Before you begin reading this let me first say that my intention is not to bash 4X market makers. My intention is to educate you on what you will be getting into if you decide to trade the spot 4X market with a 4X market maker vs. a regulated Futures broker. There is a HUGE difference in the two brokers and it could make or break you as a trader. Be careful in your decisions…
When I began learning how to trade the 4X in 2004 I thought that I had found an answer to all my problems. After all, I was hurt with at serious back injury and needed something I could do from home that wasn’t a scam. The 4X was an ideal solution to my problem…or at least that’s what the brokers wanted me to think…
To be honest, the Forex brokers have the best marketing of anything I have ever seen. You’ve seen it…
Massive liquidity compared to Futures
Higher leverage than Futures
Guaranteed no debit balance
Trade with any $$$ amount
Tighter spreads than Futures and Commission free trading
Earnings are not reported to the IRS
24 hour market
Free data feed, charts and easier technical analysis than Futures
The list goes on for the 4X marketing and I’m sure you’ve seen it all. I bought into it and began learning everything I could about the 4X without giving any other type of trading apparatus a 2nd glance. That was a mistake.
In this document I will spell out exactly what the Forex brokers, specifically the market makers, are not telling you and give the much sought after “TRUTH” about the 4X vs. Futures debate.
First off let me say that I still trade the 4X along side the futures market. The only currency pairs I trade in the spot 4X are the GBPJPY and the EURJPY. All other currencies are traded via the futures market. The main reasons for this is that the manipulation I have experienced with market makers and even some 4X brokers who claim to be ECNs is ridiculous. Since the GBPJPY and the EURJPY are extremely volatile I find that trading these 2 pairs alone in the spot 4X market is worth the risk. But every other currency pair I look at is usually based out of the Futures exchange.
Let’s start hitting these points one by one…
The 4X market has a massive amount of liquidity compared to the Futures market.
This one is true. I’ve seen it estimated that the 4X has a volume of anywhere form $1.5 to over $5 trillion daily. This is anywhere from 30-50 times larger than the US Stock Market. This is one advantage that the 4X does have over the Futures market and it is undeniable. But how much is this actually worth to you and me? Honesty, the largest amount I’ve ever traded per pip / tick is around $250. And that was a one time deal. Most traders that I know trade from 1 – 10 lots / contracts per trade. That’s not a large volume. If you have enough money in your account to trade more than that you either have enough money where you don’t need to trade for a living and you are a speculator or you are over leveraging yourself and are playing on dangerous ground.
The 4X market offers higher leverage than Futures
There is some truth to this but it works to the trades disadvantage rather than their advantage. I’ve seen 4X market makers offer up to 500:1 leverage. Let’s put this into perspective…
On US based currency pairs such as the USDJPY, at 100:1 leverage you can trade 1 standard contract for @ $1000 US in your account. Move this to 500:1 and you only need $200 to trade 1 standard contract. That seems great...to the novice trader who is looking for a quick way to make money.
In all honesty, this is how most market makers make money. Since they don’t push the orders through to the banks and take the other side of the trades themselves, they keep all the losses that the traders incur. So unless you are extremely sure of where price is going, using this amount of leverage is riskier than rolling dice at a casino. Right now, 1 contract of the USDJPY is worth @ $8.90. With a spread of 2 (which is what most brokers offer on the USDJPY) you have @ 20 pips of movement until your account is wiped out. At least at 100:1 you have at least 100 or more until this happens. I’ve seen no reputable broker that offers more than 200:1 in the spot 4X market.
Let’s contest this with Futures…
Futures brokers have a required amount per contract that fluctuates from daily rates to overnight rates which is roughly double the daily margin. In the above example, I spoke of the USDJPY. The futures equivalent is the JPY future, which is a near exact mirror image of the USDJPY.
The day trading margin is for trading during the US session, which is from @ 9:30 – 16:00 EST. The daily amount required to trade 1 JPY future contract on my futures broker, Open E Cry, is $1350 / contract. Also a contract is worth $10 and not $8.90. So you can see that the leverage is @ 80:1 and daily and drops to @ 40:1 for holding positions overnight. In the other documents in this package I suggest trading with Oanda and MB Trading. Oanda offers a max leverage of 50:1 and MB Trading offers 100:1. So you can see that for me, there is not a big difference in the 2 as far as leverage and margin are concerned.
And again, this is MAX leverage available. My rule is to use no more than @ 20:1 and usually 10:1 leverage on any trade. This is not really that big of a deal in terms of the 4X being better than the futures market.
Also, this is just on the currencies. Most futures brokers offer a $500 daily margin for the eminis. This is @ 200:1 leverage if calculated on a per contract basis and my CTS system works extremely well on the eminis, even when using high leverage. This is an advantage the futures market has over the 4x that I am taking advantage of…but I’ll get into that later.
Just an FYI for you…
Here is a link to my broker’s page on margins and offered contracts…
http://atcbrokers.com/futures_resources_margin.htm
Guaranteed no debit balance…
This is true for the most part. In trading futures you do have risk of loosing more in your account than you have. All of the 4X market makers I have seen guarantee that you cannot loose more than you have in your account.
Trade with any $$$ amount…
This is also true. In the 4X market you can trade mini and micro accounts. With Oanda you can trade pennies / pip if you like. In the futures market, the smallest account you can have is @ $2000. This allows you to trade with a $500 intraday margin. This is usually opened by people who want to try and trade the eminis
..
Nov 10, 2009
If you are planning to trade
If you are planning to trade in currency then you should know the different ways of reading the forex chart. Due to this reason you should try to gain the knowledge about reading the charts. If you know this then you would be able to earn huge profits in short duration of time. You would find that the experienced trader would always take the proper training before entering into the market of forex. If you are a learner then you should always start the trade with the nominal amount. You should no invest huge amount at a particular point of time.
If you want to learn the ways of reading the forex chart then you can purchase this software that would provide you required knowledge about the forex market. This software would aid you to keep the track of the money that you invest in this market and it would also keep the track of your time that you spend in this market. This software would help you to keep a track of the amount that you have invested in the firm. This software is handy. If you are interested to become a forex trading pro then you should try to take the maximum use of this software. If you use this software then you chart using this software then you would get the perfect knowledge about the forex trading that is offered by the forex market.
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If you want to learn the ways of reading the forex chart then you can purchase this software that would provide you required knowledge about the forex market. This software would aid you to keep the track of the money that you invest in this market and it would also keep the track of your time that you spend in this market. This software would help you to keep a track of the amount that you have invested in the firm. This software is handy. If you are interested to become a forex trading pro then you should try to take the maximum use of this software. If you use this software then you chart using this software then you would get the perfect knowledge about the forex trading that is offered by the forex market.
Currency trading market is considered to the largest market in the whole world and it one of the busiest markets. You would have problem of keeping the track of the forex market. You would be able to keep the track of the various trends that are prevailing in the market. if you are using the this software as a tool then you should study the changes that are taking place in the forex market. The knowledge that you have gain would aid you to trade in the market.
If you want to install this software then you need to explore yourself to net. You can use different trends and pattern of the forex chart. You can use the special tools that can be generated in short duration of time. You can use this tool to examine the software that you are using. The forex charts would help the trader to take the decisions about the market in which you are dealing. Forex charting software would provide relief to the people that want to become successful and want to get the deal that they want. There are different methods that can help you to the knowledge that you want to have. This would help you to make the future predictions about the forex market. This would help in charting the different types of software. There are various types of software in the market. You need to select the software as per your needs and requirements. You need to be careful in selecting the software for your deal.
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