Maybe we have a proof now about what mt4 brokers are doing with all of us traders!

Take a look at this plugin (Virtual Dealer), these are not good news to MT4´s system:

I recommend you to follow this thread in forexfactory to know some more about this plugin:

http://www.forexfactory.com/showthread.php?t=70582

Yesterday I read in a Spanish newspaper (El Mundo) a warning from CNMV (National Securities Market Commission, it´s the organism who regulates financial markets in Spain) about “Finanzas Forex” (commercial name) or “Evolution Market Group”:

- His owner: German Cardona Soler, was involved before in some different businesses since 2002,  with great losses to many people, these businesses were about telephony, betting, games…

-  This program offers to their promoters good comissions to attract new investors, even with bonds in the form of luxury cars and some helps to buy a house (60.000 eur). With this referral program the company is getting 600 investors/1.200.000 eur daily. 

- The profit they supposedly get trading in the Forex market is not realistic in a long term or constantly: from 10% to 21% monthly.

- The company has got about 18.500 clients, managing a patrimony of 77 million of eur. This income is transferred to an American Company called Crowne Gold, and from this last company the funds are “supposedly” transferred to Dukascopy broker.

- One of the most active promoters is Santiago Fuentes, who posted in his website that they were in the process to be regulated by CNMV, but this organism denies it.

Source in Spanish language:

ElMundo newspaper 

Both ECN brokers are great but with Mbtrading/efxgroup you have access to many more pairs to trade and many other tools that hotspotfx doesn´t have.

The customer service is very good in both of them. 

The problem with Mbtrading is that the platform (navigator) could be very hard to people who always traded with mt4 before and you must test it during some days to discover all that it has inside and how to trade correctly (efxgroup is offering now to trade via your browser, I haven´t tested it but it seems great and very easy). With hotspotfx the platform is easier and very simple. 

With mbtrading you can trade with only $400, in Hotspotfx you need $7500 to begin and they have another platform and conditions to institutionals in hotspotfxi.com

You can not hedge your positions with mbtrading but you can do it in hotspotfx.

Both platforms are very fast, reliable and with low spreads (hotspotfx has less comissions than mbtrading), you can also see the volume of trading inside.

In mbtrading you can withdraw the funds that you want, with hotspotfx the minimum to withdraw your profit is $1000 and only when you have more than $7500 (in profit).

I hope this help you if you are thinking to trade in one of these ECN brokers. 

Well, I know that it´s not going to be like that every month but I am surprised with my results the first month:

34% profit (From $5000 to $6718)

Sorry, I made my calculations bad and I have corrected the mistake.

http://noponzi.com/DetailedStatement.htm 

All this time that I am trading I have always wanted to trade without leaving negative positions or drawdown, though all big managed accounts out there (galleonfx, etc) has always a percentage of this drawdown. I know that it´s not easy but I am doing very well until now.

I will continue posting my results this new month. Until now I closed some positions today and there are 2 running yet.

I am also testing 2 great ECN brokers: mbtrading/efxgroup and hotspotfx. I will keep you updated about my experience with them.  

I am also thinking if I should post daily and 4 h. forex signals in this Blog but I have my own personal life and it could not be easy. I will think about it. 

Second Part from Justin Leblanc and some words about mini accounts processed by Banks: 

Having said all of that, I’d like to make a few additional points about the Forex markets, execution, and our platform. In reality, the retail Forex world is made up largely of unsophisticated traders who have not traded anything before. You can usually recognize these people because they are looking to trade at higher margin levels and expect executions that the market cannot provide. 

The Forex markets are more highly leveraged than the futures market. We offer 100 to 1 leverage. Professionals rarely use 20 to 1 leverage. Retail traders with no experience are constantly looking for higher leverage, up to 400 to 1, which shows their lack of experience. Few of these traders last long in the Forex markets. 

In addition, there are many people who think that they are “entitled” to fills because they want to buy at certain prices. This happens most commonly on “news spikes” due to economic data. People try to place market orders on the news and then are surprised if their fills arrive within a split second, but 30 or 40 or 50 pips away from where the market was before the news. Few of these people actually understand what they are trading. 

Let’s consider a few points.

In exchange rate terms, $0.01 of movement between the Euro and USD is 100 pips. That means that if news comes out and the EURUSD moves 30 pips in a second, that’s $0.003. In other words, it is not measurable in real terms. However, a trader trading at 100 to 1 margin may expect that they should be filled at a price that existed before the news hit. 

When I ask traders if they would be willing to sell the EURUSD at the price it was trading at before news hit that caused a 30 pip spike, they say no. But they expect that banks will make those prices available. In other words, they aren’t willing to accept the consequences of a “market.” Trading on economic news in the Forex world is the most dangerous type of trading that one can do. Having said that, let’s consider what the various platforms offer to protect the trader.

Traditional deal desk platforms offer very little in this regard. The trader is either buying or selling or doing nothing. Orders are largely market and stop (market) orders. However, STP and ECN platforms (which are both NDD platforms, and EFX handles BOTH of these types of orders) execute any marketable orders instantaneously. That means if you are a buyer at the market and there is a seller at a price and no one has bought from him/her ahead of you, you are filled at that price. It is a true market. There is nothing that says that you deserved to get filled 20 pips back because that would have made you money.

The Forex market has come a long way in the last two years. Traders should look for platforms that offer the following:

1) Fraud protection in the form of Fidelity bonds.

2) Segregation of client money.

3) True executions.

4) Lots of liquidity.

5) A good variety of order types, which professional traders should use to control their risk. No one should EVER place a market order when they can limit themselves to fills 5 or 10 pips above the market.

On a true STP/ECN Forex platform, no trader that understands executions should ever have issues with getting extremely bad fills (slippage). Everything should be in-line.

I have spent a lot of time watching thousands of people trade the Forex markets. Forex is a very exciting market with massive liquidity. With platforms like EFX GROUP / MBTF, which offer true STP and ECN technology, it should be a true “trader’s market,” as long as that doesn’t suggest to traders that they are entitled to fills that don’t exist in fast markets or that reckless use of market orders should always be rewarded. 

When the exchange rate between the Euro and the US Dollar moves $0.01 in a day, that’s 100 pips. This is a microscopic move that is only remotely tradable because of the leverage used in the Forex markets. 

I think a lot of people have expectations that go well beyond reason when it comes to the Forex markets. 

To summarize:

I think that things are moving closer to a centralized market place with good regulation about the limits to which a seller or buyer can price themselves away from the market but still fill a retail client. 

I think within a year or two, platforms like EFX GROUP / MBTF will have completely altered the landscape of Forex just like ISLD and ARCA did in the US stock market back in 1995-7. In the meantime, stick to the platform that safeguards your money, gives you the most options, and provides you with direct, unhindered access to the liquidity that is out there. Make sure that your funds are secure from fraud and protected from co-mingling with your platform. Make sure that your funds are held on-shore, not off-shore. 

With all of that, it’s just about your trading skills.

Justin LeBlang

EFX Group

The (common) misperception here is that banks trading on the interbank system only deal in standard lots. This is, in fact, not necessarily the case. If a platform shows enough volume and acts in a consistently professional manner toward the banks, it is possible to get sub-standard lot liquidity from the banks. Not sure who keeps saying otherwise, but this is the case. Our system handles increments of $10,000 or higher (what you consider minis) in an STP (Straight Through Processing) manner directly to the banks. At no time is a mini or standard handled by a deal-desk in our system.

Justin Leblanc

EFX Group  

I wanted to help shed some insight, if possible, on the theory about banks trading mini’s or not trading mini’s. It used to be accurate to say the banks didn’t trade in less than 100k but that is no longer the case. They do indeed trade in size far less now than that of 100k. This is in part due to lower CLS fees. It also is in part of a firm’s overall relationship with the bank(s). 

I have a few banks that will actually trade as low as $1 but the point in this is that they do not have any minimum. MBT has successfully built an Equities, Options, Futures, and now Forex business of direct access technology. We have used the same methodologies that won us the #1 rated software based brokerage firm by Barrons to apply to direct access Forex. With our technology and relationships with a multitude of banks I think you will find that direct access is the way to go if you want a true type of market to trade Forex in for speed of execution and more importantly, quality of execution. 

I know this is a fairly simple response but it really is not necessarily a complicated issue to address. I hope it helps everyone in understanding.

Regards,

Steve

MBTrading

I found a great post from Justin Leblanc (EFX Group) explaining the differences between a NDD (non dealing desk) broker and DD brokers (retail brokers with a dealing desk). I will also add in Part 2 some answers in that Forum about how mini accounts can be processed by Banks. Here we go with the first part:

There are many keys to understanding the Forex markets, and there are many parallels between the Forex markets today and the stock market back in 1995 and 1996 when ECN technology like ISLD and ARCA were coming about. The non-deal-desk system is really the beginning step of the process of making the Forex markets a truly “transparent” market with “best pricing” available electronically straight to the customer. In order for there to ultimately be a true market for Forex (such as exists for stocks and futures); companies will need to take several steps to move away from the traditional (and rigged) deal desk systems. I’d like to discuss many of those steps now. 

I do want to say up front that I work for a non-deal-desk platform. I don’t want there to be any confusion about that. If someone thinks that any of my points are biased because I work for a NDD platform and not a traditional deal desk platform. 

These are the things that I think separate a true NDD platform, such as ours, from other platforms, and then I have some comments about the Forex market and the average Forex trader beyond that. 

1) Direct access to the biggest piece of the market possible. This is really the key to it all. A deal desk is basically a trader trading against a professional on a desk who can decide when and when not to sell to them. An NDD platform, before everything else, has no one working for the platform whose job and income are based on making money against the clients of the firm. When we execute a trade, it is executed purely electronically, without bias, without human intervention, and at the best price that our system could find at the time. I think this little fact is something that people overlook.

We are paid on the commission on the trade, just like in the stock, futures, and options markets. Our incentive is therefore to get the best price possible to keep the customers happy. Deal desk platforms operate in an entirely different manner. They only make money when the clients lose money. Playing with a deal desk is like gambling in Vegas. It always favors the house because of the spread. They control if and when you get executed. We have interest in the spreads being tight and the executions being the best that they can be. In fact, the better that we do for our clients, the better that we do overall. 

2) Execution should be no different whether you are closing or opening a trade. Many of the traditional deal desk platforms separate positions as “open” versus “closing,” which is what leads to something like “hedging.” The reason that they do this is because they believe that the average Forex client loses 6.7% per month in Forex (NOTE: that is the average based on their system, which means some people make and some people lose). Therefore, when someone is closing a position, they usually just accept the other side. When someone is entering a position, they might not. Why should this be the case? Why should someone who is long the EURUSD and selling it get a better fill than someone who is shorting the EURUSD at the same moment? They shouldn’t. I’ll talk about hedging in a moment. 

3) A related point here is therefore anonymity. The system should not care where the trade is coming from. It should not care whether that person is starting a new position or closing an existing one in the same direction. Try opening an account with a deal desk platform and trading for six months. If you are making money, then open a second account under a different name. Try to buy in both accounts at the same time. The new account will get filled, while the account that is making money might get slipped or requoted at the same moment.

Why is this the case? Because the platforms (all of them) profile their clients, trade against them, and make sure that the clients who are making money start to get worse fills. Remember that if you were the guy on the desk and you took the opposite side of every trade, you would want to slow down the people that were making money too because they are making money against you by default. A true NDD platform shouldn’t care who the trade is coming from when it executes. I can tell you right now that when it comes to the EFX GROUP / MBTF system, a sell order to close a long position and a short order that are put in simultaneously on the EURUSD will be filled at the prevailing market price together, period. 

4) No requoting. Deal desks mark certain accounts as “A list” clients. This means that the clients are good traders that are showing signs of being successful. “B list” clients are the rest of the client base. “B list” clients are set to auto-execute against the platform because they lose on average. “A list” clients are not. In fact, “A list” clients in a fast market are often shown pop-up windows that say “The price is no longer here, would you prefer to pay this price.” NDD platforms never requote. Either the order is marketable, or it isn’t. 

5) A non-dealing desk system lets you know everything that they are making off of you. Would I rather trade on a deal desk, where I spend 3 pips to buy the EURUSD, and then later, 3 pips to sell the EURUSD, or would I rather trade on a system that lets me get executed by the true market, which includes customers and banks, with the narrowest spreads possible, and get charged a fee. The answer is the latter. 

6) ECN vs. STP vs. Deal Desk. It needs to be made clear that there are really more than two types of platforms. A deal desk is a fixed spread platform where the desk makes their money in the spread trading against all of their customers. This rigs the market against the retail trader because they aren’t seeing true market quotes. The platform can move their quote wherever they need if they want to fill the client. STP (Straight Through Processing) platforms execute directly from the retail client to the banks. The more banks and liquidity in the system, the better the fills for the customer.

ECN (Electronic Communications Network) platforms let customer orders interact with other customer orders. Non-deal-desk (NDD) platforms are either the second or third type of platform. EFX GROUP / MBTF are both. We have over a dozen banks in our network which customers execute against directly (STP), but we now also allow customers to hit other customers (ECN) inside of the standard pip increments of the banks. We do not shave anything against customer executions.

As you know all mt4 (and other web based) platforms and retail brokers are only bucketshops, that doesn´t mean that you are going to be always scammed by them, there are some honest retail brokers out there. But you can not be sure or relaxed trading with them.

That´s why I am testing some ECN brokers during these past months. ECN brokers charge you a little comission for your opened trades and the spreads are very low,  it is very important to know that your trades are really entering in the Forex market, not in a software program inside the server (like retail brokers do).

I proved and liked very much efxgroup or mbtrading before (efxgroup is like mbtrading but more focussed to Forex only) but today I want to talk you about HotspotFX.

http://noponzi.com/hotspotfx.png 

I began yesterday in a demo account with them. The platform is very easy to use and very fast opening or closing your trades. The comission is lower than efxgroup or mbtrading and the spreads are very low. I proved the Customer Service and it´s great. They answer you very fast and they also offer to guide you by phone if you have some doubts.

The minimum deposit to trade in HotspotFx is 7500 USD or equivalent in EUR, GBP, AUD, CHF and JPY. The demo accounts are down everyday from 21:30 GMT till 22:30 GMT and live accounts at 22:00 for 20 minutes. During that time they run the end of the day processes and also they apply roll over and reval rates to all the accounts. 

What I saw when I began testing this platform yesterday is that the minimum lot is 0,1 (100K) and so if you deposit only 7500 USD the risk is very high. I contacted with the Customer Service and they fix this problem in the platform asking me for my account number. Now I see 10k, 100k… in the dashboard and so I can trade with 10K or 0,01 (1 pip is about $1, according to the pair).

It´s great because with a decent deposit you can trade with a good risk now and low comissions-spreads. Please do not trade with 100k and $7500. Think that if you want to risk only 2% of your funds in your opened trades then you can only risk about 15 pips!!, very bad. With 10K is about 150 pips: very good

It´s easy and very fast to enter or close your positions, to add or change your SL (stop loss) or TP (Target price), even a trailing stop with 3 options. And I also see how some retail brokers don´t show the real prices to us

You can also read in Trading Technologies website a good article about using HotspotFX:

Trading Technologies

“Connectivity to Hotspot FX provides X_TRADER users with direct access to the growing foreign exchange market. Now X_TRADER customers can use one screen to trade spot foreign exchange alongside contracts listed on the world’s major futures exchanges. There is strong demand among our customer base for forex products, and we expect many of our users will take advantage of this new connection,” said Harris Brumfield, TT’s CEO.” 

As you know HotspotFX also offers HotspotFXi to institutionals, but both of them (HotspotFXr or HotspotFXi)  offer the same transparency, anonimity and competitive multibank bid/offer spreads and liquidity. HotspotFx was founded in 2000 and they are a subsidiary of Knight Capital Group, Inc. They are also regulated by the FSA.

I will keep you updated about this great and reliable ECN Forex broker. 

This is an old post from Felix Homogratus but in my bad experience with some brokers regulated by NFA now I must agree with his opinion and bring this post again for you. Don´t be confused about what NFA really does and if it´s possible move on to an ECN forex broker:

A lot of forex traders place a lot of hope on the fact that their broker is NFA regulated. I hate to tell you this, but though NFA regulation is very good, that doesn’t mean as much as most people think it does. Before I start talking about this, I want to tell you that what I express below is a matter of my own opinion and research, and I may be wrong about my opinions and research. 

As far as I know, NFA stands for National Futures Association, and it’s a private company that collects fees from its members, and in exchange for the fees, they provide certain services to the members, like audits. The way NFA works is very similar to a Condominimum Association. Remember, it’s an association, not an organization. That means that members of that association can change their own rules. Like a board of members in a condo association consists of members that are usually tenants, they can vote on things, and decide how much every member of the association should pay, and what kind of duties the association will perform. 

If you live in a Condo association, you have to abide by their rules, but nothing prohibits you from selling your condo, and buying a condo in another association. Similar with NFA, the membership is voluntary, and if somebody doesn’t like the rules, they can leave, end of story. Of course if the NFA thinks that one of their members is doing something illegal, they report them to a government agency, and that government agency may take action, and shut down a company, but as far as I know, NFA has no power of doing it themselves. Similar to your condo association, if you do something illegal, they call the police and report you, and you pay the consequences. This distinction, is extremely crucial to understand.

People think that when a forex broker is NFA regulated, it conducts honest business, but one has nothing to do with another. Legal business and honest business are two completely different things. If a forex broker manipulates the prices and takes out stop/losses of their traders, that’s dishonest, but legal. If a forex broker changes your entry prices and decides to null your profits, that’s dishonest, but it’s legal.

Most rules in the NFA are set around how broker manages its customer funds account, and make sure there is no money laundering happening. NFA has rules, but those rules have nothing to do with what’s legal or illegal. If your condo association has a rule not to dry your clothes on the balcony, but you still do it, you are breaking their rules, but you are not doing anything illegal. What they can do against you is keep warning you not to do it, and eventually try to force you to leave the association by selling your property.

According to what I know, despite of the mostly non-important rules, set by the NFA, brokers break those rules all the time, and the NFA has to decide whether to kick them out of the association or not. No matter how much they may want this, but they can’t shut someone down for just breaking their rules. Their rules have very little to do with the law. 

There are now talks about the NFA raising minimum net capital requirement for the brokers. At first this seems like an action to protect traders from dishonest brokers, but nothing can be further from the truth. I think everybody knows that most forex brokers are bucketshops, so it should be obvious that most members in the NFA are probably people from big influential bucketshops. What is the biggest business threat for the big bucketshops? The biggest threat is the small bucketshops and ECN brokers, because small bucketshops and ECNs, take some of their clients, and create a lot of competition. How can this problem be resolved? Well, it’s very simple, raise the net capital requirement, which is nothing else but stale funds sitting in the customer funds checking account of a broker.

Now, if a broker has a lot of net capital sitting in their checking account, that means one thing, and one thing only. It means that the orders are not being executed in the real market. Because if you watch the video, if a broker was to execute the orders at the big banks, the money wouldn’t be sitting in the useless customer funds account, instead the money would be trading at the big banks’ trading accounts.

So what will this new rule will do? Some people think that it would drive a lot of brokers out of business, and I used to think that too, before I did more research. This has nothing to do with brokers going out of business, NFA has no such power. This would simply mean that small bucketshop brokers with not enough net capital requirement will simply be kicked out of the NFA, and wouldn’t be able to display their logo on their website. That’s all. The only thing this new rule would do is monopolize the NFA, and instead of having a lot of members, it would have only several big bucketshop members. And those big bucketshop members will use their position in the NFA as marketing tools to detract traders from smaller brokers that won’t be NFA regulated.

The bigger ECN brokers will have to make a choice whether the NFA badge is important to them. If it is, they’ll have to take 6 million out of their pocket, in order to meet that requirement, because remember, according to the video you should’ve watched, with their structure, they may have tens and even hundreds of millions of dollars, but they are not sitting in their customers funds checking account, instead the funds are sitting at trading accounts of major banks.

So if the minimum net cap requirement is initiated by the NFA, here is what would happen. A lot of smaller bucketshop brokers and possibly some ECN-type brokers will be kicked out of the NFA. They will still keep operating, and will probably not go anywhere. What this will do is the big brokers will be able to tell traders that they are NFA regulated, and traders should not trust the other brokers that are not NFA regulated. That will probably attract more clients to them, because the clients of smaller brokers will not be fully educated and will be scared by their broker being kicked out of the NFA.

So what benefits does this large minimum funds requirement do to the traders? Well…I think there is no benefits, but only harm. A lot of the smaller bucket shop brokers that will be kicked out of the NFA will probalby be able to operate more loosely, because they wouldn’t be audited by the NFA. Some honest brokers that actually pass their orders into the real market will probably leave the NFA, and confused traders will change their accounts to the big bucket shops that are the biggest manipulators in forex. And because NFA will consist of only few bucketshop members, a lot of new traders will choose them over all the other brokers, and will simply be victims of the same dishonest manipulations that every bucketshop customer has experienced.

So I think this whole thing with minimum cap requirement is nothing else but a political move from the large bucketshop operations, and they are already starting to use this rumor for their marketing purposes of attracting more clients.

Felix  

I am trading in the Forex market for more than 1 year and maybe my experience can help many people to trade. I must tell you that it´s not an easy way. You are looking for a new way to gain some extra money (forget to make you a millionaire trading Forex) and you have always read that this is the biggest financial market in the world and you can gain that money working at home once you have learnt how to trade.

Yes, it´s great!, but as I told you before it´s not an easy way. Firstly you begin reading a lot about forex in many websites, as for example babypips, to understand the basics to trade in this market, it takes some time and effort, maybe forex is not for you. You are surprised with all the indicators and strategies that many people use, and it seems that everybody is gaining money applying them (don´t believe them, most of them will never tell you that they are losing money).

Once you have learnt all that you think you need about forex you begin to trade in a demo account (someone told you: first trade in a demo account, don´t risk your money: good advise). You are surprised!, you made more than 20% in 1 month!, how easy is to trade Forex!. Many people has experienced the beginner luck.

Some months later and after learning more and more you have decided to trade with real money, you are going to gain a lot of money You learnt a lot about indicators, financial news, strategies and you begin testing one of these strategies in your real account (have you ever heard about money management?).

Maybe the first month you gain some good money (he he Forex is easy! I am a good trader! those traders out there only gaining 5% monthly don´t know what they do!), but in a short time you have lost all your money (ouch…).How is it possible?, I was gaining a lot in my demo account during some months and also in my first month with a real account…

Yes, you need to lose money to gain experience and humility, if you don´t learn from your mistakes you will not trade with success later. And the market is not always the same, those nice strategies work very well during some months and others not.

Some months later you have lost some good money and you don´t know how to trade, you even change your strategies from time to time and always losing (Forex is not as easy as I thought…). You discover that all you have learnt seems worthless. Many people even say goodbye and never trade again when they reach this level. Other people continue with his will and illusions, they want to be good traders!, they don´t surrender and they discover how important was a good money management (if I would have known about it before…).

Now you are trading again in a demo account but this time with a good money management and with few indicators (trend lines, channels…), as simple as possible. You gain more and more experience: patience, discipline, almost an intuition that tells you when and how to trade. You are gaining more and more confidence and your trades are doing very well. Here you are beginning to trade in a right way.

Now you know that you should only risk 1% or 2% of your entire funds in your opened trades. Now you understand that Forex is not as you thought and you understand those traders gaining a lower but safer profit every month.

Do you feel identified with this experience?.

Your comments are welcome.

This month I thought to trade in a demo forex account with $5000 as it was a real Managed Account. I am taking this demo account seriously and trading it with low-medium risk. I will keep on doing it every month although ODL securities (where I opened this demo account) will finish every month the demo account, but you know: it´s easy to open another one

You can follow my trading results here:

http://noponzi.com/DetailedStatement.htm