Great New Forex Site From Thomson
By Marc Prosser | November 28, 2007
FXCM and Thomson Financial have a great working relationship.
Thomson’s IFR Forex Watch product is one of the most respected foreign exchange market commentary services in the world. (and available free to FXCM’s retail trading clients).
Recently, Thomson created a free Forex website designed for both retail and institutional traders www.thomsonfxhub.com I like the site and have asked Thomson to provide a brief description of the site:
Thomson FX Hub is a foreign exchange-oriented site which takes advantage of Web 2.0 technologies to connect our analysts and readers in real time. FX Hub filters news, commentary and analysis on the web and puts
our authoritative spin on it. We surround our commentary with tools and information critical to traders and investors, enhancing its value.
If you are looking for tedious PhD-produced palaver, FX Hub is the wrong place for you. If you are looking for sharp, opinionated, to-the-point content with enough fundamental backbone to illustrate a concept without making your eyes glaze-over, FX Hub is your kind of site. We pledge to remain regression analysis-free.
Tags: forex, fxcm, thomson, trading
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Buying when we should have been selling.
By Tom Long | October 11, 2007
Occasionally (hopefully not more than once) we find that we entered into the wrong side of a trade. We meant to sell, but instead we bought. After the few seconds of panic, we are left with a decision. What do we do now? Most professionals will tell you that whenever they find themselves in this position, they immediately close the trade and correct their error. Too many times a new trader will convince themselves that the trade may work out anyway if they stay in long enough. However, more often than not the loss just gets bigger and the trader just gets more frustrated. Now you find yourself losing when you should have been winning. If you immediately exit and reenter in the direction you originally meant to, you could quickly absorb that loss and start to profit. So do not hesitate in fixing these types of errors. If it costs you a little money, chalk it up to experience. But don’t let a mistake like this get out of hand and of course, try not to do it again.
Tags: currency trading, forex, forex trading, trading mistakes
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DailyFX Forex Radio - Dollar Braces for Critical NFP Data, Europe Rallies
By DailyFX Radio | October 4, 2007
· Dollar sentiment worsens on today’s Jobless Claims and Factory Orders data
· Will Nonfarm Payrolls report spark US dollar gains, Dow losses?
· Be sure to view the rest of the week’s event risk on the DailyFX Weekly Calendar
To discuss these or any other FX topics with the DailyFX analysts, check out the Forum
Click Link to Listen to our Evening DailyFX Radio PodCast:
http://media.dailyfx.com/podcasts/FXRadioPM100407.mp3
Want to hear our PodCasts daily? Subscribe to them for free on iTunes
Tags: dailyfx, dollar, forex, forex radio
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Forex: Australian Dollar’s Limit is 10 Trading Days
By DailyFX Updates | October 2, 2007
The Australian dollar has had a magnificent run over the past few weeks but that run has finally come to an end after 10 consecutive days of strength. It seems that 10 days is the max of any AUD/USD rally. Back in July, when the currency pair raced from 8550 up to 8800, the one way directional move also matured after 10 trading days. What does this mean for the AUD/USD going forward? As you can see in the trading pattern back in July, we could see some consolidation before a more major turn.
Tags: dollar, forex, forextrading
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FXCM - More Than Self Trading Forex Accounts
By Marc Prosser | October 2, 2007
FXCM is more than self trading forex acounts. We offer:
* Free and Paid Educational Forex Courses
* Managed Forex Accounts
* Automated Forex Trading SystemsIn short, we still focus our efforts on forex trading. However, to meet the needs of a growing forex community, we expanded our products.Education - We offer courses for new forex trading (FX Power Course), intermediate traders (Trading The Majors) and advanced traders (Day Trading Forex) These online courses range in price from $19.99 to $999.Managed Accounts - We offer the FXCM Sentiment Fund and FXCM Aggressive Sentiment Fund for those that want to passively invest in the forex market.Automated Forex Systems - Our Forex System Selector products enables clients to mix and match over 40 different forex trading systems.For more information about these products, please visit www.fxcm.com
Tags: forex, forex trading, fxcm
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FXCM’s Response to NFA Regulatory Changes
By Drew Niv | September 28, 2007
Questions provided by FXStreet
1 - What is your opinion on the recent NFA regulatory changes? How do you view the implementation of these new measures for FDMs?We believe the NFA pending regulatory changes will lead to a consolidation of the retail forex industry and this consolidation will benefit FXCM, since we easily meet the new proposed regulations.The proposed regulations will require that firms have at least $5 million in net capital. However, the requirement for brokers with large amounts of customer capital could be substantially higher. Based on the most current CFTC financial data we estimate that as many as 20 firms would not be able to meet this requirement if enforced today. The forex industry in the long term should benefit from having a smaller number of better capitalized brokers. In essence, a broker with more firm capital is less likely to make imprudent decisions that would put its funds and its customer funds at risk.Although these new regulations are good for the industry, the resulting short-term changes may be difficult for clients whose brokers do not meet the new requirements. We hope that the NFA will make every effort to facilitate an orderly transition as brokers make new arrangements to enable their clients to trade through firms that meet the new requirements. 2 - The new proposal also calls for the use of proper and uniform accounting methods and tightens internal controls. Do you think this measure could affect your company’s business in some way?
No. FXCM’s accounting practices should not be affected by the new proposed regulations. Our own business standards led us several years ago to adopt similar practices to those specified in the new proposed regulation.
For the last six years, FXCM has been audited by major accounting firms which audit public traded companies. Our financial statements comply with international GAAP standards. To live up to these higher standards, we have had to maintain a highly trained and professional staff of accountants and internal auditors. We believe only a large firm, such as FXCM, can make the type of investment in financial integrity which will now be required of all FDMs by the new proposed standards. 3 - Do you consider these measures could be a breath of fresh air that could result in more investors joining the FX Market?Yes. The FX market has been growing at an incredibly fast pace. However, its momentum could be slowed if one or more brokers became insolvent. These new proposed rules significantly reduce the probability of that happening. Thus, the proposed new rules help protect the future of the industry.My personal opinion is that the emerging credit crisis will have a major impact on equity markets. As profitability in trading stocks becomes more difficult, there will be a mass of traders into forex. We do not want those traders’ first opinion of forex trading to be of an industry in need of regulation.4 -
FXCM is in discussions with several small and mid-sized FDMs who are concerned about their ability to meet the new proposed requirements. We are interested in purchasing the client accounts of these firms, or finding a mutually beneficial relationship with them.
The FXCM Group is uniquely positioned to accept and service the books from other brokers. We have 1) A global footprint with offices in the Americas, Asia and Europe; 2) A staff of over 500, capable of handling the migration of a large number of clients; 3) over $120 million in group capital(unaudited) to fulfill the capital requirement associated with servicing these new clients.
A forex broker seeking a potential buy or an IB relationship, must first of all consider the buyer’s ability to pay. Brokers may have thousands of clients trading many millions of dollars; in such an instance, the buyer may be obligated to rebate millions of dollars to them. The brokerage firms must satisfy themselves that the buyer can afford to do that – and in fact, that it has been routinely doing that for years.
Also: The broker must be assured that the buying firm can potentially absorb thousands of new clients, service them well and, in order to continue to receive revenue from their trading, keep them as clients.
In my opinion, the most important reason that some FDMs are considering a relationship with FXCM involves trust. In blunt terms, I believe FXCM can always be trusted to pay the firm’s owners the revenue their accounts earn – in full and on time. FXCM has been working with Introducing Brokers for over eight years. In fact, our very first Introducing Broker continues to refer business to us.
Our No Dealing Desk business model is ideally suited to processing a large Introducing Broker book of business. Under our No Dealing Desk system, our monthly revenues, in the form of pip markups, are an exclusive reflection of trade volume: if we do X volume, we book X pips. And the revenues of our IBs move in perfect concert with our own, since they may be rebated an exact percentage of total volume.
The revenues of a market-making broker, on the other hand, are not only dependent on volume, but may vary significantly depending on the quality and effectiveness of the broker’s traders as well as market volatility. Therefore, if the FDM allies with a market maker, and that market maker suffers a losing month, yet still owes a volume rebate to the IB, the IB may encounter difficulties in collecting everything it is owed.
6- How do you see the M&A market in the Forex industry? Do you expect important corporative movements in the next months?
The M&A market in forex is particularly tough for several reasons.
- No common standards – for software platform, accounting standards, back office procedures. It makes integrating an acquisition much more difficult than a firm in the equity industry, for example, where standards are shared.
- Recent market volatility meant rising volumes and profits for most firms. August was one of the best months in FXCM Group’s history – we had over half a trillion in trading volume – and we suspect that other firms also did very well. This recent success, I believe, will make owners of smaller brokers reluctant to sell. As a founder of a forex firm, I completely understand their feelings and their attitude. It is very tough to exit now. However, as the new proposed regulations come closer to enactment there may be a major re-assessment.
- Many private equity firms and venture capitalists are eager to fund profitable forex firms. But they are in search of the fastest and surest payout, and will tend to ignore all but the largest and most competitive forex firms on the market. Furthermore, they realize that even those large FDMs have been put in a weak – and perhaps ultimately desperate — bargaining position by the new proposed regulations, and will negotiate accordingly. If past is precedent, at contract time the deal may become much more one-sided and full of pitfalls for the forex broker owner. Private equity firms are expert at negotiating terms that are extremely profitable for them but costly for the business owner.
The illusion of private equity firms lining up to invest in the business may give the owner false hope that buckets of cash are theirs for the taking. I believe that once the FDM owner is discouraged by the private equity experience, actual M&A activity between forex brokers will intensify.
7 - For many, the very business model of Forex brokerage firms that needs to be decided is whether or not such brokerage houses can take opposite trading positions to those held by their customers, i.e., trading ‘against them’, which contradicts traders’ well-being. What is your company position on this? How do you hedge your customers’ trades?We believe that No Dealing Desk model is best for both trader and broker, and FXCM is totally committed to it. Over 99.9% of our business is conducted on this model.
FXCM was primarily a market maker until the end of 2006, when we took a 180 degree turn to the agency execution model. So we know the market-making business. Currently, many of our competitors believe that because volatility has returned, market making is the more profitable business model. That is true — in the short term. Long-term, however, the no dealing desk system is better, in my opinion, for both the broker and the client, for several reasons.
- Better Execution During News Events & Market Volatility. It seems that in the past few years clients have become much more focused on trading news events — those turbulent times when it is most difficult to make prices. By aggregating large bids and asks from the large banks, we solved that problem, and the proof is that since we inaugurated no dealing desk our trading volume during news events has grown immensely. Market makers, however, have an especially tough time during news trading, because if they honor all prices they will lose money. (When we were market-making we certainly lost money during the big market moving news events.) Remember too that the market-maker’s prices are removed from the real market, and so they must protect themselves by offering created prices. We avoid the problem by having some of the world’s largest banks streaming their prices through us.
- Lower Spreads. We can now review our policies relating to prices and markups above the best bid/offer we get from the banks, and we’ve introduced fractional pips to further tighten spreads. In the next few months we plan to continue cutting the cost of trading pairs across the board. And we have launched numerous incentive programs to provide additional discounts to high-frequency traders.
- Greater
Opportunity to Scalp the Market. Many traders favor short-term scalping strategies. For scalping to be profitable for the client, the market maker must lose. So either the market maker takes the loss or disallows the strategy. With no dealing desk we are able to accommodate scalpers – but of course we clearly warn them of the risks involved. - Aligned Broker-Trader Interests. The no dealing desk strategy has aligned FXCM’s interests with those of our customers. Since it is in our interest for them to trade more, we want them to increase their profits and account sizes. We have studied which trading behavior is most profitable for the retail trader, and have discovered that most retail clients are less successful when they trade pairs with large swings – especially GBP/USD. They are much more profitable with the quieter, range-bound pairs like EUR/CHF, EUR/ GBP and AUD/NZD. To give our clients an extra incentive to trade the more successful pairs, we have been aggressively reducing our markups on these pairs to make their spreads the tightest of all the currencies we offer.
- Easier Implementation of Programmed Trading. We can now accommodate more black box traders, both those with high-frequency systems and those with break out systems. The change to no dealing desk allows us to service a large new group of traders who never thought of trading through us when we were market-makers.
8 - Would you like to add something else?
The major reason for the proposed regulations is that the NFA and the industry realize that we must provide more funds security to forex traders. The new proposals are a major step forward, but I think we all realize they don’t go far enough.
I am proud to say that FXCM is in the vanguard of the movement to convince the US Congress to pass legislation extending funds segregation to the forex industry. In fact, we have even established a Political Action Committee to support and coordinate the actions of this Safety of Funds initiative, and we have convinced three other large FCMs to add their names to our petitions. We are urging every firm in our industry to join us in this effort.
FXCM already has the ability to offer our clients segregated forex accounts. Thanks to our British subsidiary, accounts with Forex Capital Markets LTD (FXCM-UK) are fully segregated in accordance with
Tags: dollar, forex, forex broker, forex industry, forex market, forex trading, fractional pips, fxcm, gbp, market volatility, nfa
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A consistent approach leads to consistent returns.
By Tom Long | September 28, 2007
Too many new traders spend time developing an approach to trading based on historical data and then when they use it live for the first time and lose, they throw it away thinking that it doesn’t work. The fact may be that the approach is solid, but it is our expectations that are not realistic. We shouldn’t expect to win every trade. Some of the best traders in the world win on less than half of their trades. But they also know that after a series of trades, because of sound money management they can expect to be profitable. This is because they are consistent in their approach, so they expect some consistency in their results. When developing a new strategy, you have to judge it’s effectiveness through different market conditions. This means that you have to see how it works when the market is trending up, trending down, in a range bound situation and also when the market seems confused and directionless. This may mean running through 100 practice trades to get a good feel for the strengths and weaknesses of the approach. Just because that approach loses three trades in a row, it does not mean it doesn’t work. If you and I were flipping a coin where I won on heads and you won on tails, we know that we would each win on about half of the flips. But if tails came up three times in a row, that does not mean that there is something wrong with the coin, it is just chance. We would still know that after a series of 100 flips, we would each still have won and lost about half of the flips. Think of this as you are working on ways to trade the market. Don’t be too quick to judge that approach on a small number of trades. Think long-term when evaluating and then if the results are acceptable, be consistent in taking the trades and your trading results will also start to show some consistency.
Tags: dow, forex, forex trading, trading mistakes
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Finding a trade is a two-step process.
By Tom Long | September 25, 2007
I’ve seen some new traders have some incredible winning results in a short period of time. However, quite often they will lose those gains as just quickly. They don’t do anything different and will come to us for some sort of insight. The reason is usually the same in that they forget to first identify the mood of the market before finding their trade. What I mean by that is to first identify the direction of the trend on the daily chart and then to find your trade. If the daily trend is up, then only look for buys and if the daily trend is down, then only look for sells. If the daily chart shows a range bound market, then look to buy above support and sell below resistance. If you are not sure of the trend, then the play is to move onto another currency pair where the trend seems obvious. I see many traders buying the pullbacks on a currency pair that is in a strong uptrend and enjoy tremendous success. Then when the trend stalls out or changes, they continue to buy and may lose all of the gains. Being on the right side of a trending move can result in some great trades while trading against the trend can lead to many quick losses. A good way to see if this may be one of your problems is to run a report on your FX Trading Station to see all of the trades you have made. Then take a look at the daily chart and note where you entered into the trade. Now ask yourself how your results would have been if you had only traded in the markets where you could confidently identify the trend. You may find that adding this simple first step of identifying and trading with the daily trend increases your chance of success.
Tags: dow, forex, trend trading
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Fractional Pips
By Tim Shea | September 21, 2007
If you trade either demo or live with FXCM, you’ve probably noticed an extra digit in your prices, recently. That’s because we’ve just started quoting prices out to a further digit. So, now, instead of seeing a EUR/USD price of, say, 1.3587, you’ll see a price of 1.35874. I’m so used to seeing prices only quoted in pips, and not tenths of a pip, that it’s been a little tough to adjust. But, believe me, this is great.
Why? Lower prices! Since FXCM has started fractional pips, I’ve seen tighter spreads most of the time. Like right now, it’s early afternoon in
Tags: forex, forex trdaing, fractional pips, fxcm, pips
Topics: What's New at FXCM | 2 Comments »
Afternoon Trade
By Laetitia Vaval | September 21, 2007
I entered a short-term position (probably until tomorrow) position in CHF/JPY earlier today. I had noticed that it was trading in a range between 98.56 and 98.20. I got short “relatively” close to the top of the range at 98.483 (middle black line), placed my protective stop at 99.350 ( a previous support level — on the 1 yr chart. Since i’ll be holding this trade overnight i’m going to set a limit price at 98.00 (lower green horizontal line on the chart above). From the different colored lines you can easily see that my risk vs. reward ratio is not optimal in this trade. It seems to be about 2:1 (when it should be 1:2)…
Tags: currency market, forex, forextrading, jpy, wall street warrior, wall street warriors
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