Here at Made To Trade, we have already covered the emergence of a couple financially regulated Binary Options platforms and it now appears that a third player is going to enter the marketplace following the likes of TopOption and Banc De Binary. Yesterday Cypriot financial regulator announced that they were authorizing six different firms Cypriot Investment Firm licences. Possibly the most interesting firm included on the list is Ouroboros Derivatives Trading Ltd.
While there is not much information to be found online regarding the firm, a quick Google of ‘Ouroboros Derivatives Trading Ltd.’ will lead you to the Linkedin profile of Eran Chertok-Gorodezky who is listed as the CEO of the said company. According to his profile:
“Ouroboros Derivatives Trading Limited is the first Cyprus Investment Firm (“CIF”) to receive a license from the Cyprus Securities & Exchange Commission (“CySEC”) on the bases of providing binary options trading (license number 187/12). The company will be offering binary options trading to EU clients.”
This however is not strictly true with it being Banc De Binary who became the first firm licensed by CySEC on the basis of providing online Binary Options. It should also be pointed out the Safecap Investments Ltd. (best known for their Markets.com brand) have possessed a regulated Binary Options platform since mid December.
It is not clear whether Ouroboros Derivatives Trading Limited. currently operate a Binary Options platform or whether one will be established in the coming months. Searches for CEO Eran Chertok-Gorodezky do not turn up much, but do suggest some limited links to Israel whether this is the case still remains to be seen.
Since CySEC regulated Binary Options in early May 2012, a number of Binary Option firms have become regulated in the jurisdiction of Cyprus including S.O SpotOption Ltd. the biggest Binary Options platform provider. In January 2013, Banc De Binary became the first Binary Options provider to be regulated on the basis of solely providing Binary Options to EU customers. Currently CySEC are the only European financial regulator to recognize non-exchange traded Binary Options as a financial product, with Binary Options being classed as a form of gambling in a number of different jurisdictions (e.g Malta). It seems unlikely that other European financial regulators will follow CySEC in regulating Binary Options as a type of financial instrument.
When picking a ZuluTrade brokerage there are three main things to consider;
|1||AAAFx||0.27||HCMC (Greece MiFID)|
|2||GO Forex||0.43||CySEC (Cyprus MiFID)|
|4||Gain Australia||0.67||ASIC (Australia)|
|5||Gain UK||0.7||FSA (UK MiFID)|
|6||COLMEX||0.73||CySEC (Cyprus MiFID)|
|8||FXDD MT||0.88||MFSA (Malta MiFID)|
|9||FXCM UK||0.94||FSA (UK MiFID)|
|10||Xemarkets||0.95||CySEC (Cyprus MiFID)|
|11||FX SOL UK||0.98||FSA (UK MiFID)|
The second important thing to consider when picking a brokerage to operate with is to consider whether the said brokerage has competitive spreads. The wider the spread the more your potential profits will be eaten into. So the next step is to compare spreads between the brokerages which have the best execution with the ZuluTrade platform. The following table shows the average spreads offered on the four major currency pairings, while the spreads on more exotic currency pairings will likely have greater variation the majority of trading on ZuluTrade is in the major currency pairings.
|Rank||Broker||Slippage (Pips)||EUR/USD||USD/CHF||GBP/USD||USD/JPY||Slippage & Spread Avg|
|11||FX SOL UK||0.98||3||4||4||3||4.48|
As you can see when one takes Spreads into account, it is actually Gain Australia which offers the best service for those trading with ZuluTrade accounts closely followed by AAAFx and Gain UK. When you take into account Spreads companies such COLMEX, FXDD and FX Sol UK get left far behind. There seem to be about 8 different options which offer you a total trade cost of lower than 3.5 pips which is the most your going to want to pay for opening a trading positions.
Now we get to the final important category. Regulation is important for two reasons, one proper regulation protects you against the possibility of the brokerage collapsing. This is something that becomes very important when an individual will be trading a large amount of capital. For instance a trader who is with a MiFID regulated brokerage will have their deposits protected up to at least 20,000 Euros if they brokerage was to collapse. While MiFID ensures a minimum standard of regulation, the strength of the regulation does vary body to body. For instance CySEC and HCMC are considered to be some of the weaker MiFID regulated bodies, this being said I would be happy with doing business with any of the MiFID regulated brokerages on the list. Those in Australia would probably be best to go with Forex.com Australia (aka Gain Australia) who are regulated by the very competent ASIC. The only two brokerages on the list I would avoid are FSC regulated FX Primus and unregulated Weltrade while I know of customers who are happy with both, the lack of serious regulation in both cases would worry me deeply.
So what brokerages would I recommend for those who want to trade on ZuluTrade. Well that really depends on what region you live in.
Europe: xemarkets, AAAFx, Forex.com (UK)
Australia: Forex.com (AUS)
Back in December we announced that Alpari (AFS) Ltd. had moved its customer base to Alpari’s UK arm. There was speculation that this was due to the fact that Alpari’s biggest shareholder Andrey Dashin was planning launch a new CySEC based Forex brokerage. This speculation seems to be right as CySEC announced today that Forex Time Ltd. (ForexTime) had acquired a full CySEC Investment Firm licence.
The offering from ForexTime does look pretty exciting, it appears that while Forex is not the only offering at FXTM it will make up the core of the offering. With ForexTime planning to also offer Spot Metals, Commodity Future CFD’s, ETF CFD’s and Share CFD’s. This makes for a pretty decent range of instruments for prospective traders. While this is a pretty decent range of instruments, what excites me the most is the range of ETF’s available for trade. I feel that ETF’s offer traders some great opportunities. At the present time the range of ETF’s at FXTM is pretty limited but hopefully FXTM work on adding extra ETF’s as time passes.
I have no doubt that FXTM will go on to be a successful company being backed by Alpari’s main Shareholder will sure help. But it appears that everything at FXTM is being done very professionally with their already being a very professional website up. FXTM also supports both MetaTrader 4 & 5, with support for social network ZuluTrade being added soon.
All in all, FXTM looks to be an exciting venture that I feel will fare well in the ultra competitive over-the-counter Forex market. Expect to see a review in the upcoming days.
UBK Markets who have recently acquired a full CySEC investment firm licence, is a new start up currently in beta mode. The brokerage has been founded by the Russian Forex entrepreneurs who currently operate a couple of automated trading products (namely FXMarketWave.com and GeleanTrawler). You may have not heard of these programs due to the fact that they are largely marketed towards the Russian Language market.
It appears that the FXMarketWave program will play an important part of the new brokerage, with the program advertised on the front page of the UBK Markets beta test website. The FXMarketWave program is a technical analysis which relies heavily on Elliot Wave Theory. While Wave Theory isn’t widely popular in Western Europe the technique is widely used by a variety of successful Russian traders.
The idea behind the brokerage appears to be to provide a Forex trading environment which caters strongly to the desires and wishes of the average retail trader in Russia. Whether UBK Markets is a successful venture will largely depend on whether it can get a hold in the CIS Market which is currently dominated by Alpari. Alpari’s Russian operation currently accounts for 50-60% of the Over-the-counter Forex volume in the CIS Countries.
If UBK Markets comes up with a solution which is attractive to Russian consumers there is no reason why they can’t capture a share of this lucrative marketplace. We will keep you up to date with going on’s at UBK Markets and inform are readers if they ever provide English language support.
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
Now for the naming and shaming of the brokerages that suffer the most slippage on the ZuluTrade platform.
- Broker Independent supports a range of regulated and unregulated brokerages.
- Tradeo is not regulated by a financial regulatory body itself.
- Commissions for signal providers not stated.
- Number of traders on network: Around 5,000 different traders on the network at the time of writing.
Tradeo is an independent broker meaning that it doesn’t take on it’s on clients trades or give preferential treatment to a particular brokerage. Rather Tradeo earns its revenues by entering into revenue sharing agreements with the brokerages it operates with. Tradeo has a reasonably large user base of traders though it should be made that not all of the registered members are trading on real accounts with a number of the users trading on demo accounts. I would have to say that Tradeo is rather a small social network in comparison to some of the more well known Social networks such as eToro and ZuluTrade.
Tradeo supports a range of brokerages both unregulated and regulated. Some of the better known brokerages supported by the Tradeo platform include FxPro, Alpari, AVA FX, Markets.com, easyforex and FXCM. The range of brokerages supported by Tradeo is pretty impressive and you will certainly find a brokerage which will suit your needs. However, the support for the various brokerages varies quite significantly. For instance Tradeo is very proud of the bridge it has recently put in place with FXCM. But as far as I am aware none of the supported brokerages have the Tradeo platform fully integrated with the social platform. As is the case with AAAFx and ZuluTrade. It should be noted that ForexGlobes plans to provide such an integrated solution with all of its brokerages when it exits it’s beta period. This is somewhat a negative in regards to Tradeo, it should also be noted that all the major brokerages supported by Tradeo are also supported by their rival ZuluTrade. So it seems unclear to me why one would pick Tradeo over ZuluTrade.
ZuluTrade offers those interested in Social Trading a wide range of different signal providers to choose from. A signal provider, provides the signals which allow your account will follow and therefore will determine your trading success. This makes picking the right signal providers absolutely vital and while there are many good signal providers on the ZuluTrade network there are also some awful signal providers.
Perform a Detailed Examination of their Performance
ZuluTrade allows you a number of different indicators into a traders past performance including the total profit made, the number of weeks the trader has been active, ROI% (percentage return on investment), average pips per trade, average trade time, worst trade, best trade and necessary minimum equity. I look for a number of different things when evaluating each of these different metrics.
Total Profit: This is measured in Pips, which means its a pretty worthless metric. Different accounts have been active for different periods of time and many accounts have had performance vary over time. For instance a 9 month account may have had a great first six months and then a horrible last three months. You won’t want to follow such a trader even if they have had success in the past, as I believe consistent success is the most important metric.
ROI (Return on Investment): Return on Investment marks the total return made on the traders initial investment obviously the higher the return on the investment the better. However, traders who have hugely remarkable returns on investment might throw up some red flags as such huge returns likely indicate a high risk strategy. While such strategies can be highly effective they can often blow up in a traders face and lead to accounts being blown. This is why it would be foolish to invest on ROI alone, a trader should take into account other factors.
Winning Trades (%): Obviously the higher the percentage of winning trades the better and I generally look for a trader to have had a long trading history and a percentage of above 70%. However again one shouldn’t rely on this as their only indicator for instance a trader who averages 12 pips per trade but only Wins 70% of the time is superior to one who averages 1 pip per trade but Wins 94% of the time. A long consistent winning history of above 70% should be enough to put your faith in a particular trader providing other things are looking okay.
Average Pips Per Trade: This is quite an important metric of performance and what you should be looking for will depend partly on what brokerage you are using ZuluTrade, your going to want to look for more Pips per trade if your brokerage has wider spreads or significant slippage. Also while others won’t be as bothered as me I don’t like trading strategies which open positions in order to earn a couple of Pips. It just doesn’t seem to make sense from a risk management point of view, I generally stick to traders who average in excess of 5 Pips per trade.
Average Trade Time: While not particularly important in determining whether a trader is reliable, the Average Trade time has a varying importance depending on the rollover/overnight costs that your brokerage charges you. If you have significant overnight costs to take account of your probably going to want to give traders who keep trades open for a couple of days a miss. Things like this depend on the trading conditions that your brokerage offer you.
Maximum Draw-Down: The bigger the maximum draw-down generally the riskier the trader is. Preferably you would look for a trader who had a draw-down of less than 10%, though I will sometime place money with traders who have draw-down’s of up to 15%. Anymore than this strikes me that the trader is practicing poor money management.
Best/Worst Trade: I don’t pay particular attention this metric and generally just ignore it, I’d rather pay more attention to the maximum draw-down.
Such a detailed analysis of these metrics should help you determine whether it would be a good decision to follow a particular trader, they also give a good basis to which you can compare two different signal providers. If you want to go into further detail you can do a trade by trade analysis of the signal providers positions and take a look at them on charts to see whether they had good reasons to enter into the various positions opened. Most of the time you won’t need to do such analysis. Just looking at the key metric should be enough.
The non-exchanged traded Binary Options industry has expanded vastly since their inception in early 2008. The growth in the number of competing Binary Options platforms has been powered by a number of platform providers providing cost effective and easy to implement platforms. Whether such growth can continue indefinitely seems questionable but today we are going to outline the offerings of the three largest Binary Option platform providers.