Why the retail shops make sense

[Torch]

Interesting discussions going on.. forex v futures etc.. why would you fools possibly use forex retail shops, look at these ridiculous spreads etc etc etc

Here's a thought though.

Having been attracted to moving on from the retail shops to more direct trading through CBFX and the likes of Hotspot etc, I have taken a deep breath, simplified the foggy mess in my stoopid mind and remembered the various elements that got into forex in the first place.
... and walked away, back to the retail shops. Why?

Deep breath..

You cannot lose more than your initial account.

That to me makes all the minor technicalities irrelevant. Yes, I was upset when FXCM stopped guaranteeing stops (although I got real...)

..and it's not that losing my account is a danger (I paid my dues live demoing, not paper trading or curve fitting backtests to sleep better at nights)...
But.. in this day and age of identity fraud etc, isn't it reassuring that some son of a gun cannot hack in to your account and bankrupt you? E.g. a spreadbet going long on the dollar at 400-1 leverage This is real value. The rest is daft technicalities. See the big picture.

Forex for those who work hard and are not looking for a cheap holy grail fix (get all those gimmicky indicators off your charts , get back to basics (candlesticks etc but for real this time) and cancel that subscription to Nostradamus) offers the path to the malibu mansion for the little man. A muddy faced boy from Newcastle can walk up to Donald Trump and pull off his wig and look him in the eye and this could never have happened before private forex.

So don't take this for granted. And stop banging on about futures.
Yesterday is gone. Good.

 

[JumpOff]

You cannot lose more than your initial account.

Are you sure you don't have to sign some waiver that says fx carries with it a certain amount of risk, and that you are liable for margin calls?
Can't imagine that these retail shops will take the fall for you if some outlier event takes place and they can't lay off your bet in the market some how....

JO

 

[JTrader]

Torch
You cannot lose more than your initial account.

Hi

this is news to me also. I also thought that you could end up owing them a shed load of money if market events so determine this. Which retail forex brokers state that if you do lose say your initial £1000 account deposit/balance/stake - you will not lose any more - and your account balance will not move into negative territory?

Cheers

jtrader.

 

[JTrader]

http://www.ac-markets.com/EN/about_us.advantages_trading.asp -
No negative balances - limited risk. With ACM your risk is only limited to funds or deposit. Our unique, automatic margin liquidation policy eliminates concerns about debit balances by guaranteeing that you will never owe more than you have in your account.

It seems AC-Markets guarantee that you will not lose more than your initial account balance. I've not heard of any others offering this facility though.

Cheers

jtrader.

 

[Torch]

From the FXCM website-

Margin:

Up to 200:1 Leverage
Guaranteed Limited Risk

Margin/Risk Management
For the purpose of risk management, traders must have position limits. This number is set relative to the money in a trader’s account. Risk is minimized in the Spot FX market because the online capabilities of the trading platform will automatically generate a margin call if the required margin amount exceeds the dollar value of the account as a result of trading losses. All open positions will be closed immediately regardless of the size or the nature of positions held within the account.

(-goes on to contrast with futures trading as follows-)

If the futures market moves against you, your position may be liquidated at a loss and you will be liable for any resulting deficit in the account.

------------------------------------------------------------------------------------------------------------------------------

The following quoted from various pages on Oanda's website

<Do I have to trade on margin?>
Yes, all trades are conducted on margin as to protect customers from losing
more than the current value of their accounts.</p>

How does FXTrade manage my position versus my margin limits?
FXTrade automatically checks margin requirements every time you issue a trade
and every time there is a price movement in a currency pair. An Account Summary
posting the Margin Used and Margin Available will be present on the trading
screen at all times. For accounts with 20:1 margin, when/if your margin availability
declines to 4%, a warning will be issued via a pop-up window (only if you are
logged in). You will receive a similar warning at 3%. If your open positions
continue to decline below the 2.5% margin availability, FXTrade will automatically
close out all positions. This will protect you from losing more than your margin
deposit.

What is a margin ; as it relates to OANDA's
FXTrade Platform?
OANDA's margin call occurs when a trader's available margin drops below 2.5%
for accounts with 20:1 margin ratio and at 1.66% for accounts with 30:1 margin
ratio.. At this threshold, FXTrade will automatically close the trader
out of all open positions

http://fxtrade.oanda.com/faq/fxtrade_faq.shtml#11

An FXTrade account will receive a margin call, when the margin required
becomes twice the Net Asset Value of the account (or, in other words, if the
margin required divided by two becomes larger than the net asset value of the
account). A margin call results in an automatic closing of all open positions,
and is necessary to ensure that clients do not lose more than the account balance.

A margin call
is a situation in which the FXTrade Platform automatically closes all of
your open positions and may be necessary to ensure that you cannot lose more
than the amount of collateral in your Account.

http://fxtrade.oanda.com/fxtrade/margin_rules.shtml
------------------------------------------------------------------------------------------

Having used FXCM, GFT, Oanda and ACM all of whom automatically protect you from Margin calls (note Oanda's specific definition of a 'margin call' is really a margin call protection..), my own current faves are Oanda and ACM, Oanda hedging all positions (unlike its rivals) and ACM additionally offering guaranteed stops (unlike its rivals).
-Both are good fast non buggy Java platforms, Oanda probably just shading it on balance.

 

[Torch]

The following is quoted verbatim from GFT's 'policy changes...to minimise risk' document.
(see full pdf at http://www.gftforex.com/documents/pressreleases/gft-05022003-alternatives.pdf)

GFT has also added a "no-debit balance" feature to customer accounts. The no-debit balance feature
gives traders limited risk - if a trader goes into a debit, the risk is only limited to the deposit amount
and nothing below that. GFT, unlike several retail forex firms, will not collect on debit balances and
will assume the debit liability.
In an increasingly volatile market, GFT wants traders to have some security in their trades. "This is all
about our customers and what they need," said Gary Tilkin, president and CEO of Global Forex Trading.
"They need to know that even though the market fluctuates by the minute, they will be guaranteed
their price and limited debit risk. Traders are demanding more flexibility from their forex firms."

(Regarding margin calls, the following is stated upfront in their support faq.

Q. Do you perform a margin call?

A. No, we do not perform margin calls.)


(Actually I am starting to have issues with GFT, not least the bugs in their platform, but when it comes to clarity in their policies I certainly have no issues...)

TOP ​

 

[JTrader]

Thanks Torch

good research there .