Forex Blog

The  U. S. managed to fall to another record low value today at 1.5238 per euro but recovered from a daily loss and even gained somewhat against the European currency. Personal income statistics was a little better than expected today and Michigan consumer confidence index was also revised towards the improvement.

Personal income in January rose by 0.3% — better than the expected 0.2%, but this growth was lower the December’s 0.5%. Personal spendings grew also better than expected — 0.4% against 0.2%; in December they grew by 0.3%.

Chicago PMI (it measures the business’s health) fell sharply in February from 51.5 to 44.5. It fell even below the market analysts’ expectations that were at 49.5.

Michigan Sentiment Index (it measures consumer confidence) for February was revised today from 69.6 to 70.8, while the consensus value for the revision was at 70.0.

GDP release today in U.S. pushed dollar down after yesterday’s macroeconomic statistics and allowed EUR/USD to reach a new record at 1.5179. Meanwhile GBP/USD decelerated its pace a little and turned to a less bullish trend today.

The preliminary GDP data for the third quarter showed 0.6% growth — the same as it was in the advance release a month ago, but below the expected 0.8%. That’s quite a poor result for the U.S. economy, but still — not a recession.

Initial jobless claims last week were at 373,000 — a very high number even if compared to the previous 354,000. A small decrease to 350,000 was expected by the market strategists.

It started eleven days ago on the ForexFactory forum, but I’ve read it first about a week ago on a TalkGold forum’s thread titled “Mt4 Brokers Are All Scam Brokers By Definition”. Of course, I’ve got interested in this topic because I’ve been trading on MetaTrader brokers’ accounts for almost two years and I have never thought of them being a scam “by definition". That made me read both of the threads thoroughly.

Here is the main problem that is pointed out in those threads. Back in February 2006 MetaQuotes announced a 5-day test of the Virtual Dealer Plug-in on the demo trading server. This plug-in was designed to imitate “real dealer work — random time of answer, requote etc [sic!]“. Eleven days ago a post on ForexFactory forum shows a part of some document’s scan describing plug-in’s functionality, including such things as “automated moving up the Limit & Stop Level and Freeze Level according to the preset list of news time”, “disabling (setting, modifying, deletion) of pending orders during news receiving”, “Max Losing Slippage”, “Max Profit Slippage”, etc. Thread starters and many other forum participants believe that this plug-in is being used in all MetaTrader 4 brokers on real trading accounts and that’s what making all such brokers the cheaters. The fact that MetaQuotes deleted all threads about the Virtual Dealer Plug-in on their forum added even more confidence to those traders.

So, what now? Personally, I can say that there’s no actual proof that this plug-in is used on real accounts on any of the MT4 brokers (I am not saying all). I am almost sure that this plug-in (or its newer version) was used during the Automated Trading Championship by MetaQuotes (this competition was for demo accounts). Another point — even if this plug-in can be used on real accounts and is used there by some of the MT4 brokers, it doesn’t imply that all of them are using it and are outright scams.

What will happen when more traders will read about this problem? Those, who thought that the MetaTrader brokers are evil, will definitely become more sure in their belief, those, who didn’t mind before, most probably won’t mind this problem too.

What should you do in this situation? I don’t know, but I’ll continue to trade with the brokers I’ve been using for a long time now, if I find that they hunt my stops or have a high slippage in their favor I will immediately switch to another broker. But I don’t think that it’s a good choice to leave a broker, with services of which I am currently satisfied, just because of some suspicious plug-in’s existence.

Today EUR/USD reached its new historical maximum at 1.5105 as the dollar continued to weaken both on the rates cut expectations and later - bad macroeconomic data releases in U.S.

Durable goods orders - a very important indicator of the business’s health - decreased 5.0% in January, more than the expected drop of 0.4%.

New home sales in January fell to 588,000 annualized rate - below the December’s 605,000 and forecasted January value of 600,000.

Crude oil inventories last week again showed a very strong gain - 3.2 million barrels. But nevertheless oil prices continue to break all maximums.

Today dollar continued its bearish trend against euro and pound, sliding down significantly after the consumer confidence release. Both EUR/USD and GBP/USD were going for correction after the better than expected PPI report, but started to return to their earlier positions in shortly after the Conference Board’s release.

Producer Price Index (PPI) gained 1.0% in February — a significant value for a one month change, after 0.3% fall in December and with only 0.4% gain forecasted for this month. Core PPI increased 0.4% — also higher than analysts’ forecast (0.2% growth).

Consumer confidence index in February dropped to 75.0 from 87.9 in January. That’s a rather horrible result — except of the period of Iraqi War in 2003, consumer confidence is now at its record low value since November 1993. Time to use the R-word again?

EUR/USD trend: hold.
GBP/USD trend: hold.
USD/JPY trend: hold.
EUR/JPY trend: hold.

Citigroup introduced a new retail Forex broker this year — CitiFX. I uploaded the information related to this broker on my site today. CitiFX uses the trading platform made by Saxo Bank. There are no mini Forex accounts available and the minimum deposit is also very high — $10,000. Leverage is lower than in majority of other broker — 1:50 and 1:25 on some pairs. Demo accounts are available for free. This broker can be an interesting choice for the existing Citi customers, but for the vast majority of the Forex traders such conditions are far from preferable.

EUR/USD gained more than 100 pips today on the bad macroeconomic data coming out in U.S. This currency pair went up from 1.4714 at the opening of the Asian trading session to 1.4816 at the end of the New York session. GBP/USD also grew very fast today — from 1.9420 to 1.9622. The major trend movement against the European currency happened after the release of the Philadelphia Fed’s business activity index, which showed a significant worsening of the business markets’ situation in U.S., while some definite improvements were expected. It fell from -20.9 to -24.0 (it was expected to increase to -10.0).

Among other important statistical releases that came out today was the initial jobless claims count for the last week — it dropped down slightly — from 358k to 349k (a drop to 345k was expected by the market traders) .

U.S. commercial crude oil inventories again grew sharply — a gain of more than 4.2 million barrels was registered for the last week. It’s the fifth straight weekly gain and almost every time it was far above 1 million barrels. This helped to keep the oil price below the "sacred" $100 level today.

CPI release for January along with some moderate data on housing lifted traders’ expectations and spurred some good growth of the U.S. dollar with both EUR/USD and GBP/USD losing about a half percent for the day. It may be a good sign for the dollar bulls eventually as it is almost definite now that the recession is either ending or is not going to happen at all.

January CPI grew at the same pace as in December — 0.4% up above the expected by the markets 0.3% growth.

Housing starts during the same month increased from 1,004k to 1,012k, but were slightly below the expected 1,015k level, while building permits decreased from 1,080k to 1,048k and were slightly above the expectations (1,040k).

This my first interview with a major Forex broker. Jaclyn, Public Relations Coordinator of the FXCM broker. Decided to answer some of the questions I’ve sent them via e-mail. The questions touch various topics and should be interesting not only to the current customers of the FXCM, but also to any trader who is interested in a current on-line Forex trading situation. Bad thing is that answers sound too commercial, in my opinion. But that shouldn’t be a problem anyway.

What important features distinguish FXCM among other Forex brokers of your kind? Why do traders pick you among others?

FXCM principally stands out for the high quality of our execution and our excellent trading signals. Our No Dealing Desk system gets prices and liquidity from 7 of the world’s largest global banks and financial institutions (we plan to add more in future). FXCM streams the best available prices we receive from these institutions, plus a clearly disclosed markup, to our clients. The markup is typically one pip on either side. This pricing model clearly aligns our interests with that of the trader. Furthermore, FXCM has very strong credit relationships with these financial institutions, based on over $350 billion in monthly notional trading volume. These credit relationships aim to provide FXCM clients access to both excellent prices and deep liquidity.

All live clients at FXCM also receive free trading signals. We have collected together a number of powerful trading signals and tools from both third party providers and the DailyFX research team into a site called DailyFX PLUS. This site includes over 100 technical trading signals per day, specialized strategy pieces, and twice daily SSI positioning and Open Interest data.

What qualities are vital for every successful Forex broker, in your opinion, those things that make brokers grow?

Clients care about making money. Giving clients the best system which helps them try to make money is the most vital growth strategy. Having excellent execution with deep liquidity, low spreads, and fast confirmation is essential. We feel our No Dealing Desk system provides these things, as well as a level playing field free of dealer intervention. Having high quality trading signals and tools, such as our interactive charts and DailyFX PLUS, are also important for the client’s success. Finally, traders need to be able to concentrate on their trading. They should not be distracted by worrying about their broker’s financial stability. FXCM comfortably exceeds all current and currently proposed minimum capital requirements in the USA, is regulated on 3 continents, and is now the only retail Forex broker to post its balance sheet publicly on its website. Our clients’ ability to trade with confidence is the key to FXCM’s future growth.

Being a big company, FXCM had more than $200 million revenue in 2006. Since then, how has it grown?

The FXCM Group continues to grow strongly. We can now boast over 100,000 accounts trading on our platform, and our nominal trading volume has risen from over $100 billion per month to over $350 billion. I August 2007, we set a new record of over $500 billion in nominal volume.

MetaTrader 4 trading platform is rather popular among Forex traders. Checking your site some time ago I didn’t find any signs of its support. But now you announce that you are going to add it soon. Will it be some FXCM customization of the platform or will you go with the generic MetaTrader 4?

We are planning a soft launch of the popular MetaTrader 4 platform in February 2008, with a full launch in March. MT4 is a very popular and useful front-end platform. We’re matching that with our excellent trading backend, the No Dealing Desk system. We expect Metatrader enthusiasts will enjoy taking advantage of our great execution system, and also enjoy being able to use Metatrader with a regulated and financially secure broker.

Being one of the leading Forex brokers, do you invest in the development of new instruments or features? Something innovative, that can only be achieved with the large team of professionals.

We are constantly bringing our extensive resources to bear on developing new products. We have recently introduced a large number of platform improvements, including fractional pip pricing, one-click trading, and the ability to trade from charts. We have also added many trading resources, such as trading signals in DailyFX PLUS and the innovative SSI. The DailyFX team of analysts is constantly expanding their scope and depth of coverage, providing insightful fundamental and technical analysis as well as actionable trading setups every day for range traders, news events, hedging, and carry traders. We plan to continue expanding our offerings in the coming years and to remain on the forefront of retail Forex innovation.

Please, tell us more about FXCM managed Forex accounts. Do you plan on adding more types of them?

FXCM currently offers two Managed Account Programs, the Sentiment Program and Sentiment Aggressive Program. These automated active funds utilize FXCM’s unique SSI data to trade, and have performed well in 2007.* You can view updated results on our managed accounts webpage. We are planning to release several new managed account programs that are not correlated with our current programs, further expanding our clients’ options for managed products.

FXCM has been involved in the controversial Refco bankruptcy case. How did this fact affect your business, if at all?

Refco held an investment stake in FXCM, but was not involved in FXCM’s day-to-day operations. This stake has been sold to a very large investment bank and a number of other investors. You can read more about it on our website.

Considering the recent popularity of the e-currencies and the on-line payment systems, does FXCM plan on adding such options for the funds deposits and withdrawals, PayPal, at least?

As a trading firm regulated in the USA, UK, Hong Kong, and Canada, FXCM exercises strict anti-money laundering (AML) procedures. While these e-currency services are convenient, they are also fairly anonymous, and do not satisfy these strict AML standards. We do not currently plan to offer them.

What do you think about allowing trading accounts’ size below $300? With micro-lots maybe?

As I mentioned before, FXCM is compensated through a disclosed markup to the prices we get from several global financial institutions, acting as sort of an agency-model broker. That means that FXCM’s revenues are purely based on volume. So, FXCM is concentrating on attracting high-volume traders. We offer an expansive Gold Program for large accounts, which offers free professional charts with backtesting, specialized reps, free wire transfers, and exclusive trading commentary from our senior strategists, Kathy Lien and Boris Schlossberg. Of course, as one of the inventors of the Mini Account, FXCM has many advantages for small traders as well, including No Dealing Desk trading. All mini accounts get the same powerful trading signals in DailyFX PLUS that all other accounts get, and any new mini account holder at FXCM can get our popular FX Power Course for free. I believe the FX Power Course is a great introduction to the market, as it covers many of the basic skills that all traders need to develop.

Does FXCM plan to acquire any smaller Forex brokers in future? To increase your market presence, or to enter regional or very specific markets?

FXCM already has a worldwide presence, with clients in nearly every country. We are planning to expand our support for the Middle East by opening a Dubai office this year. As for smaller Forex brokers, it is important to note that legislation has been proposed in Congress to raise the minimum capital requirement for US-based Forex Dealer Members again, this time to $20 million. The recent raising of requirements to $5 million has already resulted in significant consolidation in the Forex market, and we expect that if this new requirement passes, there will be further consolidation.

Currently FXCM is offering a very useful Forex informational resource — DailyFX.com. Are there any plans do provide more such helpful resources in future?

One area that we have greatly expanded our offerings is the DailyFX Forum. You can access it from the DailyFX.com website. Our analysts are active participants in the forums, creating and facilitating discussion amongst traders. FXCM plans to add new sections and services here. We are also constantly improving and expanding our offerings on DailyFX, as well as our free webinar series and popular online courses.

In my opinion Forex is far from gambling, but taking in attention the current U.S. governmental campaign against on-line gambling, do you think it is possible that the Forex trading (at least through "dealing desks") will be banned as gambling?

Forex is a newly regulated industry, and we need to uphold a higher standard of conduct. Dealing desks can work well for both client and broker, but there is a very real perception that dealing desks have an inherent conflict of interest between their clients’ profit/loss and their own firm’s bottom line. FXCM’s No Dealing Desk system eliminates this potential conflict of interest, and I think it is in the industries best interest to move in this direction.

* Past performance is not indicative of future results, as returns may vary according to market conditions.