Interesting article on the scope of retail FX trading. Some interesting factoids:
- 615,000 Americans "dabble" in FX trading
- 75% to 77% of FXCM's customers lost money every quarter last year
- FXCm's customer turnover is 4 times more than ordinary retail stock brokers
- Gain Capital ended up making an average of $2,913 from every active trader it had last year, even though the average customer account contained only $3,000
- FXCM made $2,641 for every active trader, while the average customer had $3,658
The following 7 users say Thank You to shodson for this post:
Interesting article. Being the LA Times I do have to question any potential agenda. That being said, I found the paragragh "More commonly, however, it's the customers who lose out on these transactions, despite required disclosure statements that warn investors: "Your dealer is your trading partner, which is a direct conflict of interest."". Very interesting. Sums up why I stopped trading FX and refuse to do so in the future.
Anyone remember RefcoFX? Still have my bankruptcy settlement check from the RefcoFX liquidation framed and hanging on the wall as a reminder to never, ever trade FX. Ever had a nice winning trade busted by the platform/broker, geeze I wonder why.
Most people I know who trade through an FX shop have no idea that their account funds are not segregated like the futures market. What this means is that your account funds can be used by your dealer for any purpose. Your account funds can be used to pay off creditors of the dealer if the dealer goes under. This may have changed since I got screwed by RefcoFX. Check with your FX dealer. Ask if your funds are segregated.
Yes, I do have a biased opinion of the FX trading world and deservedly so. You tend to remember getting screwed out of thousands of dollars.
The following user says Thank You to TAJTrades for this post:
Glad you isolated those points Scott . I traded accounts with an ECN , FXCM and oanda at the same time , not on the same trades but having 3 accounts . Spreads aside , the disparity in liquidity , service , quotes (sometimes the quotes would drop out or freeze) and actual fills is astounding . Overall the ECN rules in regards to the individual trader . Its not perfect and I wouldnt expect them to be but a dealing desk or market maker HAS to take the other side of your trade to reduce exposure and risk and an ECN is an intermediary exposing your order to a liquidity pool and has no vested interest in your position .
I dont know which is better and dont know if one gives an advantage to the other . I like spot because I can divi up my positions to suit my needs and have great leverage with a relatively small account . Futures contracts are pricey for a little guy like me , relatively speaking , because I cant whack a conract into smaller pieces to scale out . If I want to control $20,000 in the market and break it into smaller lots I can do that with spot whereas one 6E contract I control $125,000 (I think) and cant break it up to scale out .