Choosing an FX Dealer

As of right now, Forex is an unregulated industry with a very high income potential to Forex dealers. This makes it very difficult to distinguish solid dealing firms from low level bucket shops that will do everything possible to make you lose. That’s why there are introducing brokers such as Fisk Financial. Introducing Brokers can place you with a dealing firm that best fits your requirements, and help maximize your trading experience.

Using an introducing broker (IB) costs you absolutely nothing, and the IB is compensated on the back end by the clearing firm. The dealing firm benefits from its relationship with the IB because the IB drives business to the dealing firm and is more interactive with the client. In return for working with an IB you will receive various added value services, usually at no extra cost.

Forex Regulation & Member Capitalization

With so many different firms to choose from, it can be difficult to be confident in your selection of a Forex dealer. A dealing firm needs to be able to cover themselves on all trades that are processed. A good dealing firm needs to have enough capital on hand and strict dealing practices to be able to handle all of their clients properly. The NFA, which is a self regulatory organization, monitors the behaviors and dealing practices of Forex brokerage firms. A positive trend in the industry is beginning to push low level bucket shops out, however many still exist and its important that you do not get stuck with one of them.

A good place to find out how well a firm is capitalized is on the CFTC website. The CFTC is the Commodity Futures Trading Commission. Their website is www.cftc.gov. In order to look up a firm’s capitalization you need to go to this website www.cftc.gov/tm/tmfcm.htm. Look at the adjusted net capital, the capital requirement, and the difference between the two. Obviously the more overcapitalized a firm is, the better.

Size and Professionalism

It’s always important to look at a firm’s size as at least one measure of credibility because there are so many small bucket shops out there and they have nothing to lose besides your money. A well capitalized firm (over 10 million in access net capital) will usually hold themselves to a standard of professionalism with their customers. At Fisk Financial, we choose to only work with the brokers that have proven themselves to be staples in the industry today. Because of our client base, we are able to choose which firms we want to deal with, and assure our clients that these firms comply with appropriate regulation. All of the firms we work with are U.S. based, and in our opinion, very well-capitalized; they hold a level of professionalism that we have noticed to stand out over the other firms. We have actually narrowed down the number of firms we work with to one that has, in our opinion, exhibited a commitment to service and best practices across the board.

Importance of Transaction Costs

Lets say you are trading the EUR/USD with a commission free broker and a spread of about 2 PIPs. On a standard lot, that spread of 2 PIPs is equal to $20 USD. Assume that you trade 2 lots a day for 25 days out of the month; that’s $20 USD X 50 Trades = $1000 USD a month, in the spread alone! For the sake of this example lets assume that you generate $200 in profit for the month. Now imagine if you could receive a piece of the spread on every trade you make, let’s say .4 PIP, then you could have doubled your profits. $4*50 trades is a $200 cash rebate into your pocket. Now just by using an introducing broker and collecting a rebate your success has increased.

Some firms may advertise and show you a consistent spread of 1-2 pips on the EUR/USD for example. However, because the firms could be low level bucket shops, they may be either: placing your trades off market, messing with your execution, or not allowing you to withdraw your profits in a timely fashion. Bigger and more stable firms, with better service may not always be the cheapest, however their customer service, execution, and platforms will be far superior. If you combine this with an IB volume rebate such as the one Fisk Financial can offer you, you will be positioning yourself for greater success.

Our Preferred Dealer – FXCM

An advantage in most trader’s eyes for FXCM is the fact that they do not have a dealing desk. This means that your trades are passed directly to various banks and liquidity providers that FXCM has a relationship with. This means superior execution and anonymity from market makers. Many traders who choose use a more fundamental style prefer FXCM’s trading system where they don’t have to worry about their trades not being executed. FXCM offers 24-hour customer support that has proven to be a cut above the rest in the industry.

• FXCM offers the popular MetaTrader platform
• FXCM also offers their proprietary trading platform for advanced charting
• FXCM is one of the largest retail FX dealers in the world in terms of excess net capital
• No dealing desk model
• 24-hour customer service
• Excellent leverage