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[qq1]

Hi,
We talked of this topic during our recent CU gathering, and thought it may be useful to others in this forum.
Pls be very careful of USA forex brokers. Forex is a unregulated market with no exchange. Well, I read about this before I started going into forex trading, but the full extend didn't hit home until recently.
It means two big disadvantages to us retail clients. Firstly it means that your broker may possibly be trading against you. Secondly it means that your funds in  your account may not be protected. Do not believe fully whatever the broker say about customer funds are segregated in different accounts, because once something happens, your money in your account is suddenly no more yours.

FXLQ is one of the biggest forex liquidity providers in USA but few months back FXLQ was effectively shutdown and my money is stuck there, FXLQ is now going thru receivership, I  hope I will get back at least something one fine day.

In a similar case, many people have heard of Refco closing shop several years back. Refco was also one of the biggest at that time, they even have an office in Singapore.

Well, I don't mean to be discouraging any of you trading forex. Just be careful, that's all.

[csk]

It is not just FX online brokers in the US, but everywhere. The FX
industry is an unregulated market. As such, there is also no regulation
or laws that funds from FX account has to be segregated and cannot
be used as working capital for the brokers.

For the futures industry which is regulated, customer funds have to
be segaregated by law. So if the brokers go under, customer funds
are safe.

The other disadvantage of many online FX is the day-to-day swap
roll-over. My understanding is that regardless of the interest rates
differential, the online broker may charge for swap roll-over even
though you should be receiving and not be charged.

For example, if you are long NZD agst USD. Since NZD has a much
higher interest rate than USD, your swap rollover is in your favour
so you should be receiving points instead of paying.

I have always say that the FX market is the world biggest legalized
bucket shops. Every trade that you make, your broker (even if it is
a legal bank) IS YOUR COUNTER PARTY!!! For any trade - you buyer
they seller, you seller they buyer.

This is unlike futures and stocks where your trade are executed on
an exchange. Your broker is really your broker to get the trade done.

In a regulated market, trading against you is illegal. You buy from
broker, you sell to broker is illegal. Front running your orders is also
illegal. But trading against you and front running orders is so
prevalant in the unregulated FX market.

Here is to confirm how this bucket shop mechanism works. This is
taken from a well-known TA product website.

QUOTE
<snip>. acts as the counterparty for each forex transaction and
as a liquidity provider to clients using its access to the inter-bank
market. In doing so, <snip> assumes the risk associated with each
transaction. A portion of <snip>'s profitability may be the difference
between the bid and the offer provided to the client, as well as
<snip>'s ability to offset any risk transferred to <snip> by clients.
UNQUOTE

A better alternative is the currency futures on the CME:
http://www.cme.com/trading/prd/fx/index.html

The CME currency futures a CFTC regulated market like all other
US futures market.

[HC]

Here is a chinese posting (long) on a painful experience:

http://bbs.fx998.com/viewthread.php?tid=35565&pid=372794&page=1&extra=page%3D1

[qq1]

csk mentioned futures as a possible better alternative. Well I am also starting to explore it, but I don't find alot of forums/discussions concerning futures, unlike forex. Perhaps it would be good if Lion or HC or someone knowledgeable could start a futures forum in CU. I don't even know if people use charts to trade futures.

[CU]

csk mentioned futures as a possible better alternative. Well I am also starting to explore it, but I don't find alot of forums/discussions concerning futures, unlike forex. Perhaps it would be good if Lion or HC or someone knowledgeable could start a futures forum in CU. I don't even know if people use charts to trade futures.

Hmm.. for now I'm already over-confused between watching stocks & forex (just started about a month), added another trading instrument like futures would bomb my head.. Mai lah.. like that I will lose concentration. Old liao.. for this 5 min I may learn something, the next 5 min when I learn a new thing, the thing learned in previous 5 min might just erased off my mind