Order Flow Trading for Fun and Profit.pdf

DARKSTAR FORUM POSTS GET “ORDER FLOW TRADING FOR FUN AND PROFIT” HERE  http://www.orderflowtrading.com Zero sum game Quote: Originally Posted by Nerva I've heard various sources from other forums and publications differ as to whether Forex is actually a zero-sum game. (i.e., if you win, someone else loses) Here are some arguments for and against that assumption: Forex is a Zero-Sum Game: -Each position you hold, long or short, there will be someone else on the other end who will be losing money if it goes in the direction you want. (think about the mechanics of exchaning the money and variable rates) -Forex is often lumped in with futures, etc. as a risky market. Forex Is Not a Zero-Sum Game: (my position, although I think in some ways it is a zero-sum game) -The market moves based on psychological and fundemental underpinnings. -Not all speculation in the market (exchanging of currencies) is based on profiting. (businesses, individuals, etc. can also trade one currency for another) -Market price is based more on the enthusiasm of buyers and sellers, and not just the underlying mechanics of the exchange rate. (just as in the stock market the price may have little correlation to the actual value of the firm.) What are your thoughts? I think in some cases there are points when banks and institutions can throw their weight around to take out stops, but overall, one institution cannot just "gobble up" a small fish. Why? Market price is driven primarily by the enthusiasm and psychology of millions of instititions, traders, and currency exchangers - all creating price patterns which can be used to make a profit. I think it's important to clear these issues up in order to better grasp the dynamics of the market. This question seems to come up every couple months...

Want to understand a zero sum game? Consider what would happen if every man woman and child on the planet suddenly wanted (for whatever reason) to get out of their asset positions at the same time. If the value of the asset would drop to zero, you are in a zero sum game. Forex, the stock market, and even the real estate markets are all zero sum games regardless of what you read in the promotional materials. Quote: Originally Posted by merlin i beg to differ dark. the stock market is not zero sum. the company stock can rise, making everyone's shares worth more, even though no exchange (trade) has taken place. How does that happen exactly? Not being argumentative, I'm actually very curious... Quote: Originally Posted by Tesla Being an ex-stockbroker, maybe I can field this one... I'm guessing you're used to forex and commodities, where when you take a position you're really entering into a contract with a counterparty which either gives you rights or responsibilities or both. If I buy a put option on cattle, I've got a right to do something and the person on the other end of the trade received monies in exchange for agreeing to let me do it. Same thing with forex. As the value of the rights and responsibilities fluctuate, the value of the contract or position does as well. Stocks (and most items of value like realestate) work a bit differently. It's usually not an ongoing relationship with a counterparty (though it can be with shorting and options). Example scenario: Gene Splicer Inc. is a publicly traded company which discovers a drug that cures 99% of all cancers. The stock jumps immediately to a billion dollars a share. Who's lost money? Remember that there's not someone short one share for everone long one share. Here's another bit of trivia... you can draft up a contract for put and call options on a house. If you do so, any further fluctuation in the perceived value of the property is a net zero gain since someone gains and someone loses. Hope this makes sense, trying to get it all posted before I crash for the night. -------------------------------------------------------------------Ok. I understand what your saying but I have to disagree. The argument for stocks and even realestate being positive sum fails to account for any indirect costs of market price movement. Try this example: I open up Darkstar’s Lint Manufactures and list it on the stock exchange. As a manufacturer of lint, I have earnings of $100/yr (there is always a sucker somewhere). I own 100% of the 100 shares of stock (just follow along…). How is price discovered for the value of my stock? We

could look at the market multiple, or the sector multiple and come up with a value, but how does that money actually get in my pocket? Let’s say I want to use a multiple of 15X to value each share at $15. To get this value, I have to sell the stock to someone who agrees with my valuation. Since we have such low earnings and a shitty product, let’s assume there is only 1 other person in the whole world interested in purchasing my stock. If they value my shares at a 10X multiple, I can only receive $10 per share regardless what I think its worth. My choices are to accept the buyer’s valuation, or hope that I can find someone else to value my shares higher. Until I find someone else, my shares have an effective value of $10. Taking all of the above into account, let’s say I release an earnings report showing an increase to $200/yr. I can now justify $30 a share to myself and anyone who will listen, but the only interested buyer for my stock can argue that my company has oversold the market and earnings may drop dramatically next year. He now only wants to value my shares at a 5x multiple. In this scenario, even with a phenomenal earnings report, the value of my shares has not changed. They are still only capable of being converted into $10 per share. This is all pretty basic. The part that screws everyone up is when we examine the indirect costs of price movement. Going back to the pre-earnings report $100/yr figures, let’s examine how each party benefits and loses as a result of post-report price movement. The potential buyer for my stock wants to buy my stock. Without him, my stock has zero value. We should never forget this. Prior to the report, this potential buyer has the opportunity to buy my stock at $15/share, but is only willing to pay $10. Let’s assume the earnings come in at $1000/yr. Even with a 10x multiple, each share is now worth $100 to the buyer. If the buyer decides to pay this rate, the profit that would accrue to me as a result had nothing to do with the report. The buyer has changed his opinion about how to value my shares. As was pointed out above, if he does not alter his opinion in a way that alters a shares value, the report is irrelevant. The $90 extra per share that the buyer decides to pay post-report is where my profit came from. It was the buyers indirect opportunity cost that I benefited from. If he had decided to buy my shares at $15 pre-report, the new valuation would have accrued to him instead of me. In short, my benefit could not have been possible without his loss. You can swap in around too. Say the report came out at $10/yr in earnings. The $9/share I lost was paid to the potential buyer in cost savings. My opportunity cost for not selling was his savings gain. Zero sum. No matter how you slice it you cannot escape the fact that without an agreement to transact, a security has no value. If every man, woman, and child on the earth suddenly decided that owning stock would cause them to die in 1 minute, every share on every exchange would instantly be valued at $0. Unless or until you can resolve that problem, you are participating in a zero sum game.

ECN Quote: Originally Posted by suetombo

hey guys, im have the biggest noob question... ive read all about retail brokers and how they take the other side of your trades , my profit becomes their loss like a t a casino and etc... so i'll avoid them entirely.... im new to the forex business and i have a lot of money to play around with... i wish to join up with an ECN because from what i have read up they are the real deal... but basically my question is , i know it mite sound stupid but say i deposit 100,000 and got really lucky and profited 10 million and i decide to withdraw everything... will my payout become a massive liability for the ECN so that they will bar me from ever doing business with them again? i keep hearing ppl say that the more successful you are the better it is for the ECN so they keep making their commissions and so forth, but is the sky really the limit in dealing with these type of brokers? say i had a crystal ball or something and i kept winning all the time, what will happen? thanks First of all, if you have $100k to open an account you should move directly to Currenex or FXall, the only "true" forex ECNs. IB and MB's may be legitimate ECNs as well, but their reluctance to divulge their counterparty banks makes me a little leery about them. Putting that asside, you should in theory be able to make as much money as you can at an ECN and the broker will thank you for doing so. On a true ECN, you are not transfering losses or wins between people. You are buying an selling a single block of currency on each side of the transaction. When you buy at 100 and sell at 110, the person who paid you 110 for your position is in effect giving you your profit. At EOD when settlement occurs the 110 will be collected from the counterparty buyer and the 100 will be paid to your counterparty seller. The remaining 10 then gets deposited in your account. For a loss it just works in the opposite direction. Hopefully that makes sense...

Interest Rates Originally Posted by ssteiner87 If i'm correct, a rise in interest rates is an attempt by the fed to contain inflation, which is the most ugly thing that's killing the value of our money and assets. What throws me off is that when we raise rates I thought that means banks typically lend out less money/loans, which obviously does the exact opposite of stimulating growth. When rates are lowered, that attracts more banks to lend out money which encourages growth and stimiulates the economy. However it makes sense that investors would want a high interest rate like 17% (US interest rate in the 1970s!!!) over something like 0.25%. So I still haven't figured out if a rise in rates is good or bad for the currency. It is important to note, however just because a country's currency is strong, that doesn't make it good..... In short it’s the portfolio flows into a country that drive the currency value higher. Investors are looking for growth and when a central bank signals that there are inflation risks it is usually the result of an economy growing above potential. Also the way you describe the negative effects of inflation are a bit out of context. A "high" rate of inflation in the neighborhood of 3% annually is only marginally worse for a country then a "low" 2%

rate. In the grand scheme of things it means next to nothing for the short to medium run valuation of a currency. Ofcourse if inflation was running at 10%+ it would be a completely different story... As a side note, inflation isn't inherently bad. If the inflation rate was zero, the inherently risk averse population that had money and assets would have no compelling reason to take on the risks associated with capital investment. If they simply stuck their money in a savings account (as they would most assuredly do) the economy would grind to a halt. A stable, but low inflation rate forces people to take on the investment risks that will ultimately lead to their long run economic prosperity. Again, if inflation was running at 10%+ it would be a completely different story...

Why Technical Traders Fail The general premise of TA is that all information is contained in the chart. This is of course technically true, but the unspoken secret is that it only tells you what has already happened. The coin toss experiment and a real market chart look identical, because for the purposes of technical analysis, they are. As a TA practitioner, it is irrelevant WHY the prices moved as they did. Without that information, the core decision process relies on the probability of an event occurring. How are those probabilities determined? Through back testing of existing data! So what prevents the technical trader from back testing a 10,000 flip coin chart for recurring themes? Beyond the inherent understanding that a coin toss is truly random, nothing. Trading on the basis of probabilities is guaranteed, 100%, indisputably, without question, a losing proposition. Why? Because price can only do two things; move up or move down. 50/50. Once you account for the spread, it becomes 49/49 or worse. Over an infinite number of trades, your account will inevitably drop to zero just as it does in a casino. The post earlier where Captain Piptastic ran a test on gbp highlights this fact with all of his tests losing money once the spread was accounted for. Money management is irrelevant to a technical trader because in the end their dead anyway. Playing a 50/50 game, for every pip you increase the TP over the stop, you increase the chance of being stopped out proportionately. Going back to Captain Piptastics work, the “Ugly” winner sits squarely on the probability distribution curve even after optimizing the ratios. If more data was utilized, it would be easy to conclude that a return to zero equity would result at some point in the future. And that’s really the key point; money management can help you last long enough for luck to put some cash in your pocket, but if you continue playing, your going to give it all back in the end. Betting strategies don’t work in Vegas, and you shouldn’t expect them to bail you out of the market either. It comes down to: You’re either exploiting inefficiency in the market or you’re providing the liquidity for those that do. Everything else is a roll of the dice…

Liquidity & Stop Hunts

Banks and hedgefunds trade $100mil+ positions and it is usually impossible to drop that much on a trade without moving the price. They tend to accumulate securities on the run up and then dump them into the stops. If the stops weren't there, liquidating those positions would drive the price down and erase any profits they accumulated. I say up, but it works just as well on the short side...

Developing a Winners Mindset

Something that helped me develop a good mindset was to spend less time as a loser and more time as a winner. Starting in the beginning of the week I would try and find a good trade that I felt was sure to be a winner. If I lost the trade, I would continue looking for another winner. If I won the trade (even by just a few pips) I would not trade agin until the following week. For a month or two I went into every weekend on a win and it really helped me identify myself as a winning trader. Once I genuinly saw myself as a winning trader my actual results began to exceed my windest expectations. Now every winning trade is just positive reinforcement... This also had the advantage of enforcing the discipline to be selective in my trades; the value of which should not be underestimated. Luck be with you.

Pro Traders

I think a pro(fessional) is anyone who makes a living by using their skills in a given profession. This doesn't imply that they are an expert or a master, just that they have established a level of skill sufficient to sustain themselves. The pro trader question is a good one, in that there are many different situations where someone could sustain themselves without any skill. But I wonder if there is really any difference at all. Is the pro basketball player that blows out his knee still considered a pro when he can no longer play? Is the computer software developer that gets downsized and can't find a job still a pro? How about the scientist that spends years developing a vaccine that never gets FDA approval? At what

point did any of these people stop being one? Were they ever really pros at all? It could easily be argued that if they were better skilled they wouldn't have found themselves in the situation they did. I don't know that you can ever really answer these questions outside of the "does it pay the bills" quantifier. The traders you sighted were all pros at some point because they knew how to trade in a way that managed to put food on the table. But I wouldn't consider any of them master traders because they couldn't consistently outperform their peers. They couldn't do so because there skill level was just not high enough. Being a pro trader somehow seems different because so few people can actually make enough money, long term, to quit their day jobs. Those that can are absolutely qualified to call themselves pros until they can no longer do so. And in that vein Jim, you ARE a pro, as are many others on the forum.

Quote: Originally Posted by lizmerrill I have been having a discussion with my father re these questions, and can someone please clarify the answers for me: Consider the usd/jpy. If one buys 1 lot or $100000 of usd, and the current rate for the base currency is 120 yen, the he will exchange 12000000 yen for $100000. He will have bought the usd and sold the yen. He will be charged a carry rate, he will pay interest on the 12000000 yen and receive interest on the usd, differential is called the swap. Right so far? Now why does he have to pay interest on the currency sold, the yen, and why does he receive interest on the usd? Its easier to think of in terms of debt/equity. When you short usd/jpy you are in effect going into debt with a Japanese bank (borrowing Yen). As with any debt your obligated to pay the prevaling interest rate to cover the lenders risk. Now you have this big pile of yen and it isn't doing you any good, so you convert it into USD and loan it to your broker. Because your broker is now in debt to you he is obligated to pay YOU interest. If your borrowing costs are lower then your lending rate, you collect the spread. Technically you don't really pay interest to a japanese bank nor do you lend money to your broker. Another trader or other liquidity provider is taking the opposite side of the transaction and you guys are collecting from/paying each other but that makes the discussion too complicated... Quote: Originally Posted by lizmerrill Now, assume the usd rises to 150 yen. When you sell the usd and buy the yen to unwind this transaction you convert 12000000 into $, right? but if you convert back to $ you will lose money on the transaction, because the $ rose in value? No you are currently long dollars, so you will convert your $100k into 15m yen. Once you pay back your 12m yen loan it will leave you with net 3m yen. The math goes something like: .....100k USD X 150 yen per $ = 15m yen - 12m yen loan = 3m yen net

You can then convert that 3m BACK to dollars ($20k usd) and withdraw it from your account. This is all on top of the interest spread you made.

ept 30, 2006 Quote: Originally Posted by tsicby I thought Oanda quoted the interbank xchange directly, but their site is a little vague on the subject. I'm a complete newbie. How does this work? Are brokers marking up and giving a "retail" quote or do they quote the actual interbank price? In comparing Oanda with Currenex, I have found that asside from the spread, they are spot on. I'm not sure howCurrenex compares to EBS or Reuters, but my guess is that it's identical or it would make for some sweet arb opportunities. So in short, with Oanda your effectively getting interbank quotes. Quote: Originally Posted by mrcooldude Darkstar, You speak of Currenex rates – there is no-such thing, since Currenex is not a liquidity provider; it's just a software company. For example, I use the Currenex platform with a couple of different brokers, and each price-feed is slightly different. So talking about "Currenex rates" is similar in principle to taking about "Metatrader rates", in that the price-feed depends on from whom the rates are coming, rather than which platform is being used. It also depends on whether the firm adds a premium to the spread or charges a separate commission. This is ofcourse all perfectly accurate, but it doesn't alter the point I was making. Quotes on institutional currenex networks are provided by banks. Most of the banks operate on multiple networks and are feeding the same prices to each prime broker. If they weren't it wouldn't require much effort to arb the different networks. Since those opportunities are few and far between, it is easy to generalize that "currenex pricing" at one prime brokerage is indicative of the quotes available on alternative networks. Given that Oanda is spot on with "my" currenex feed, I don't mind simplifying the answer to tsicby's question by saying that their pricing is pretty damn accurate.

Quote: Originally Posted by loser Hi all,

I am an aspiring forex trader want-to-be, and I only started out Forex Trading in July 2006. I've read books and go seminars to learn more about the market. In less than 2 months time, I've know all the basics from the setups to how to read the indicators and I thought it was enough. As I went into trading with Mini, I was given a 200x1 leverage by Forex.com and I blew out 3 times from August to December in very short time. When my friends saw my gloomy face, I still managed to hid from them and they thought I was a successful trader who is making money, and then they thought they've found a "holy grail" in me. I lied about my situation and I lied about my overall results. I was a scumb and I was nothing more than just a big fat mouth and an empty shell. Although I can share about all indicators and explaining simple forex term, I became the "in thing" within my social circle. But deep inside, every day I traded with my life, I wasn't able to make pips consistently. I knew that it already hit the resistance or Fibo level or whatever trendlines and channels you can make, but I always succumbed by my emotions. I was not able to trade with ease. I told myself to trade on the 1-hour time frame, but when there is no entry possible, I switched to 4hour and ah-ha yes I've found the entry point with all my EMA and MACD cross over each other. I thought trading was that easy, I've decieved even my dad that I am still making profit. That did not become a reality after my last month of trading. I told them that I've lost 5,000 USD in the process, I've shared with my closest friend that I've lost that amount and close to crying out in the nights when nobody around. I wanted to be a trader really, I want to be financially free but it seems I can't. After 4 months of hardship, and listened to traders and from books that I MUST CONTROL MY EMOTIONS and PROPER MONEY MANAGEMENT, and yet yet all I still can't. Am I stupid or what my inner devil laughing at me, calling me an educated idiot who never wake up. Now I am, I am very much disappointed with myself, my performance, my lies, everything that resulted in that 5,000 dollars loss. It may not sound much to some of you, but to me, it is a lot and it is painful. Very painful. My friend asked me if I want to be a whimpee, I don't want. I want to rest and come back again. Blind confidence aside, I really don't know if I can make it. I really really don't know. I'm scare, I've no confidence and I dare not tell anybody about my problem but to share in this forum. I just hope a kind soul to share with me your experience so I can get some comfort from. Don't console me that trading is not for me, because deepdown my innerself I know trading is for me. It is only about emotions. Please help me by telling me how to control them. I am in a lost, my paragraphs here are not well structured, I just type what I think. I am really really in pain, but definitely not suicidal. Not for 5,000 definitely.

My lifestyle has totally gone upside down due to that loss, I couldn't sleep, I even feel so stressful when I type this out. I'm not going to write further more. If some of you know what I've went through, please share with me. I need help, psychologically and emotionally. If I can pull off this period, I can become a better trader I believe. Quote: Originally Posted by Mr Trend 1.You have to accept capital risk.If you can't totally accept the money that you use to trade as money that is possibly gone, then you will not succeed. That is not to say you should trade with money you can afford to lose. That's a stupid saying. But instead, you should look at your capital in a risk-free, ho-hum way. It's just numbers. You're just keeping score. No more, no less. 2.Realize that everyone's been there.I don't know a trader who hasn't took a beating at some point in their trading career. Realize that everyone has been in the exact same situation as you. 3.Some people need to take a beating to get it. Be honest with yourself.Some people need to be slapped around to get it. I do. I need to learn the hard way. You could tell me over and over not to do something, but I will probably do it anyway. You can change that mindset, but most of the time, you have to get killed in the process. Most of the successful traders quit making rookie mistakes like overleveraging and overtrading once they drop 20-50% of their account a few times. That feeling makes them sick to their stomach. Most go on to blow their accounts... 4.Stay positive. A loss is agoodthing. Don't forget that. A loss is only a bad thing when you do stupid, rookie things. But then, it's not the loss, it's your head at that point. 5.Get involved in church.Start praying more. Talk with God more. Interact with fellow believers in your faith. It will improve your mind and body overall. I, for one, have lost a lot of money. I knowexactlyhow you feel. Quote: Originally Posted by Bear73 I haven't been on here for a number of months but saw this thread and had to respond. To all those out there that have been asking me to post again , I apologise that it has taken me so long to get back on. I read your post and thought would be a good idea to throw some words of advice our there for you and some ideas doe how to pick your forex business up again. Firstly , your mind set might have to change a little bit.

You are essentially running a business and once you start to think along those terms as opposed to trade and looking at the money things will start to change. I would suggest you write a business plan , the same as you would be doing for anything else. Some suggestions for this business plan would be this 1 - No more than 5% or capital a risk in any one trade 2 - No increase in trading size for a 2 week period. What this mean is that if you have a couple of trades that go your way then you do not increase that amount of money per trade until the end of 2 weeks after your first winning trade. This doesn't mean that if your capital is going backwards that you shouldn't be reducing your size , you definately do. Read details on the capital management of the Turtle Traders off the web to give you a better understanding of what I am talking about here. 3 - No more than 1 trade per day. This sounds hard to follow , but it will make a massive amount of difference to your trading. If you have a bad trade you try and "win" the money back and this is a no no !! 4 - Work out what hours you are going to trade and treat it like a job. I know people say that they are trying to get away from that , but this is the only way that you will make money consistantly out of it. I would suggest that you be looking at the 8am (London time) as the key time to look at taking a position. 5 - Never allow a winning trade to become a loosing trade. So once your in profit of 25 points or so then set your stop to break even straight away and getting back to point 3 , if it comes back and takes out your stop and then goes 200 points in your direct then its just tough and will have to wait till the following day. 6 - You must have a business plan and some sort of check list that at the end of every trading day you mark off to see if you have followed your rules. I would suggest that you keep some sort of online trading diary that you can't change. No one that knows you will be aware of how your going and as you can't change it will keep you honest about your results (and I don't mean your points but your result about how you stick to you rules. 7 - Look at a system of stepping out your position over time. Most brokers now a commission free so multiple trades don't cost you anything more to do. Say 25% at +20 points , 50% at +50 points and 25% at your target. I would use this in a combination of OCO orders with a break even stop. 8 - Start investing in your education. This means a lot of reading. I would treat it again like a business. When you get a university degree you don't get it over night. Set yourself a schedule of reading 2 hours a night instead of TV or something that fits in with your lifestyle. I would suggest the public library for source of research, it will save you a tonne of money which as a new trader is not

fun. If they do not have the book in that your after , you can request if and most of them will do it at no charge for you. By doing this you will be exposed to new ideas across a very broad spectrum of trading and something for a totally unrelated market you might be able to use. For example , the main ideas for my trading came from a book on Fund Managers and futures trading book , not a currency trading book , and related them to my market. I would suggest that you have the discipline for this over a extended period of time even if you are consistantly profitable. Just a couple of other things that might help you. I would try to think like the people that really control the market , the day traders for institutional firms in London , Frankfurt and New York. They sit down at 8am London time and trade and at the end of the day they close there positions for square and go home , fresh slate and next day come to work new and fresh. If they are doing it on a massive scale and making very very good money doing it then why would you try and do anything different. This second point may sound funny , but try to think like a female trader. This sounds strange , but statisics don't lie. Females make up a smaller amount of new traders but make up almost 50% of successful traders , what does that tell you ? That females traders have a higher chance of becoming successful than male traders. The main reason for this is that they do not have the adrenaline rush that most male traders do , they are shown a set of rules and follow them. Some of the books that I would recommend to you is trading in the zone - Mark Douglas and Trend Trading by Daryl Guppy. You should be starting will a small account a treating it like a 12 month computer game when you are learning and realise that you will be doing it like this for 12 months. For you to become successful it has to become second nature to you and almost mundane. I hope this helps. I apologise for everyone for not having any input for the last couple of months but I have been concentrating on my trading business and a couple of other things and moving to the other side of the planet. All the best Bear After the phenomenal comments from Bear and Mr Trend, the only thing I can add is that you should question your underlying reasons for wanting to be a trader. The un-discussed thing about trading is that it changes you. It shows you the type of person you really are and either rewards you or punishes you depending on how that revelation sits with your values. At the moment you think your upset about the $5k you lost, but that isn’t what prompted you to post your situation on the forum. People lose many times more or less then you and don’t express the shame and disappointment that you have. You’re disappointed with yourself for pretending to be

something you’re not and that $5k was the punishment you delivered upon yourself to learn the lesson. Tomorrow you can start with a brand new account and trading system, but if you don’t pay attention to the lessons your mind is trying to tell you you’ll find yourself back here again sometime soon. Figure out exactly why it is that you do what you do and your trading will surpass your wildest imaginations.

Originally Posted by MrFuture I mean, no complaints here, but I have to wonder why is it that I can get real time charts and data for free and super cool charting softwares like MT4 that in addition to the coolest indicators, it allows you to customize AND manually back test charts to find out how you systems work out. I mean, with stocks, forget about it, you gotta pay at least $100 per month to have all of these things.

Also, here we can daytrade as much as we want, without having to worry about 3 day settlement rules and the "no more than 3 roundtrips per week if you have less then $25,000" rule. It all looks too good to be true. So yeah, why is it like that ? Can all this soon change if forex becomes even more popular ? I hope not...but I heard that the daytrading rules of stocks got more stricht in the last 5 years so....so techinally we are at risk, right ? ( and by we I mean those of us who only have a copule thousand dollars and not $25K). Peace 1) You DO pay for many of those things. It is just baked into the spread. 2) Free forex demo accounts are so because the majority of the expense associated with stocks and commodities is billed by the exchanges they trade on. No exchange, no expense. The platform becomes a marketing tool paid for by the spreads on live account transactions. 3) Forex is an international market. The SEC can place whatever restrictions on forex that they wish, but that doesn't mean anyone outside of America needs to follow them. Very few brokers are actually based in America and as such are not within their justistiction. So I wouldn't worry about crazy account requirements any time soon.

Quote: Originally Posted by irishdanceking I'm new to the forums, so hi everyone. I need some advice pertaining to my college Major. I am very interested in Japanese and all things related to the Stock,Bond, Currency, Commodiy and Futures markets- and read in a career book that a foreign exchange trader would be a job that would allow me to incorporate both of those subjects. My question is, what Undergrad Major is best for a foreign Exchange Trader or for a job in any financial service for that matter? I was thinking either International Political Economy or Economics , but was told that Finance would be better. What should I study that would help me with this type of job? And also, can I specialize in the economy of Japan as an FX trader? Thanks and God Bless

Personally I don't think any of your choices are going to make the slightest difference whether you'll be successful as a trader or not. PHD economists can't predict with any certainty what is going to happen in the financial markets and finance majors are more concerned with how to structure loans then they are with the direction of the yen. The degrees may be helpful in getting you in the door, but once your there it is a matter of personal fortitude and psychological makeup. If you want to be a trader then trade. Pull 40 or 50% returns for the next 4 years and there isn't a bank on earth that won't hire you to trade, education or not. Unfortunately that is a lot easier said then done, so make sure you have a good degree with ample opportunities to fall back on. Quote: Originally Posted by irishdanceking It's getting in the door that I'm worried about, once I'm in I think I'll be fine. What would you suggest for getting in the door? Couldn't tell ya. Banks don't pay enough to spark my interest. It might help to look here though: http://jobs.efinancialcareers.com/Trading.htm Quote: Originally Posted by irishdanceking Really, I read that FX traders( if that is what you are talking about)get paid a lot. Thanks much for the link, it it much appreciated. They do ($300-500k) but if your good it's peanuts in comparison to what you can make trading your own account. Plus they make you move to a specific location, work a 60+ hour week, fuss with paperwork, and deal with people. It's just more trouble then its worth. If I wanted that kind of aggrivation I would start a hedge fund. :D Don't get me wrong brother, I'm not telling you to avoid an education. You certainly should take the opportunity if you have it. Just don't make all your future decisions based on the expectation of trading OPM. If you want to be a trader, do it on the side while your going to school for some other career. Wost case scenario, if your trading skills are found lacking (which is a VERY high probability) you can get a nice, well paying job.

Quote: Originally Posted by Houd

Hi, We all know trading involves lose and gain. Do you think some one could have 1% profit in average? Example: - One could start with $ 10K and after year, he gain $ 45K and lost $ 10K so the net gain is $ 35K means 1% profit a day. Do you think this Example is artificial and impossible to get? This is about the most convoluted thread I have read to date... Can a trader make 300% in a year? Yes, I have had two 300% MONTHS this year. (50:1, live, 5 figure account. To address that subject.) Can you do it as a neophyte trader? A snowball has a better chance in hell. Expect that you will lose money until it can be proven otherwise. Can x variable combined with y variable lead to z returns per year? How should we know what your system is capable of? Why not just try it and see how you do. Can a trader make 1% every trading day? I have never heard of one, but anything is possible. Was it really necessary to have 5 pages of discussion about these simple questions?

Quote: Originally Posted by miscon777 Wow... what a great bunch of silliness we have here... seems like a couple people who really agree with one another trying to make sure no one else disagrees with them. Now that's what web forums are all about, right? Huh. OK... I'm a mathematician. Take my word for it. I suppose I should be one of those guys who believes deeply in such things as mathematical randomness in markets. And I tip my hat to the core original point of this thread, which (if I follow), was 'Isn't it interesting that randomness can regularly produce patterns that closely imitate the FX market," but only because - again, as a mathematician - I understand thatgiven any range of probability, recognizable patterns will develop. A static 50/50 probability as a starting point is about the most boring and uninspired representation of this principle. Kinda sad that people have wasted time writing spreadsheets and books to try to prove it... all they've done is re-proven what any mathematician worth the label already knows - randomness still forms recognizable patterns to the human brain. So, er, um... what? Personally, I'd never trade based on pattern recognition - but that's my personal style. Obviously, as people have pointed out, a pattern doesn't mean anything in particular is going to happen

next. And yet, some folks make money on it... because its random? Maybe. If they're making money, who cares? The stark reality - and I say this for people new to trading, who may be very turned off or confused by this thread - is that markets are not random. Don't shoot me down because that "wasn't the original point of the thread" - like markets, forum threads grow and evolve over time, and we don't need "thread nazis" trying to shoot down valid points... especially for those new to trading, who need to hear informed opinions on all sides so that they can make their own decisions. The reality is that markets are mostly based on large institutions making decisions with large orders. There's nothing random about that - its a series of human beings making decisions for good reasons, and even if mathematical "randomness" can reproduce the resulting patterns, it doesn't change the core reasons that those patterns develop. What's the old mathematician's saying about '10,000 monkeys could type a work of Shakespears by randomly hitting keys on typewriters if given enough time?' So that says, what - that Shakespears must have been randomly writing down letters, and just got lucky? Or that we should consider this random monkey test as a true yard stick when we analyze William's use of iambic pantameter? Or maybe that if we ourselves spend time writing down random letters, or looking spreadsheets that do the same, we can somehow understand better how McBeth came to exist? C'mon, folks. Fundamentals give big institutions information, which causes them to make decisions that move markets, and meanwhile speculators play around in the waves, sometimes sinking, sometimes swimming. Is there any point in looking backward to try and understand why a 10 or 20 pip move occured? Of course not. At the same time, does it make sense NOT to pay attention to the fundamentals that cause the big institutions to push their massive weight in one direction or another? Again, of course not. None of the reality of true market movement has anything to do with a clever spreadsheet or some books on basic probability math and its resulting patterns... whether they happen to be directed at the trading crowd or not. I'll tell you this right now, as a hardcore mathematician - I would never trade randomness, wouldn't rely on pattern recognition, and I don't even use TA indicators, because I know that no chart pattern or TA indicator ever can tell you what will happen next. Do an analysis on any time frame, any currency, over any longterm span, and you'll see that the likelyhood that any given bar will move in the same direction as the previous bar comes out to about 50%. Sounds like a toin coss... and yet, it just isn't. I trade news - the very thing that will completely blow every mathematical or pattern analysis out of its bounds - and it works pretty damn well. Just about every chart pattern or TA approach will tell you "If there's news coming, get out." Why? Because they are simply filtering the dataset through a secondary and arbitrary mathematical formula, which cannot account for the underlying reasons that markets actually move. When it happens, all their filtering formulae go out the window.

But I guess all this yuk-yuk about randomness, chart recognition, and TA is what keeps brokers rich and convinces newbies to lose their shirts... its a bit sad, in a sense. Bastage! I just spent an hour writing up materially the same thing and you beat me to it. Ohh well, great post, couldn't have said it better myself. One part you left out was the relationship between money management and probability, so I'll salvage some of my wasted time and just address that. ...Money management is irrelevant to a technical trader because in the end their dead anyway. Playing a 50/50 game, for every pip you increase the TP over the stop, you increase the chance of being stopped out proportionately. Going back to Captain Piptastics work, the “Ugly” winner sits squarely on the probability distribution curve even after optimizing the ratios. If more data was utilized, it would be easy to conclude that a return to zero equity would result at some point in the future. And that’s really the key point; money management can help you last long enough for luck to put some cash in your pocket, but if you continue playing, your going to give it all back in the end. Betting strategies don’t work in Vegas, and you shouldn’t expect them to bail you out of the market either. It comes down to: You’re either exploiting inefficiency in the market or you’re providing the liquidity for those that do. Everything else is a roll of the dice… Quote: Originally Posted by Bemac So does that make what will happen next Random?... While the question wasn't directed at me, I'll throw in my ¥2.34. Yes, if the basis of your entry was a movement in price. It comes down to the WHY of price movement. There is a reason why price is doing what it is doing, but without an understanding of the decision making processes that occured BEHIND the movement, your playing a 50/50 game of chance on what will happen next. Quote: Originally Posted by Bemac So... in esscence... you do trade randomness... you just wait for the coin to land first. There is nothing random about what happens when that particular coin lands... PS- While I happily give the nod to event trading, there are other inefficiencies that one can capitalize on. One just needs to escape the chart to find them.

Quote: Originally Posted by Captain Piptastic So then it's perfectly acceptable to you to risk 25% or more of your account on each trade as the previous poster implied? I personally risk 12.5% of my account on every trade. BUT I have a 90% win rate on 30pip stop/3550 pip take profit trades. I also only trade 3-5 times per month so I need returns.

It's not the amount you risk, it's the overall expectency of the system. A 25% risk per trade system can work, it just needs to be really fricken good. Quote: Originally Posted by Captain Piptastic Taking 90% win rate at face value you still have a 5% probability of a 38% drawdown over 50 trades. That will require a 66% gain to recover. Beyond that at 3-5 times per month how long have you traded this method at a 90% win rate. What I'm getting at is can you really consider your data set large enough to be statistically valid. I hear exactly what your saying, but you have to run the other side of the equation as well. How many of those 50 trades will be consecutive winners? Compound 15-25% on each trade then take the drawdown. Hell, go ahead and take it twice in 50 trades. 38% sucks, but in the grand scheme of things it is insignificant. Not that it makes much difference to the arguement, but since you asked I'll answer the rest: The data set isn't really relevant to my trading. What I do isn't based on the probability distribution of a pattern. I trade orderflow and as a result, operate at a different level. There are certain things that are possible and there are things that are not. I generally only trade when it is impossible for my trade to lose. The trades I DO manage to lose are the result of my own personal shortcomings; impatience, greed, fear, etc.. So as probably as a back to back maximum loss may seem statistically, it fails to account for how I personally make trade decisions. After a loss, risk is tightened and only perfect opportunities are taken until a new peak is hit (1-2 trades). Quote: Originally Posted by Captain Piptastic A probability distribution still applies to you. I concede that there is no way to escape measurement, but your presuming to say that everything in the universe must order itself on a bell curve, which is clearly not the case. The mistake your making is a trap that academics frequently fall into. By taking a measurement of a dataset and determining statistical probabilities, you are attempting to predict future outcomes mathmatically. There is a subtle difference with profound implications between the existing facts and the assumptions. As an example, lets look at auto insurance. By examining a large pool of accident data, a statistician determines that red cars have a higher potentiality of being involved in an accident then any other colored car. This is an undisputable fact (given the dataset) and is grounds for charging drivers of red cars higher insurance premiums. BUT, the subtle fallacy was just perpetrated. Does owning a red car actually make you more likely to be involved in an accident? No. People who are attracted to red cars may have a higher propencity to speed, but by no means will painting a safe driver's black car red "cause" him to alter his driving habits. Acording to statistical logic, that car now has an increased chance of being in an accident. The assumption is that the color red "causes" accidents.

Your doing the same thing when you take my stats and extrapolate a 5% probability of 2 consecutive loses. What causes those loses exactly? The bell curve of your data? It may be handy to evaluate options based on the potentiality of an outcome, but statistics do not CAUSE anything to happen. If it were that simple, you could look at any historical market activity, build a probabiility distribution and automagically make billions of dollars. Given that successful quants are outliers or the bell curve of trading, I wouldn't put that much faith in the statistical crystal ball. Quote: Originally Posted by Captain Piptastic So then you don't risk 12.5% per trade? No I still trade the same size, I just make it a point to get a breakeven stop in sooner and look for a lower profit target (35 as opposed to 45 or 50).

ug 26, 2006 There has been much discussion of late regarding broker spreads and liquidity. Many assumptions are being made about why spreads are widened during news time that are built on an incomplete knowledge of the architecture of the forex market in general. The purpose of this article is to dissect the market and hopefully shed some light on the situation so that a more rational and productive discussion can be undertaken by theForex Factory members. We will begin with an explanation of the purpose of the Forex market and how it is utilized by its primary participants, expand into the structure and operation of the market, and conclude with the implications of this information for speculators. With that having been said, let us begin. Unlike the various bond and equity markets, the Forex market is not generally utilized as an investment medium. While speculation has a critical role in its proper function, the lion’s share of Forex transactions are done as a function of international business. The guy who buys a shiny new Eclipse more then likely will pay for it with US Dollars. Unfortunately Mitsubishi’s factory workers in Japan need to get their paychecks denominated in Yen, so at some point a conversion needs to be made. When one considers that companies like Exxon, Boeing, Sony, Dell, Honda, and thousands of other international businesses move nearly every dollar, real, yen, rubble, pound, and euro they make in a foreign country through the Forex market, it isn’t hard to understand how insignificant the speculative presence is; even in a $2tril per day market. By and large, businesses don’t much care about the intricacies of exchange rates, they just want to make and sell their products. As a central repository of a company’s money, it was only natural that the banks would be the facilitators of these transactions. In the old days it was easy enough for a bank to call a foreign bank (or a foreign branch of ones own bank) and swap the stockpiles of currency each had accumulated from their many customers. Just as any business would, the banks bought the foreign currency at one rate and marked it up before selling it to the customer. With that the foreign exchange spread was born. This was (and still is) a reasonable cost of doing business. Mitsubishi can pay its customers and the banks make a nice little profit for the hassle and risks associated with moving around the currency. As a byproduct of transacting all this business, bank traders developed the ability to speculate on the future of currency rates. Utilizing a better understanding of the market, a bank could quote a business a spread on the current rate but hold off hedging until a better one came along. This process allowed the banks to expand their net income dramatically. The unfortunate consequence was that liquidity was redistributed in a way that made certain transactions impossible to complete. It was for this reason and this reason alone that the market was eventually opened up to non-bank participants. The banks wanted more orders in the market so that a) they could profit from the less experienced participants, and b) the less experienced participants could provide a better liquidity distribution for execution of international business hedge orders. Initially only megacap hedge funds (such as Soros’s and others) were permitted, but it has since grown to include the retail brokerages and ECNs. Market Structure:

Now that we have established why the market exists, let’s take a look at how the transactions are facilitated: The top tier of the Forex market is transacted on what is collectively known as the Interbank. Contrary to popular belief the Interbank is not an exchange; it is a collection of communication agreements between the world’s largest money center banks. To understand the structure of the Interbank market, it may be easier to grasp by way of analogy. Consider that in an office (or maybe even someone’s home) there are multiple computers connected via a network cable. Each computer operates independently of the others until it needs a resource that another computer possesses. At that point it will contact the other computer and request access to the necessary resource. If the computer is working properly and its owner has given the requestor authorization to do so, the resource can be accessed and the initiating computers request can be fulfilled. By substituting computers for banks and resources for currency, you can easily grasp the relationships that exist on the Interbank. Anyone who has ever tried to find resources on a computer network without a server can appreciate how difficult it can be to keep track of who has what resources. The same issue exists on the Interbank market with regard to prices and currency inventory. A bank in Singapore may only rarely transact business with a company that needs to exchange some Brazilian Real and it can be very difficult to establish what a proper exchange rate should be. It is for this purpose that EBS and Reuters (hereafter EBS) established their services. Layered on top (in a manner of speaking) of the Interbank communication links, the EBS service enables banks to see how much and at what prices all the Interbank members are willing to transact. Pains should be taken to express that EBS is not a market or a market maker; it is an application used to see bids and offers from the various banks. The second tier of the market exists essential within each bank. By calling your local Bank of America branch you can exchange any foreign currency you would like. More then likely they will just move some excess currency from one branch to another. Since this is a micro-exchange with a single counterparty, you are basically at their mercy as to what exchange rate they will quote you. Your choice is to accept their offer or shop a different bank. Everyone who trades the forex market should visit their bank at least once to get a few quotes. It would be very enlightening to see how lucrative these transactions really are. Branching off of this second tier is the third tier retail market. When brokers like Oanda, Forex.com, FXCM, etc.desire to establish a retail operation the first thing they need is a liquidity provider. Nine in ten of these brokers will sign an agreement with just one bank. This bank will agree to provide liquidity if and only if they can hedge it on EBS inclusive of their desired spread. Because the volume will be significantly higher a single bank patron will transact, the spreads will be much more competitive. By no means should it be expected these tier 3 providers will be quoted precisely what exists on the Interbank. Remember the bank is in the business of collecting spreads and no agreement is going to suspend that priority. Retail forex is almost akin to running a casino. The majority of its participants have zero understanding how to trade effectively and as a result are consistent losers. The spread system combined with a standard probability distribution of returns gives the broker a built in house advantage of a few percentage points. As a result, they have all built internal order matching systems

that play one loser off against a winner and collect the spread. On the occasions when disequilibrium exists within the internal order book, the broker hedges any exposure with their tier 2 liquidity provider. As bad as this may sound, there are some significant advantages for speculators that deal with them. Because it is an internal order book, many features can be provided which are otherwise unavailable through other means. Non-standard contract sizes, high leverage on tiny account balances, and the ability to transact in a commission free environment are just a few of them… An ECN operates similar to a Tier 2 bank, but still exists on the third tier. An ECN will generally establish agreements with several tier 2 banks for liquidity. However instead of matching orders internally, it will just pass through the quotes from the banks, as is, to be traded on. It’s sort of an EBS for little guys. There are many advantages to the model, but it is still not the Interbank. The banks are going to make their spread or their not go to waste their time. Depending on the bank this will take the form of price shading or widened spreads depending on market conditions. The ECN, for its trouble, collects a commission on each transaction. Aside from the commission factor, there are some other disadvantages a speculator should consider before making the leap to an ECN. Most offer much lower leverage and only allow full lot transactions. During certain market conditions, the banks may also pull their liquidity leaving traders without an opportunity to enter or exit positions at their desired price. Trade Mechanics: It is convenient to believe that in a $2tril per day market there is always enough liquidity to do what needs to be done. Unfortunately belief does not negate the reality that for every buyer there MUST be a seller or no transaction can occur. When an order is too large to transact at the current price, the price moves to the point where open interest is abundant enough to cover it. Every time you see price move a single pip, it means that an order was executed that consumed (or otherwise removed) the open interest at the current price. There is no other way that prices can move. As we covered earlier, each bank lists on EBS how much and at what price they are willing to transact a currency. It is important to note that no Interbank participant is under any obligation to make a transaction if they do not feel it is in their best interest. There are no “market makers” on the Interbank; only speculators and hedgers. Looking at an ECN platform or Level II data on the stock market, one can get a feel for what the orders on EBS look like. The following is a sample representation: You’ll notice that there is open interest (Level II Vol figures) of various sizes at different price points. Each one of those units represents existing limit orders and in this example, each unit is $1mil in currency.

Using this information, if a market sell order was placed for 38.4mil, the spread would instantly widen from 2.5 pips to 4.5 pips because there would no longer be any orders between 1.56300 and 1.56345. No broker, market maker, bank, or thief in the night widened the spread; it was the natural byproduct of the order that was placed. If no additional orders entered the market, the spread would remain this large forever. Fortunately, someone somewhere will deem a price point between those 2 figures an appropriate opportunity to do something and place an order. That order will either consume more interest or add to it, depending whether it is a market or limit order respectively. What would have happened if someone placed a market sell order for 2mil just 1 millisecond after that 38.4 mil order hit? They would have been filled at 1.5630 Why were they “slipped”? Because there was no one to take the other side of the transaction at 1.56320 any longer. Again, nobody was out screwing the trader; it was the natural byproduct of the order flow. A more interesting question is, what would happen if all the listed orders where suddenly canceled? The spread would widen to a point at which there were existing bids and offers. That may be 5,7,9, or even 100 pips; it is going to widen to whatever the difference between a bid and an offer are. Notice that nobody came in and “set” the spread, they just refused to transact at anything between it. Nothing can be done to force orders into existence that don’t exist. Regardless what market is being examined or what broker is facilitating transactions, it is impossible to avoid spreads and slippage. They are a fact of life in the realm of trading. Implications for speculators: Trading has been characterized as a zero sum game, and rightly so. If trader A sells a security to trader B and the price goes up, trader A lost money that they otherwise could have made. If it goes down, Trader A made money from trader B’s mistake. Even in a huge market like the Forex, each transaction must have a buyer and a seller to make a trade and one of them is going to lose. In the general realm of trading, this is materially irrelevant to each participant. But there are certain situations where it becomes of significant importance. One of those situations is a news event.

Much has been made of late about how it is immoral, illegal, or downright evil for a broker, bank, or other liquidity provider to withdraw their order (increasing the spread) and slip orders (as though it was a conscious decision on their part to do so) more then normal during these events. These things occur for very specific reasons which have nothing to do with screwing anyone. Let us examine why: Leading up to an economic report for example, certain traders will enter into positions expecting the news to go a certain way. As the event becomes immanent, the banks on the Interbank will remove their speculative orders for fear of taking unnecessary losses. Technical traders will pull their orders as well since it is common practice for them to avoid the news. Hedge funds and other macro traders are either already positioned or waiting until after the news hits to make decisions dependent on the result. Knowing what we now know, where is the liquidity necessary to maintain a tight spread coming from? Moving down the food chain to Tier 2; a bank will only provide liquidity to an ECN or retail broker if they can instantly hedge (plus their requisite spread) the positions on Interbank. If the Interbank spreads are widening due to lower liquidity, the bank is going to have to widen the spreads on the downstream players as well. At tier 3 the ECN’s are simply passing the banks offers on, so spreads widen up to their customers. The retailers that guarantee spreads of 2 to 5 pips have just opened a gaping hole in their risk profile since they can no longer hedge their net exposure (ever wonder why they always seem to shut down or requote until its over?). The variable spread retailers in turn open up their spreads to match what is happening at the bank or they run into the same problems fixed spreads broker are dealing with. Now think about this situation for a second. What is going to happen when a number misses expectations? How many traders going into the event with positions chose wrong and need to get out ASAP? How many hedge funds are going to instantly drop their macro orders? How many retail traders’ straddle orders just executed? How many of them were waiting to hear a miss and executed market orders? With the technical traders on the sidelines, who is going to be stupid enough to take the other side of all these orders? The answer is no one. Between 1 and 5 seconds after the news hits it is a purely a 1 way market. That big long pin bar that occurs is a grand total of 2 prices; the one before the news hit and the one after. The 10, 20, or 30 pips between them is called a gap. Is it any wonder that slippage is in evidence at this time? Conclusions: Each tier of the Forex market has its own inherent advantages and disadvantages. Depending on your priorities you have to make a choice between what restrictions you can live with and those you cant. Unfortunately, you can’t always get what you want. By focusing on slippage and spreads, which are the natural byproduct of order flow, one is not only pursuing a futile ideal, they are passing up an enormous opportunity to capitalize on true inefficiencies. News events are one of the few times where a large number of players are positioned inappropriately and it is fairly easy to profit from their foolishness. If a trader truly wants to make the leap to the next level of profitability they should be spending their time figuring out how identify these positions and trading with the goal of capturing the price movement they inevitably will cause.

Nobody is going to make the argument that a broker is a trader’s best friend, but they still provide a valuable service and should be compensated for their efforts. By accepting a broker for what it is and learning how to work within the limitations of the relationship, traders have access to a world of opportunity that they otherwise could never dream of capturing. Let us all remember that simple truth Quote: Originally Posted by FXopportunist In your example, if a bank quotes 8903 @ 8905 that is a single bank. the other hundreds of banks have every right to make up their own price as well. Not even close to true. They can buy and sell their own trade and interests the same way we do. BUT if they enter an agreement to be a liquidity provider then they are bound to some form of integrity. You mean like a liquidity provider on the NYSE who has the authority to halt trading during a news release until they can determine what price they want to transact at? I'm sure that would make you real happy... Anyway, where are these magic liquidity agreements your talking about coming from? First you assume they even exist and second that they guarantee some specific spread. The first may be the case, but the second surely isn't. A wise friend of mine once said, "try learning the ropes before you start changing the size of the ring". Instead of trying to convince everyone that the forex is evil, corrupt, a casino, and should be regulated into oblivion, maybe you should take some time and do some research. That way we can discuss things that actually have a snowballs chance in hell of actually making us some money.

Quote: Originally Posted by FXopportunist This started out in another thread but I felt it was worth its own discussion In the end, if regulators finally come in and kill our leverage and margins and makes us like futures, it will not be because of complainers. It will be, because upon review, Forex is being run too much like a gambling sites. Prices too vaguely based on the market to be considered investing or trading. Where contracts specifically state the "the house" is counteparty to all deals and all deals will be settled based on "the houses" data. All of the other markets have a central clearing entity and, therefore, can be verified in any dispute. Forex is awsome, it pays all my bills, I would hate to have to make the adjustment to futures or even equities. But, when a broker can make up their own spreads, spike stops, hold prices until the market suits their position again, it is not trading. If they are claiming that you are trading the forex market, then these activies are fraud by definition. If they are saying that your agreement them allows them to "make the market" that you are trading in, then it is not Forex at all, it is a gambling site by definition. This is the legislators and regulators problem with Forex. And, unfortunately they are right. The only way to defeat the legislators arguement is to make it so that a broker cannot control the data that you trade by. Have a 3rd

party supply the data with total transpearancey and have the trader and broker agree to that data source. That would immediately eliminate all of the lying, cheating and bull crap. Would love to hear from everyone on this. What would be so bad about regulation? I for one would appreciate having some authoritative body that a broker has to answer to when they participate in shady activities. Further, security of funds and minimum capital requirements would give the business the ligitimacy that it is sorely lacking. The only ones that would be hurt in the process would be micro-mini traders that can't pony up the cash that would inevitably be required and the shady brokers, but I think thats a small price to pay to avoid another refco disaster. I don't know where you guys are discussing this, but most futures contracts are at 50:1 or 100:1 as is, so there is little risk for margin to be reduced. It's not quite 400:1, but that is excessive anyway.