Broker Conversation

Ok, in the comments on the last posting someone asked for more info on my conversation with my broker.

I called my broker and asked to speak to the managing director who i got through to immediately.

before i tell you how the conversations went let me address the concerns i had:

1) the broker specified a maximum of £100 per pip

2) eventually there would be a lot of money in the account - how secure were they?

3) would their 'dealer assist' trade placing be able to get the fills quick enough on large trades

4) could in effect two or more of us playing the same system put the stability of the actual company in jeapoardy?

On looking at these questions one thing struck me - I need to have a good win-win relationship with my broker. Many people in the forex world seem to feel an advesarial relationship with their broker - 'the broker ripped me off' is often said.

We have to realise that a broker is in this for the money just as we are - they want to make money and we want to make money - there is no reason at all that we cant both achieve the same thing with a good level of co-operation.

so with the aim of forming a relationship i picked up the phone and got the MD.

Im a bit of a blunt guy and after the initial introductions i asked my first question which was "how many million pound accounts do you hold" he answered and said he couldnt give specifics but when i said im not after their names - just how many, he told me there was several.

I asked how big his biggest account holder was and he told me that he had a couple of punters with accounts in excess of 7 mil.

I then addressed the £100 a pip limit. It turns out the £100 a pip limit is a 'per trade' limit and you can open as many trades as you wish.

I asked what the reaction would be at being suddenly presented with a trade of £700 a pip and he said it would certainly raise some eyebrows and may be difficult to fill without notice. however he also told me of one client who regularly trades at upwards of £1000 a pip without issue.

We then spoke at length about the security of the company and safeguards that were in place. He told me that by law in the uk they have to place all client funds and winning positions into a fund which is untouchable by them - he told me that each day the company had to report on the size of this fund, the customer holding and current winning positions to the FSA (financial services authority) and that they were unable by law to use any part of that account to cover losses.

I have since verified this with the FSA.

After a long conversation of around 30-45 mins the general gist is that once up to £200 a pip i should be contacting for a personal trader and telephone my orders in giving some warning to them to help them out.

They make money by getting a better fill at market than they offer we punters and of course from the spread - they will generally get 1 or 2 pips better filled than we do .

personally i dont have a problem with this and he even said that at decent levels of trade we will be able to negotiate for a better rate of say a 2 pip spread thanks to the volume we will be trading.

I mentioned that the system i trade could well result in occasional winning days of £300,000 and asked if this would cause a problem to the liquidity of the business if there were a few of us doing it. He told me that if we were to take 300k in a day that they would be looking to make 310k on the trade and that the fund holding of the business could easily swallow that kind of take over a sustained period.

it works like this - you cant be advesarial with your broker if you are playing large sums - this has to be a win win situation for both parties concerned as if it isnt this is when they start to shaft you.

Subsequent investigations with the FSA, Dunn & Bradstreet and other sources have settled my mind that there will not be a problem in excecuting our strategy of 10k to 1mill.