Today, I present to your attention an interview with Loucas Marangos, CEO of TFI Markets. He’s agreed to answer some questions regarding their Forex broker and the currency trading market as a whole.
What makes traders choose you as their Forex broker? I mean the main features they look for when they select you among others.
This is a difficult question and it can get very confusing for anyone looking for a suitable broker to open an account. Certainly there is no “best” broker but each client must assess the advantages and disadvantages associated to each broker and then make a decision.
Up until recently we were not actively advertising and maintained a very low profile as a company, despite a long history in the industry. Accordingly most of our clientele has been sourced from recommendations from existing clients.
We have a list of characteristics that combine to form an attractive package for our clients:
- Our business model is not based on income generation from client losses but client volumes.
- We do not use any automated
plug-insto increase income generation at the expense of clients and our dealers are authorized to take losses on any transaction in order to ensure execution at market prices.
- We spend time to talk to clients and help them to avoid common pitfalls of FX trading. We will spend time to educate clients on how to trade and when we spot a trading pattern that is detrimental to the client we will discuss it with him.
- Our clients trade at fixed spreads. We do not widen spreads. On May 6th 2010, during the Dow flash crash, we did not widen our spreads even when liquidity suddenly disappeared from the market.
Isn’t 1:100 leverage too low nowadays? Many Forex brokers offer much higher leverages than that. Why don’t you provide at least 1:200?
To be honest with you, we consider even 1:100 to be extremely high. We offered the 1:100 option since we operate in a very competitive market but we strongly and actively recommend to our clients to limit their leverage to 1:20. As you know the Forex market is in fact the less volatile financial market, it is leverage that makes it more and more speculative. The high leverage levels that have become a characteristic of the FX market can be paralleled to strapping a couple of jet engines on a car that is actually very slow and safe. You will make it go very fast but sooner rather than later it will crash.
The actual decision to limit leverage offered was a difficult one since the typical trader has come to consider the offering of high leverage as an advantage of the broker. And although it is very easy technically for us to offer higher leverage options we took a decision that was based on a point of principle as we do believe that the extremely high risk inherent to higher leverage trading is an extremely risky proposition for the client to the point where the risk of total equity loss is close to 100%.
Do you plan offering MetaTrader 4 as the only trading platform for clients? Or do you plan adding something else? Maybe some
We have considered other alternatives but we believe that at this stage the widespread use of MT4, its stability, ease of use and great technical analysis package make it a great application, both for the end client and the managers/administrators. The decision on whether to choose an alternative to MT4 is probably linked to the decision of whether or not to adopt MT5.
The implementation of a web based trading application is something we are actively considering and we have an ongoing discussion for a solution that is based on MT4 technology.
However I need to make a point of distinction here, software will only contribute marginally to the long term experience of the client. Behind the flashing lights and interesting looking interface there is always a broker and ultimately it’s the broker’s policies that will define how satisfied a client is.
What’s your stand on the upcoming release of MetaTrader 5? Will you be offering it to traders? Will you abandon MT4?
The decision of whether or not we should adopt MT5 is not a decision that will be made now. We will be considering this option by the end of the year, once all the initial release issues have been ironed out. I believe that eventually MT4 usage will decrease and MT5 adoption will increase as eventually MetaQuotes will stop allocation of resources to the development and support of MT4.
Are you a native Cypriot company or have you chosen its regulatory environment?
The TFI Group is a native Cypriot group, actively operational in the FX market since 2000. We have been operating under an Exchange Control License issued by the Central Bank of Cyprus until the decision was taken that the regulator for margin FX was moving to the local Securities and Exchange Commission (CySEC). At this stage we moved all the FX operations to a subsidiary entity (TFI Markets Ltd.) and applied for regulation to CySEC.
What do you expect from the industry regulation? Would you like to see some actions from CySEC? Or would you prefer them not interfere in the Forex industry at all?
We believe that regulatory change will be one of the main catalysts for the industry. This will most likely manifest in the enforcement of maximum leverage levels for retail clients (we have seen the first indications of this from the US) which will directly affect the business models of FX brokers. Additionally we expect that the regulatory environment will become more friendly in conducting cross border business as internet based trading is taking over.
CySEC has taken a brave decision to step in and regulate the FX market as many market participants were based in Cyprus. Regulation might appear to be a nuisance but in the longer term, if left unregulated we believe that the industry would suffer from its own doing.
It seems that currently you are offering only the traditional wire transfer and credit card deposit/withdrawal methods. Do you plan adding more options (faster and more convenient), like WebMoney or PayPal?
You are right to point this out. The reason is that we only recently lowered our minimum account size to $1,000 which made funding from anything other than an actual wire transfer feasible. Credit cards were added and the technical infrastructure for other payment methods although available has not been tested and integrated with other company systems.
You’ve decreased your minimum account size from $30,000 to just $1,000 (still quite high, in my opinion) recently? What have made you do so? And why haven’t you decreased it farther?
Prior to regulation by CySEC the company was restricted to dealing with professional and experienced clients as dictated by the Bank of Cyprus Exchange Control License that governed its operations. Accordingly we were not looking for the smaller client.
But we understand that the focus of the industry today has shifted from the professional to the retail client. Accordingly we took the decision to lower our account size to $1,000. Looking at industry standards, $1,000 as you correctly identify is too high but we took this decision based on a number of factors that are both of financial and business model based.
To be more specific, there is a certain acquisition and maintenance cost associated with any client. At the same time the profit generated from any single client is defined by either trading volumes or client losses. You will find that as a general practice lower account sizes go hand in hand with high leverage and business models that generate profit from client losses. As we generate our income from client trading volumes and not client losses, even at $1,000 an account will probably not be generating profit for us.
What’s your stance on a rather popular opinion that states that Forex is gambling? Why the whole industry is associated with some
Forex, itself is not gambling. It is the most efficient and liquid market in the world. During “normal periods” you will find that the market in major currencies moves +/- 1.3% from the previous day’s close 99% of the times. During a crisis this can move up to +/-3% or even higher. But there is no comparison to a stock that can plunge 10% in a single day and is only tradable during specific times.
The proposition changes as you add leverage. Higher leverage levels will amplify the effect of small price movements on client’s equity. At high leverage levels Forex trading becomes extremely speculative. For example if a client utilizes 1:500 leverage then a 0.2% movement against him (this can happen in seconds) will wipe out 100% of his equity. This is so speculative that it does resemble gambling and not trading in a financial instrument and this is why we strongly suggest to our clients to limit their leverage to 1:20.
Do you plan adding some new interesting features to TFIFX? What are they?
We are always looking for ways to improve customer experience. And although www.tfifx.com does in its present state offer our clients a complete solution, it will get significantly better. However at this stage I do not want to give anything away so you will allow me to skip the specifics on this one.
What advice would you give a newbie Forex trader that only starts his “career”?
There is so much to cover here that can take days but some simple rules can make life easier for the newly initiated.
- Read the research that your broker provides and try to understand the lingo. If you don’t understand either browse the internet for the definitions or talk to your broker.
- Focus on major currency pairs at the beginning, they are less volatile and research coverage is significantly better.
- Put a take profit and stop loss level at the time when placing your order. If you are willing to lose $100 then your expected profit should also be the same. This is very important. Very often we see new clients making 80% profitable trades but end up losing as a whole because a single loss making trade where they let their losses run.
- Be humble. You are in the most liquid market in the world. All traders even the most experienced ones make mistakes. Be brave enough to take a loss and avoid a small mistake becoming a big one.
- Most important. Keep things into perspective. If you deposited $10.000 and now your equity is at $13.000 you made a 30% return. Be happy and not greedy. Take some money out of the account.
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