, early on in my forex trading career, before I knew much about trading. It went something like this:

I had opened a trade on USD/CAD and was looking for a short score of like 20 pips. I didn't know how far I would let the trade go against me before deciding to turn tail and taking the loss, I hadn't thought it through that far. I figured I would know when to get out, and anyway, the trade was definitely going my way. As it turned out, the trade didn't go my way. In fact, nothing went my way. Soon after a strong burst against my position, my internet connection passed out. I almost did too... What was I supposed to do? I couldn't even see my baby!

So I called up FXCM phone dealing and they closed out my trade very quickly and efficiently. There was no long procedure or waiting on hold, or anything of the sort. I was connected right away and they understood exactly what I wanted to do and did it without any problems. I was quite impressed. Although I was a novice trader (to put it mildly) I knew a quality product when I saw one. To this day I still use my FXCM account for certain types of trades.

PROS:
Excellent trading platform functionality, ease of use, and reliability;
Good execution;
Good customer support and phone dealing;
Regulated and well-capitalized broker;

CONS:
No guaranteed order fills - you get what the market gives you;
Lack of tradeable currencies - no exotics, oil or gold;
Large, faceless company that doesn't care about you;

Quick Facts:
Offices in New York, London, Hong Kong and Tokyo;
Accepts deposits by ACH (US), Visa, MasterCard, Wire Transfer, Check;
Maximum Leverage of 200:1 on all retail accounts;
Server-side trailing stops, OCO and if/then orders available;
Scalping OK;
Account can be held in any of the following currencies AUD, CAD, EUR, GBP, JPY, NZD, USD;

If you would like to know more, please check out this FXCM Review as well.

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.

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.

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.