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.