If you have a browse around the internet you will find a huge number of different CFD brokerages of the ones that are regulated you will notice that the majority of these brokerages are regulated by Cysec. For those unversed in regulation you may be confused to what exactly Cysec is and why Cysec regulates the majority of European Brokerages, here in this post I want to explain this to you.
Firstly, Cysec is a regulatory body which regulates investment activity in the jurisdiction of Cyprus for those who don't know Cyprus is a small island off the coast of Greece. Cyprus happens to be a full member of the European Union. Being a member of the European Union allows investment firms that are regulated in one European state to operate in all of the other member states under the MiFID directives.
Certain things about Cyprus mean that it is a very favorable jurisdiction to operate from. This has led to a huge number of investment firms to decide to base themselves in the jurisdiction and is why a large number of CFD brokerages are based there. Another thing that has attracted a lot of business to Cysec is their differing position on Binary Options, while no other jurisdiction in Europe has considered Binary Options to be financial instruments Cysec has allowing Binary Options operators to set up shop their and become fully regulated. Attracting even more business to the shores of Cyprus.
Cysec regulation fully complies with that is laid in out in MiFID, but some feels that Cysec offer weaker regulation than some other European Nations and this appears to be true. For example to set up a retail Forex business one has to be regulated as a bank not merely as a investment vehicle as is they case in Cyprus. It can also be pointed out that the Cysec compensation fund only stretches to 20,000 Euros where as the compensation offered by the FSA is much greater something recognized by Alpari (AFS) boss on the announcement of their imminent move to the United Kingdom.
So what to conclude from all of this well it is clear that Cysec is fully compliant and up to European regulatory standards meaning that you should experience some minimum level of protection when operating with a brokerage based in Cyprus. However it may also be true that Cysec isn't Europes toughest regulatory regime.
Friday, 11 January 2013
Does being regulated mean your legitmate?
There are many regulated brokerages and many good ones at that but does it mean that they are legitimate or are their some scammers who operate regulated brokerages? Well from the appearance of things there seems to be a number of different brokerages who are in clear flout of regulation but yet still remain regulated by their respective regulatory authority. For example YouTradeFX has a very bad reputation with many different people and their have been some complaints that people have never received their money back during withdrawals, if this is indeed the case then YouTradeFX is clearly not operating in line with the regulations. Though it is always very difficult to know the truth of such allegations due to the fact many of the reviews and comments of individuals online are very dubious and quite questionable. This is made worse by the fact some sites give very favourable reviews of YouTradeFX while other sites are much more skeptical of YouTradeFX in their coverage of the site.
Why then are many brokerages with alleged dubious practices still operating? Well it generally takes regulators a while to shut down any dubious sites and companies as they have to do a full investigation into two the company to discover whether they are in fact in breach of financial regulations. This means the brokerage can often operate for a number of months even when they have ongoing investigations against them, it also generally takes a number of complaints to the relevant bodies in order for the regulators to go after these companies. I suggest that those trading make complaints to the regulatory body every-time they feel they have been majorly wronged so the regulators can get an idea of who might be breaking regulatory practices. Back talking about YouTradeFX it appears that they are almost certainly breaking regulatory practices by accepting US Clients, which is in clear breach of the US regulations.
Why then are many brokerages with alleged dubious practices still operating? Well it generally takes regulators a while to shut down any dubious sites and companies as they have to do a full investigation into two the company to discover whether they are in fact in breach of financial regulations. This means the brokerage can often operate for a number of months even when they have ongoing investigations against them, it also generally takes a number of complaints to the relevant bodies in order for the regulators to go after these companies. I suggest that those trading make complaints to the regulatory body every-time they feel they have been majorly wronged so the regulators can get an idea of who might be breaking regulatory practices. Back talking about YouTradeFX it appears that they are almost certainly breaking regulatory practices by accepting US Clients, which is in clear breach of the US regulations.
Wednesday, 9 January 2013
What is leverage?
Leverage involves borrowing money in order to be able to trade larger positions than one would normally have too. While you don't actually take out this money and ever physically receive it, it is what allows you take on much bigger positions than you could normally do so. That is why you have to pay an overnight charge when you keep a CFD or Spread betting position out overnight as your essentially paying interest on your whole position usually charged at the LIBOR divided by 365.
Leverage both increases your potential returns as well as maximizing profits and also increases your potential losses. This is why leverage can be so dangerous with some brokerages offering leverage of up to 1:888, this means with a hundred dollars deposited you can trade a position worth $88,800 and with a $1000 deposited you could trade a position worth $888,000. The only regulated broker with such huge leverage that I know of is xemarkets.
I am unsure what to think of this kind of leverage as it could possibly allow individuals to lose their accounts in one bad trade. Several things suggest to me that highly levered trading could also be more addictive and more similar to gambling, as it would only take one hugely levered trade to make all your losses back.
However there are a number of ways in which one can control their leverage in the hopes to not run into these problems. First one should use stop losses to prevent huge movements against their positions, this will at least minimize some of the potential losses. Also making sure that you don't trade beyond your limits. This important as you must make sure that you don't take on too bigger positions even if the leverage on offer would allow you too. Taking these measures will allow you use many of the benefits of leverage while reducing some of the risks.
Leverage both increases your potential returns as well as maximizing profits and also increases your potential losses. This is why leverage can be so dangerous with some brokerages offering leverage of up to 1:888, this means with a hundred dollars deposited you can trade a position worth $88,800 and with a $1000 deposited you could trade a position worth $888,000. The only regulated broker with such huge leverage that I know of is xemarkets.
I am unsure what to think of this kind of leverage as it could possibly allow individuals to lose their accounts in one bad trade. Several things suggest to me that highly levered trading could also be more addictive and more similar to gambling, as it would only take one hugely levered trade to make all your losses back.
However there are a number of ways in which one can control their leverage in the hopes to not run into these problems. First one should use stop losses to prevent huge movements against their positions, this will at least minimize some of the potential losses. Also making sure that you don't trade beyond your limits. This important as you must make sure that you don't take on too bigger positions even if the leverage on offer would allow you too. Taking these measures will allow you use many of the benefits of leverage while reducing some of the risks.
Tuesday, 8 January 2013
Picking Somewhere to Trade
I have noticed that out there are so many reviews of trading websites that are very biased and don't give a proper reflection of the service on offer. For example, FXEmpire gives UFX Markets a really top review making out that it's some incredibly brilliant service here's the quote from their review:
These reviews are very different and in fact the Forex Peace Army court has ruled three times against UFX Markets and have decided that they are a scam provider. Which is rather shocking considering UFX Markets is a Cysec regulated company. It is also tough for traders to determine what companies are legitimate and which aren't if their are some websites that are willing to promote these spurious at least brokerages.
So how does one determine what providers to go work with? This is a hard question a good starting ground is probably both Forex Peace Army and also Earn Forex who allow traders to review their sites and do a decent job of working out and flagging spurious or false reviews. But even then it's quite hard to make out what reviews are legit and which aren't it is also difficult to read through a number of poorly written reviews. I've seen a number of sites that offer pretty unbiased CFD Reviews however many of these websites only have a small number of reviews and therefore do not help you when making decisions about many sites.
UFXMarkets had been a solid and trustworthy broker to thousands of traders around the world. Because of this, you will find a very sturdy and reliable dealer at this firm. The spreads are tight, and the trading conditions are fair. There are also binary forex options available as well.This amazing recommendation is again repeated in the reported user reviews which are also all glowing. Is this due to the fact that FXEmpire are a member of UFX Markets affiliate program, I'm guessing its so. It's disappointing to know that big well ranking websites are sending customers brokers that so many people are having real problems with, take a look at the reviews at Forex Peace Army
These reviews are very different and in fact the Forex Peace Army court has ruled three times against UFX Markets and have decided that they are a scam provider. Which is rather shocking considering UFX Markets is a Cysec regulated company. It is also tough for traders to determine what companies are legitimate and which aren't if their are some websites that are willing to promote these spurious at least brokerages.
So how does one determine what providers to go work with? This is a hard question a good starting ground is probably both Forex Peace Army and also Earn Forex who allow traders to review their sites and do a decent job of working out and flagging spurious or false reviews. But even then it's quite hard to make out what reviews are legit and which aren't it is also difficult to read through a number of poorly written reviews. I've seen a number of sites that offer pretty unbiased CFD Reviews however many of these websites only have a small number of reviews and therefore do not help you when making decisions about many sites.
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