What are Bitcoins?

Bitcoins are a relatively new thing and many people don’t know what they are. Bitcoins are a virtual cryptocurrency with the creation and transfer of Bitcoins being based on an open-source protocol which is independent of any central authority. Users are able to earn Bitcoins by using computing power to solve the cryptographs, with there being a set limit of coins released and ever increasing difficulty level making money by mining Bitcoins is only really feasible for those with very powerful computing devices. The price of Bitcoins has risen in value over the past few years, with many believing that Bitcoin has the potential to revolutionise the global monetary system. While the Bitcoins have risen substantially since their introduction, the e-currency has been very volatile and in April 2013 the price of Bitcoin dropped from $266 per coin to a low of $50 before recovering a substantial amount of their value.

Bitcoin Trading: Some Background

It has been possible to trade Bitcoins for a considerable amount of time, with their being a number of exchanges that allow individuals to exchange their Bitcoins for real physical currency and vice versa. But trading opportunities have been limited with these exchanges only allowing individuals to long on Bitcoin’s by holding the virtual currency themselves. This has significantly limited trading of the currency as many people have wanted to short sell the currency when they believe it had become overvalued.

It wasn’t until this year that trading Bitcoins both long and short became a real possibility after a number brokerages and firms began to introduce Bitcoin derivatives. Plus500 and AvaTrade introduced Bitcoin Contracts-for-Diference (CFD’s) which have allowed clients of the brokerages to go both long and short in the Bitcoin/USD. CFD’s are a financial derivative which allow individuals to trade financial instruments without owning the underlying asset which has lead to more people actively trading BTC/USD. However as there has been no way to short actual Bitcoins the spreads and trading conditions haven’t been particularly brilliant with both of the mentioned brokerages quoting spreads in excess of $1 in order to effectively manage their risk.

In addition to Contracts-for-Difference, traders have been able to go both short and long in Bitcoin/USD by depositing cash with non-exchange traded Binary Options brokerages. A number of these brokerages have begun to offer the Bitcoin/USD as trading instrument, which has helped them attract new clients who wouldn’t have otherwise been interested in Binary Options. Binary Options have got a flack as a product and many people believe they don’t offer good value for money with the odds being stacked heavily in the brokerages favour.  Both CFD’s and non-exchange traded Binary Options aren’t available to US customers which means those based in the States will be unable to use them in order to trade BTC/USD.

The Future of Bitcoin Trading 

Historic Bitcoin Prices

It appears that traders will be soon be able to go long and short on the Bitcoin/USD with BTC-e the world’s five largest Bitcoin exchange announcing that they would be introducing Bitcoin trading via MetaTrader 4. At the moment the product is in its trail phase with individuals be able to trade Bitcoins using a demo account, with leverage currently set at 3:1. If the trial phase goes well BTC-e intends to make it possible to trade Bitcoins through MetaTrader 4, this could potentially revolutionise the Bitcoin trading environment as it would allow brokerages and traders to go long and short in Bitcoin. If BTC-e does end up launching the product for real, it is very likely that other exchanges would follow suit and begin to offer their own trading product. With Bitcoin prices being highly volatile their will plenty of trading opportunities and Bitcoin trading could take off in a big way. There is huge demand for such a product and it is only a matter of time before Bitcoin trading takes off in a big way.

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The FMRRC (Financial Market Regulations Center) is a non-commercial organisation that was created in order to provide regulation to certain Russian derivative dealers and brokers. However the FMRRC is not a governmental regulatory body with financial regulation in Russia being carried out by the Federal Financial Markets Service (Федеральная служба по финансовым рынкам, ФСФР). The FMRTC is no relation of the governmental regulatory body and is an independent organisation that charges its members a fee to become accredited and regulated by their organisation. 

However the Financial Markets Regulation Center has no legal powers to regulate its members. The greatest power that this organisation has is to revoke the membership of those who have opted to become certified by the organisation.  If one of its certified members doesn’t implement the decision laid down by them. The idea of such an organisation is to reassure people who opt to deposit money with Russian based contract for difference brokers. As there is no legal framework for the regulation of CFD’s in the Russian Federation, meaning that CFD providers are able to operate without regulation. 

However the scope of such an organisation is extremely limited. For example, the organisation has no power to check whether companies have been properly under taking the segeration of client funds or complying to the proper advertising standards etc. So provide scant if any protection for clients who opt to deposit funds with one of their certified brokers. It begs the question of why people would deposit funds with such unregulated entities when their is the option of depositing funds with a number of properly regulated European Brokerage houses.  

The most interesting thing about the FMRRC website is the fact that you can’t see a full list of brokers who are meant to be regulated by them which is very intriguing. I see no reason why should risk their funds with a FMRC ‘regulated’ broker. Similar pseudo regulators include the ‘RAFMM'(Russian Association of Financial Marker Members) and others.

 Important Facts 
  • Regulation: No offical governmental regulation only psuedo-regulation from the FMRC. 
  • Instruments: Forex, Commodities, Stocks, Indices and Bonds. 
  • Special Features: None of any note. 
  • Leverage: Of 300:1 on Forex pairs but otherwise varies instrument to instrument. 
  • Minimum Deposit: $100 

The Platform
4XP’s trading platforms are all powered or provided by MetaQuotes the well known creator of the popular MetaTrader trading platforms. 4XP offer both the old MetaTrader 4 platform and the new MetaTrader 5 to their clients who are free to choose what platform to use dependent on their personal preference. Many people are familiar with the offerings from MetaTrader and will take like a fish to water when using 4XP’s versions of the platform. 4XP also offers a web based platform again powered by MetaQuotes, providing quite a lot of the functionality included in the more comprehensive downloadable MetaTrader platforms. Quite nicely 4XP also offers a mobile based trading platform which allows users to trade on the move, while the functionality is pretty basic it still allows one to open and close positions with ease. All in all when it comes to 4XP’s platform it’s a pretty standard offering. 

Special Features 
When it comes to special features there’s nothing much to talk about. 4XP do offer some limited educational tools but such as one to one coaching, webinars and the possibility to open a demo account. But these kind of educational tools are pretty standard at most Contract for difference brokerages.   


Spreads 
The Spreads on offer 4XP are fixed and pretty unremarkable with the tightest Forex spreads being three pips. While the spreads on offer at 4XP for major Forex pairings aren’t competitive their not actually awful either. However, when it comes to minor pairings the spreads are awful with some being absolutely massive. The spreads on the other instruments aren’t particularly great with some of them being absolutely massive, strongly suggesting that 4XP is a pure and simple bucket shop. You could find a much better deal with a properly regulated MiFID brokership, who would most likely offer you far tighter spreads as well as their being proper regulatory oversight. 

Customer Service 
The customer service provision at 4XP hasn’t got the best reputation around, with many being dissatisfied with the service they have provided. Some have complained of very aggressive sales tactics in order to drive as much business to the company as possible. Their have also been complaints about 4XP failing to respond to problems and complaints that their customers have been experiencing with individuals often being forced to take their grievances to Forex review sites in order to receive any proper response from 4XP representatives. Which quite frankly is not good enough. Though it must be said that representatives do their utmost to resolve these disputes when they do reach various Forex review sites, this may be just to preserve their public image.

Regulation 
4XP claims to be regulated by the FMRC. However the FMRC is not a proper governmental body, it is rather a non-profit organisation which charges companies a fee in order to become regulated. The FMRC doesn’t have any legal powers over the companies it regulates and can’t ensure that client monies are properly segregated from the companies. This isn’t at all satisfactory especially when their are major industry players who are fully regulated by reputable regulatory bodies. For example their appears to be an endless list of different MiFID regulated brokers out there who offer a better overall service than 4XP. So why you would choose to risk your money with an unregulated entity such as 4XP is beyond me. Moves however are being made to regulate OTC Forex in russia, you can read about them here.

Overall, I can’t see any reason why you would pick 4XP to act as your broker. Especially, when there a huge number of properly regulated European brokerages out there.

I often get asked how much capital is needed for Foreign exchange trading, a number of people that I end up talking to think that in order to be able to trade Foreign exchange one must have a lot of disposable income. This is a bit of a misconception, since the rise of the internet in the late 90’s and the introduction of leveraged finance in the 80’s, the financial markets have become much more accessible for the average man on the street.  It is now possible to open a real money account with a regulated brokerage for as little as $5. This means that the majority of people in the Western World could realistically trade Foreign exchange if they wanted too.

Their is however a different issue at stake and that is how much capital (or money) does one need to successfully trade Foreign exchange. Is success only realistic for those who have vast capital reserves, or can the man depositing $5 into his account have a shot at making money from Foreign exchange trading.

Those trading with very small amounts in their accounts are likely going to need to use significant leverage in order to even trader micro lots. While leverage gives traders the chance to increase their profits, it also increases your risk significantly and can lead to your account being wiped out completely by only small swings in the marketplace. This makes it much more difficult to make profit, as you have to be constantly concerned and may be forced to close your trade early missing out on significant opportunities to make profit.

As it has been pointed out in a number of pieces, by working with limited funds traders limit the range of brokerages open to them. For instance Dukascopy a leading ECN brokerage only accept clients who are willing deposit over $2,000. Dukascopy provide an excellent quality of service and also offer very tight spreads on the currency pairings they offer. This means that you can maximize your profits and also engage in scalping strategies which would be available to those trading with brokerages who offer wider spreads.

I have also seen some statistics from some leading brokerages which suggest that those who have larger deposits are more likely to be successful with their trading. Statistics from FXCM UK show that those who only have $100-500, were the least likely to be profitable traders. These suggests that having more in your account may help you, or simply that more serious or successful traders tend to accumulate more cash into their accounts or just deposit bigger.

All in all, in my personal experience a good amount starting of capital for most traders would be around the $500 mark. It’s a good amount to start out with, and should mean that you don’t have to take on excessive leverage. Of course having more cash in your account doesn’t guarantee success, as Forex always involves risk. I’m also sure that there are a number of traders who can take $5 and turn it into a very impressive account.

Important Information 

  • Regulatory Authority: Regulated by CySec of Cyprus 
  • Instruments: Wide range of Currency Pairs and Limited number of Commodities 
  • Features: Support of MT4 and mobile based trading, as well as offering low minimum deposit accounts. 
  • Leverage: 1:50, 1:100, 1:200 depending on the type of account
  • Minimum Deposit: $25 for a Mini Account and $10,000 for the top VIP account. 
 
The Platform 
easyforex offers a number of different options in terms of the platform for those who wish to trade at the site. For starters the offer web trading allowing you to log and trade from any computer which has the internet. While the web trader is perfectly functional and will allow one to implement trades easily and quickly it hasn’t got some of the functions offered by the other easyforex platforms. Alternatively, one can download easyforex’s TradeDesk software which will allow you to trade all the instruments offered by easyforex. With the TradeDesk software you get an increased number of features including improved charting and technical analysis and the  TradeDesk software is pretty reasonable. However what the majority of serious traders will be interested in is the easyforex Metatrader 4 platform which is pretty much the standard affair one would expect from Metatrader 4. Thankfully Expert Advisors are acceptable for usage on the easyforex platform and easyforex customers can test their Expert Advisors on up to 20 years of data. A nice added feature is the fact that easyforex offers mobile trading platforms for Windows Phone’s, iphone’s and Blackberry phones. However rather disappointingly there is no platform available for my many Android users out there. 

Special Features 
There doesn’t seem to be much to set easyforex apart from its competitors when it comes to special features. easyforex offer all the standard educational information you would expect from a Forex provider, which is really what you would expect as they wish to attract as many clients as possible. Having a minimum deposit of $25 is quite nice as it allows it more people to try trading out, however people are unlikely to be successful trading with such limited funds. 
 
Spreads 
The Spreads on offer at easyforex aren’t particularly impressive even on the instruments where they are the most competitive with the tightest spreads being 3-4 pips. With the spread British Pound/Swiss Franc spread being a gigantic 11 pips when using a Mini account. However I have still seen worse spread offerings out there, though I do have to say that on some instruments some of the spreads on offer at easyforex preclude the possibility of making any serious money. However these tend to be on exotic currency pairings which many individuals may not wish to trade anyway. I would recommend that you check out the spreads before opening account to see whether they are competitive when it comes to the particular instruments you wish to trade. 
 
Customer Service 
This is one of the areas where a lot of criticism has been sent the way of easyforex. There have been many accusations of poor customer relations and unprofessional attitude towards their customers this is something that easyforex obviously deny. Citing the fact that customers are assigned account managers who they can personally call about their problems, etc. However this is pretty much a standard affair. There have also been complaints about a lack of transparency as many have asserted that the company is primarily based in Israel while only operating a virtual office in Cyprus where the company is officially registered. These claims have rocked the confidence of many who have or thought about trading with easyforex. 
 
Regulation 
easyforex has somewhat an infamous history when it comes to regulation. In 2009 easyforex were fined a total of 45,000 euros. easyforex had failed to comply with (the oft thought lax) CySec regulation on a various number of points including manipulating the companies capital requirements, no information vetting clients experience, no records of transactions, no record of a particular clients funds and non immediate deposit of client funds. All of this is pretty serious stuff and it appears to me that they were somewhat lucky to keep their licence. Then in 2010 easyforex was fined a further 10,000 euros this time for producing misleading marketing information which did not properly state the risks of Forex trading. There has also been a number of investigations in Israel into fraud regarding easyforex in 2010 five customers launched a 500 million shekel law suit against the owners of easyforex. However, easyforex is still regulated by CySec and is now at least hopefully conforming fully to the regulations set out by CySec. 
 
Overall, I would be highly cautious about depositing any serious money with easyforex due to the fact I don’t feel I would be getting the best deal when it came to spreads and due to the fact that easyforex has a questionable regulatory history.

The other day I cam across a piece of information regarding NetoTrade who we have featured in a review on this blog. Back about a month ago NetoTrade was the subject of a public warning from the FCA, who stated the following:

This statement is to advise members of the public that an organisation identifying itself to UK citizens as:

NetoTrade UK LTD  and NetoTrade Global Investments LTD

Website: http://www.netotrade.com
788 Finchley Road, London NW11 7TJ
Email: support@NetoTrade.com
Tel: 44-203-5143882
Tel: 33-975-184903
Fax: 44-203-5142167

is not authorised under the Financial Services and Markets Act 2000 (FSMA) to carry on a regulated activity in the UK. Regulated activities include, amongst other things, dealing in investments as principal, arranging deals in investments, managing investments, and providing investment advice (‘investments’ include currency options, speculative foreign exchange contracts, contracts for differences). We believe that this organisation may be targeting UK customers and overseas consumers, and claiming to be located in the UK.

What does this mean for you?

If you are an investor, you should be aware that the Financial Ombudsman Service and the Financial Services Compensation Scheme are not available if you deal with an unauthorised company or individual.

How can you check whether a firm is authorised?

To find out whether a company or individual is authorised, go to the FS Register.

This confirms the suspicions we had regarding NetoTrade when we featured them in our review, back then we noted that the website seemed to flick between two different companies NetoTrade UK Ltd and the more mysterious NetoTrade Global Investment Ltd. Both of the companies featured in the warning by the FCA. The FX View has a piece on the NetoTrade issue but falls short of describing the company as scam rather saying they strongly suggest that you only do business with regulated companies. It is totally obvious that you should only do business with regulated entities otherwise your putting yourself at considerable risk, the fact that people still readily deposit cash with brokerages that operate without regulation shocks me. The Instaforex and LibertyReserve situation which happened recently is just another example of why traders shouldn’t operate with brokerages which are not regulated.

Am I willing to call NetoTrade a scam? Not quite as I have no personal experience with the brokerage, though I would echo the views of other people who say that they would never do business with a brokerage that operates unregulated. What is quite bizarre in the case of NetoTrade is that they claim a UK address and openly advertise this on their site but are infact unregulated in the United Kingdom. Again I don’t really see any reason why a brokerage would do such a thing, but then a UK address looks a lot more professional than some random offshore registration.

I had to do this as I was so tempted to see where NetoTrade was actually operating from, so I fired up Google street view and entered the listed address of NetoTrade UK Ltd. and the result was very intriguing. Anyone who does this will find out that NetoTrades UK offices appear to be above a shop along the Finchley road in North London which doesn’t really suggest to me that the company is really operating from the United Kingdom. Again I can’t call out NetoTrade as being an actual scam as I have never done business with them, if your really interested I would take a look at their website to see what you think.

 

Important Facts 
  • Regulatory Authority: Financial Services Authority (FCA UK) 
  • Instruments: Indices, Stocks, Commodities, Forex  
  • Features: An easy to use platform with an attractive design with a large amount of instruments available to trade and demo accounts available.  
  • Minimum Deposits: £100  

The Platform  

The platform on offer from CMC Markets is very sleek and easy to use. The platform is very newbie friendly and is easy to get gripes with so even the most inexperienced trader should be able to get gripes with the platform. Ordering and placing trades and placing stop losses are a breeze. The charting package on offer on CMC Markets spread betting platform is better than on some of the other competitors package. The platform also incorporates live news into the trading platform which is always nice for those who want to trade on news or momentum. The Spread betting platform is also available for ipad and iphone and on android. The apps for these various mobiles are functional and easy to use, alas there is no application for the Blackberry my smart phone of choice. 
 
Special Features 
There aren’t really any unique features to the CMC Markets platform or experience. But the things that CMC Markets does it does well. With both the platform and the charting on the platform being excellent. 
 
Other Features 
CMC Markets offer a free demo account  for newbies to try their hand at financial spreadbetting as you suspect from a large trading company such as CMC Markets. Also as you would expect from a company of CMC’s size and the educational information provided by the company is of reasonable quality but nothing exceptional. If you deposit £200 into a CMC account, they also offer there users a chance  to attend a day seminar in London on trading (was correct at time of writing). Some pretty decent stuff on offer really, but nothing extremely exciting. 
 
Spreads 
The spreads available on CMC are generally very competitive on all the various instruments they  offer on the website. While some providers may be able to beat the spreads offered by CMC on certain instruments, the spreads offered on the majority of instruments will be up there with the best providers. So anyone who wishes to trade with CMC shouldn’t be put off by the spreads. 
 
Customer Service 
The customer service on is pretty much the standard affair when it comes to a spread betting company, 24/5 telephone lines for you to call. A decent complaints procedure which generally see’s you complaint being resolved in a amicable way. Again they are regulated by the FSA so have to be careful how with they deal with customers in order not to be reported to the Financial Ombudsmen. 
 
Regulatory Authority 
CMC Markets financial spread betting service is regulated in the UK by the Financial Conduct Authority. CMC Markets has a pretty good regulatory reputation without any blemishes on their record. Having a much better reputation than many other regulatory authorities throughout the European Union. 
 
Overall, CMC provides a professional spread betting service for customers who reside in the UK. Regulated by the FSA and offering decent spreads, CMC Markets might just represent a good choice for your trading needs.