OPENING AN ACCOUNT (Things about Brokers)
1. Who Is On Your Team?
A broker is in business to make money, pure and simple. They are not going to hold your hand, or keep you from committing financial suicide, unless that activity makes them more money…. And it never does! That being said, I will address some common questions about brokers:
--Do brokers run stops?
I have never seen any evidence that brokers run stops. Stops do get run, but by hedge funds and banks.
--Do brokers target my account for any type of “funny” activity?
No, they don’t need to.
--Does my broker trade against me?
Yes, they do. As a small retail trader, don’t believe anything else to the contrary.
2. How do I open an account, and who should I open it with?
Opening an account is about as easy as it gets. Just google “Forex Broker” and you will have a lot of choices. Better yet, you can go to www.forexfactory.com or other forex message boards and find lots of colorful ads. Opening a demo account is something a 5th grader could do, it is very simple. For a real money account, that is a little more involved and will usually take a couple of days for all of the paperwork to clear. As for which broker to choose, that is like choosing a whiskey or cigarette…..Everyone has a particular brand that they prefer, but almost all will get the job done. For Non-US traders, your choices are vast and good. For US traders, it gets a little more complicated. Do you go with a US firm, and be stuck with all of the overbearing regulations, or go with an offshore firm that offers more flexibility? I have both, a US account and an offshore account. For new traders based in the US, I recommend going with a US company first. The high margin requirement in the US will keep you out of a lot of trouble when you are starting out.
3. To Demo or not to Demo
A Demo account is a good idea for a week or two to get familiar with the particulars of a new brokers platform. Beyond that, I don’t think they are much good. Demo results cannot be duplicated with a live account. A trader changes when there is real money on the line, even a 10 cent pip, even a 1 cent pip (especially a new trader)! You need to choose a pip size that will keep your interest, but will not cause you a lot of stress during the draw downs. Remember, using my system, the MAXIMUM you can trade is a 10 cent pip for every $500 in your account. You may certainly trade less than that. Your returns will be lower, but so will your risk and stress level. Many reads will scoff at this .10/$500 rule and trade a larger pip. With 500:1 leverage you could trade 2 standard lots ($20 pip). If this is you, and you are still reading this, then you either skipped the section on leverage on the previous page, or you think you know more than I do. If you missed the leverage section, please go back and read it. If you think you are smarter than me….. why are you on this website?
