ZuluTrade, is a great social trading platform however many people complain that they often experience heavy slippage when copy some of the signal providers on ZuluTrade. This slippage can sometimes seriously eat into a traders profits. So I undertook an investigation to establish which brokerages experienced the worst rates of slippage. To do this I looked through a selection of ZuluTrades most sucessful signal providers and averaged out the slippage each brokerage had over the past year.
The Top Ten Brokerages
|Unsurprisingly, AAAFx had the leas slippage out of the all brokerages offered on the ZuluTrade platform. As AAAFx is totally integrated with the platform this is what you would expect. However, much of the rest of the list is quite shocking for instance I do not think that many people would expect that some small players in the world of Forex would suffer as little as they do. Slippage of under a single Pip would still allow most people to make money from copying ZuluTrade’s better signal providers. Both Gain Australia and Gain UK did pretty well (for those not in the know Gain operates Forex.com). Lagging back in 10th place with Slippage of less than 1 Pip is xemarkets of Cysec. So it does appear that there are a number decent regulated alternatives to trading with AAAFx, however none of the alternatives come close to AAAFx in terms of slippage. However a number of these brokerages listed offer spreads that are considerably tighter than the Spreads offered on AAAFx. This means that AAAFx may not be the best choice for those wishing to use the ZuluTrade platform.
Now for the naming and shaming of the brokerages that suffer the most slippage on the ZuluTrade platform.
|Some of the slippage experienced with these brokerages is completely outrageous. KVB KUNLUN customers suffered average of 4.28 Pips of Slippage which would seriously eat into a traders profits. Again things aren’t much better for customers of YouTradeFX who suffer an average of 3.29 Pips of Slippage. Whats worse is that some of these brokerages featured on our shame list aren’t particularly competitive when it comes to the Spreads on offer. If you are currently trading with one these brokerages I suggest that you move to a different provider.
My study of Slippage on ZuluTrade only featured 38 brokerages, this due to the fact that for some of the less commonly used brokerages didn’t have large enough data sets for me to be able to compare them to the properly to the 38 brokerages which did feature in the study. What the study does show is that those using ZuluTrade should ensure they pick a competitive brokerage in terms of both slippage and spreads.
Many people are confused with the difference between Margin trading and Contract for Difference, while there are similarities between the two there are several important differences between the two instruments.
Both forms of trading use Margin. When you open a Margin FX or Stock position you only have to put up a small percentage of the cash up front effectively borrowing the rest of the money for the position from the broker. You may be able to open a $5,000 position with only $500 in your trading account for instance. The same thing happens when you open a position with a Contract for difference provider with the trader being able to open a position worth a $5,000 with only $50 in their account. The difference is when you open a Contract for Difference position you do not actually own the underlying financial instrument in question, you are entering into a Contract with a counter party namely your brokerage. Where as with Margin Trading you are the owner of the underlying instrument though you have borrowed a significant amount of the money from the brokerage in order to take the position. Both Margin Trading and CFD offer different benefits, though it should be noted both pose significant risks.
I am going to lay out a number of bullet points showing the important differences between the instruments:
- Leverage – CFD’s generally give the trader the opportunity to trade with significantly more leverage, this is due to the fact there is no exchange of a physical asset going on. With the extra leverage CFD’s offer greater possible returns as well as the possibility for greater losses.
- Spreads – Margin Trading has the advantage of offering tighter spreads on the instruments offered this is due to the fact that Margin trader is essentially using a broker with Direct Market access who makes their money by charging commission on trades.
- Liquidity – CFD’s (Specifically those offered by Market Makers) generally provide better liquidity than Margin Trading. There may be times when Market conditions mean there is very limited Market liquidity meaning trade size may be limited. As CFD’s do not require the trader to own the underlying instrument they wish to trade.
- Stop Losses – Again Margin Trading customers can generally not use Guaranteed Stop losses due to the fact there is no guarantee that a trade can be closed at a particular market price.
- Account Size – You will generally find Margin Trading requires new traders to deposit a significant amount of money in order to be able to trade the financial markets. While Contract for Difference providers will accept customers depositing as little as $5, though this would involve taking on a significant amount of leverage with every trade.
Margin Trading is probably better suited to traders with significant capital at their disposal. Though you will find many professional traders who operate both Margin and CFD trading accounts to take advantage of the benefits offered by each form of trading.
This is an infographic to describe world forex trading activity. It shows the top 15 traded currency pairs, volumes and buy and sell percentage rates. This is designed to aid new traders in getting a general overview of the forex market, which should allow them to make better use of their trading platform and maximise their potential. This infographic has been provided by Vantage FX UK who are a forex trading brokers based in London UK. Through them you can open a demo account to practice forex trading so you can acquire new skills and knowledge about forex which should give you a greater insight into the world of forex trading and may lead to you opening a live account with them so you can start trading almost immediately. Check them out today if you’re interested in opening an account or if you’re just looking for some trading education and tips.
Vantage FX UK are a forex trading brokers based in the city of London. They provide both Live and Demo accounts to forex traders, both new and experienced, as well as giving trading tips and advice.
A Forex rebate scheme is a scheme which offers potential traders the possibility of being refunded some the spreads they are charged by brokerages. The schemes are members of affiliate programs for the brokerages they promote meaning they collect a share of the revenue made by the brokerages you sign up to. They then share this revenue with you making money for themselves while also giving you cash back. For instance the xemarkets affiliate scheme offers it’s members up to 50% revenue share for each customer they sign up. So then the Forex rebate scheme will then share this revenue with the customer who signed up through there link a certain percentage of the revenue earned from the affiliate program. Meaning the original customer gets pay out when a certain amount of income has been generated from the affiliate program.
Many of these schemes are completely legitimate and will pay you a share of the earnings the broker makes from you. The amount of rebate you will receive varies between various brokerages due to the fact that different affiliate schemes offer different revenue share. Signing up to rebate scheme will not harm your rights with the brokerage and can help you earn extra cash or at least reclaim some of your losses. There are a number of different Forex rebate schemes out there.
Made To Trade
Here at Made To Trade, we have begun to run our own Forex rebate scheme for information on the scheme and the different brokerages we support on the scheme send an us an email at: email@example.com. We can offer significant rebates for a number of different brokerages, we can also offer advice on which brokerage would be best for you. While we do not offer they widest range of brokerages around we pride ourselves only working with European Regulated Brokerages, as well as providing a personal service to those who want to get Forex rebates from a selection of regulated brokerages.
Cash Back Forex
Cash Back Forex, are one of the oldest Forex Rebate websites on the internet and offer Forex cash for a wide selection of regulated and unregulated brokerages. Some of the rates offered by CashBack Forex are among the best in the rebate business and they claim to be able to beat the rates offered by their competitors. Meaning that Cashback Forex offers one of the better Forex rebate schemes available on the internet.
Social Trading is very hot at the moment with all the major CFD providers coming out with their own social trading platforms or providing support for other social trading platforms such as ZuluTrade and Tradeo. I decided to investigate whether social trading works or whether it doesn’t live up to the hype. For this I decided to open demo account at the most popular social trading network ZuluTrade.
I started by opening a ZuluTrade demo account with £5000 play money. I then proceeded to pick four different signal providers with a good track record and limited Draw Down, in the hopes of minimizing risk. After having made my various picks I waited and let the signal providers make there moves. Apart from this I used the default settings suggested by the providers and ZuluTrade.
According to ZuluTrade if I had followed the signal providers I had chosen from 2010 until now my £5000 play account would have grown have doubled in size and been worth over $10,000 now. It wasn’t until the next day did any of my signal providers open any positions, however things got off to a good start with the said signal provider opening three positions all of them being reasonably profitable.
After this I simply left the four signal providers I had chosen to do their work and trade the Forex markets. After 14 days about half way through the month the traders I had followed had made me £250 from my initial £5000 deposit. From the below graph it appears that my account hasn’t had a negative day, which is really quite impressive. In half a month I had made a 5% return which is very impressive over such a short period of time.
After 21 days, my demo account was up by £458 a return on investment of 9% with still another 7 days to go, it seems possible to get a return on investment of over 10% a month by copying some of the best traders on ZuluTrade. It seems that if you pick your signal providers wisely you can make some serious profits with ZuluTrade without having to micro manage your account to much.
I therefore recommend that people at least try out the 30 day demo account and decide whether ZuluTrade is suitable for them. I would personally contend that ZuluTrade is the best social trading platform currently available and seems superior to eToro and Tradeo’s offerings. Obviously there are still considerable risks involved with trading at ZuluTrade, however for some I am sure that using ZuluTrade would be a great option.
Made To Trade’s: Top 5 Trading Documentaries– What we here regard as the best 5 Trading Documentaries, some very interesting documentaries on this list.
Floored is a documentary looking at the death open outcry trading and is available to watch free online at Babelgum. A worthwhile watch for anyone who has an interest in trading and the history of financial markets.
The Black-Scholes Formula is a good documentary produced by the BBC on the Black-Scholes Formula and it’s effect on options trading and how it lead to the collapse of mammoth hedge fund Long Term Capital Management.
Many are unaware that there are two different types of Contract for difference brokerages. Firstly, there are those who simply take the role of agents executing all orders on the underlying exchange, this type of brokerage gives it’s customers direct market access. In contrast with Direct Market Access brokerages their are Market Makers who make a market and then live off the spread. With Market Makers taking a number of different measures to manage their risk. To learn how Market Makers manage their risk check this post out.
When trading with a brokerage that offers Direct Market Access, the bids and offers on display will match those in the underlying market. This means that the spreads on offer are much tighter than brokerages that operate on the Market Maker model. Though when trading with a CFD brokerage that offers direct market access you will have to pay fixed commissions on each position opened. This can really eat into smaller traders profits.
With a Market Maker, they will determine the spread on the given instrument to manage risk and to increase profits the Market Maker will often offer spreads considerably wider than those found in the underlying market. When hitting buy you may also experience slippage and re-quotes which is particularly annoying, however you are less likely to have to pay a commission on each position opened with the brokerage. Which can be beneficial to those who have limited funds to trade with.
Choosing whether to use a Market Maker or Direct Market Access brokerage really depends on your needs and what products you intend to trade. The shorter your trading time frame the more beneficial a Direct Market Access brokerage will be. However if you want access to a wider range of global markets a Market Maker may offer you a better range of instruments to trade. This is due to the fact that a Market Maker can theoretically create a market for any tradeable financial instrument, whereas a Direct Market Access brokerage would need access to the particular market. A lot of professional traders will use both for these very reasons.
Given the advantages of brokerage who offer Direct Market Access (DMA) why do people use Market Makers? Well Market Makers have a number of benefits for one they tend to offer a wider range of markets, including foreign and illiquid markets. They also tend to allow traders to access the markets with less capital and undertake smaller size trades. For example to trade CFD’s with DMA broker you may need to open account with at least $2500, but many Market Makers allow you to trade the markets with as little as $100 (theres even a few regulated brokerages that allow you to trade the markets with as little as $5).
Liquidity can also be an issue with Direct Market Access brokerages. For example suppose you want to buy 500 Shares of a particular company if there are only 10 Shares available to buy you won’t be able to execute your order. It is for this very reason that one can’t take advantage of guaranteed stop losses at a DMA brokerage, due to the fact that there is a chance that you won’t be able to close a position at that particular price.
Both Direct Market Access and Market Makers have their own advantages and deciding which to trade with will largely come down to what your particular needs are. In an ideal world it would beneficial to have access to both a DMA and Market Maker, but many will forced to pick one over the other and they should consider which brokerage model would suit them better.
No Deposit bonuses have become something that has become common in the poker and gambling world. Now a number of different brokerages have started to offer no deposit bonuses. However from the above table you can see that the majority of the brokerages that offer these no deposit bonuses are unregulated offshore entities. Of the brokerages that offer no deposit bonuses only three are properly regulated entities. Both HiRose and Plus500 offer no deposit bonuses as well as being regulated by the FSA.
The Plus500 bonus involves giving and verifying your phone number with Plus500. They then deposit the bonus in your account, but you are only able to withdraw the bonus if you undertake enough trading activity in the allotted time frame. After three months the bonus is then removed from your account. While it is possible to earn the amount of trader points required to withdraw the bonus it is somewhat of a challenge. Your only allowed to create one account per household as well meaning if you fail at your first attempt you can’t set up a new account to take advantage of the bonus.
At HiRose financial it is similar except that the bonus and the profits made from the bonus can only be withdrawn after you have made a real money deposit. This means that a trader is going to have to make a deposit of some sort if there ever going to free up their bonus earnings. Apart from HiRose and Plus500, all the other no deposit bonuses listed are with unregulated and mainly offshore brokerages.
If you want to try your hand at trading real money without depositing yourself, the Plus500 no deposit bonus is probably your best shot. I will aim to keep this page up to date if any other brokerages begin to offer no deposit bonuses.
eToro is probably one of the best known brands when it comes to social trading. Social Trading allows you to see what positions other traders are taking and choose to copy them. eToro allows you to copy different traders, so that when they open a new position you too also open a new position. The idea is that you can copy successful traders and make profits without having to make a trading decisions too.
Obviously all trading all involves risks and so does eToro Open Book. eToro has put in a number of different measures in order to help minimize the risks for traders using their system. For example you can only have 20% of your total capital risked with one particular trader, so if this particular trade blows up his account with a serious of disastrous trades you won’t be totally out of pocket. In theory then you could follow 5 traders and assign each trader 20% of your capital to following the actions of these traders or follow more traders giving each trader a smaller amount of capital. Making you almost a kind of fund manager rather than trader.
While eToro’s measures to protect their traders from losing all their income many have complained about the Open Book and Copy Trader system promoting high risk trade strategies. If trader gains guru status they receive commission for each of the followers and can earn very substantial income from this commission. For example an individual who has attained guru status and has over a 1000 followers can make up to $10,000 a month from commission alone.
This has attracted a breed of high risk traders to the eToro with the express purpose of opening an account with a small deposit (as little as $50) and obtaining followers thus making themselves significant commission. Due to the fact they have so little of their own money it can make sense to engage in high risk strategies (often Martingale systems) for the sole purpose of gaining followers and making commission. As the commission can vastly outstrip the money they have risked in their accounts. Many have fallen victim to following these high risk traders not understanding what kind of strategies these traders were using and ultimately losing up to 20% of their total capital.
This can often easily be avoided by only following traders who have had long term success. Many of the high risk traders will have made extraordinary returns in a very short period of time for example making 20%+ returns in a single month is something that cannot normally be maintained. Some of the best hedge funds in the world would be happy if they could make those kind of returns over the course of the year. Instead traders should look to follow those who have consistently made profits with very little draw downs.
Their is always going to be risks involved in trading and Social Trading places your money in the hands of others making what happens out your control. I am sure some people have success by being careful and following the right traders while others have been bitterly disappointed having placed their money in the hands of someone using a high risk strategy simply with the aim of making of commission off their followers.
Many will have noticed that the majority of brokers do not accept customers from the United States of America. This is due to a number of regulations that prevent non-US regulated brokers from accepting American citizens as clients.
The Dodd-Frank Wall Street Reform and Consumer Act of 2010 which was signed by President Barrack Obama led to the CTFC releasing a number of new rules regarding retail foreign exchange. These rules were designed implement some of the provisions laid out in the Dodd-Frank Act, which were aimed at protecting retail customers from financial fraud.
- Firstly, every Foreign Exchange Brokership who undertakes business with US Citizens, must be regulated by CTFC as either Retail Foreign Exchange Dealers (RFED) or Futures Commission Merchants (FCM).
- Secondly, the maximum leverage these companies may offer to retail customers is 50:1 on major pairs with leverage being limited 20:1 on exotic pairs. This is much stricter than European regulation were no upper leverage limit is set.
- Thirdly, the minimum security margin deposits will be 2% for positions taken in the major currencies and 5% for all others.
As you can see the CTFC’s rules prevent US Citizens from trading with regulated European Foreign exchange broker’s, as the vast majority of European brokers do not have the adequate US regulation in order to be able to accept US Customers. Acquiring a licence in order to operate under the said regulation is costly and many will have decided to try and concentrate on other non-US Markets instead. These regulations are certainly responsible for their only being a small number of brokers who operate both European and US arms of their company (despite their being several notable exceptions).
The legislation was quite controversial a number of Forex brokers claimed that the legislation would drive business out of the country. Both from the increased costs of regulation and the fact that many believed the extra constraints would put off a number of customers. The leverage constraints do seem pretty restrictive in comparison with other competing regulatory jurisdictions and requires that the individual has a significant amount of capital in order to be able to trade the Foreign exchange markets. This has frustrated a number of American traders who wish to open accounts with European brokerages who are able to offer much greater amounts of leverage.
American citizen’s should avoid brokerages that will accept them despite the fact they are American (unless of course they are CTFC and NFA regulated) as it is almost certain that the said brokership is operating illegally. No reputable brokership wants to face possible legal action from the CTFC (In 2011, the CTFC sued 14 separate companies for flouting regulation). Lists of regulated American brokers can be found on the relevant regulatory bodies websites. While these regulations have certainly helped protect the US Consumer from Forex fraud many also feel that this has stunted the growth of retail foreign exchange in the USA.