Forex Brokers - Account Levels - Account Management

[Joe T]

Question for successful traders...

I have for the last 3 years tested a trading methodology that has yielded me consistent monthly returns and I have now doubled my account. I am very conservative by nature, so I wanted to be very sure that this was not a random result before I risked a great deal of money. I have honed the system pretty well so that I can scale my trading to the amount of equity I have available to invest without fearing a major lasting downside issue, understanding that nothing in this area of trading is certain. In fact, my evaluation shows I have been more conservative than I need to be and am pretty sure I can increase my returns to a greater level.

After three years, I am prepared to move from an experiment with a relatively small account to something much more substantial.

My question is - for traders with a lot of money tied up in trading accounts - how do you manage your funds? Do you cap the amount in a single account to a particular level? Do you split your funds between multiple brokers and accounts? Or if you find a broker you feel good about, do you just let your accounts ride with a single broker?

I have never had such a large sum of money in my account that I felt the need to concern myself with all the things a person may worry about with larger sums of money. Since I anticipate continued success, these questions are not just for today, but for future considerations.

My other question is about taxes. With a smaller account, I pretty much was OK with just labeling this as income, meaning it was taxed at my marginal rate. I will want to take advantage of lower tax possibilities so will likely look for an accountant to handle my taxes in the future. Any advice on the right questions to ask to ensure that I get someone who knows what the heck they're doing? I've broached the topic with a couple different accountants and while they assured me they'd be able to handle it, I was not at all confident that they seemed to have a clue what I was talking about when I mentioned currency trading or Forex.

Just curious what kind of advice those out there have to give on the subject?

[jack mason]

My question is - for traders with a lot of money tied up in trading accounts - how do you manage your funds?
Or if you find a broker you feel good about, do you just let your accounts ride with a single broker?

Providing you select properly (due diligence) you shouldn't have a problem dealing with one outfit.
Eventually, if/when you're talking a real heavy bankroll then you're likely to begin negotiating with low level institutional access pricing, & providing you can put up an account history worthy of them considering your business you'll get to receive some pretty competitive costs & pricing options.

I got recommended to IB http://www.interactivebrokers.com/ibg/main.php from a couple of the guys on the Technical Templates thread.
They're a pretty big noise in the retail sector & I was very satisfied with their service, product range, costs & execution process, but you'll obviously need to investigate your own avenues.
Just be careful who you get into bed with, there are some real dirt bags out there.

My other question is about taxes.
I've broached the topic with a couple different accountants and while they assured me they'd be able to handle it, I was not at all confident that they seemed to have a clue what I was talking about when I mentioned currency trading or Forex.

Your best bet is to seek out specialist tax/accountancy firms who handle trading related clients.
Each situation will dictate a very unique set of criteria & your circumstances/financial position will need to be assessed & dealt with correctly otherwise it could be a costly journey.

Try contacting someone like http://www.ckaccountingandtaxation.com/Services.htm to touch base & get some feedback about what type of advice you might require going forward.
Don't worry about specific questions at this stage, just be succinct with your current (& proposed) situation & let them feed back to you whether their services can be tailored to your circumstances.
If they can't, ask them for referrals.

[2Taps]

I got recommended to IB http://www.interactivebrokers.com/ibg/main.php from a couple of the guys on the Technical Templates thread.
They're a pretty big noise in the retail sector & I was very satisfied with their service, product range, costs & execution process, but you'll obviously need to investigate your own avenues.

Hey Jack,
I note you use the past tense in your post when commenting on your relationship with Interactive Brokers.
Can I enquire if you're still using them?
If so, are you still satisfied with their offerings?

[Joe T]

Thanks for your replies. I currently use FXDD and have since I started, and I have had no issues that have concerned me. But I have also traded smaller scale, so I'm always on the lookout for good advice. I wouold never hold anyone responsible for advice I received because ultimately it's my responsibility to find a good broker. Having said that, I sometimes get frustrated because it seems like more often than not when asking about brokers, I'm told "I never recommend a broker, because I think you need to make the decision yourself through due diligence." But part of that due diligence is getting people to provide opinions on various brokers! So I actually appreciate providing an opinion in IB.

If anyone out there uses FXDD for sizeable accounts, I'd appreciate your opinion of them. No reason to dump who I have if I can feel good about them.

The way I trade, to be perfectly honest, squeezing an extra PIP on spread just isn't really all that important. That may sound odd, but it just isn't. That said, I wouldn't turn it down, so if I get to the point where I can start having that conversation I'd try to take advantage... why not? Probably a ways from that at the moment..

In general, what account size are we talking about where you can start having that conversation?

[jack mason]

The way I trade, to be perfectly honest, squeezing an extra PIP on spread just isn't really all that important.

I was referring more to the long term costs, execution, slippage & fill issues than spread availability.
These days with the intense competition in the retail sector, spreads are pretty much in line across the board. That really isn't such an issue when trading small size as they can easily absorb & distribute according to their needs.

You’ll get to see the real measure of their service when you begin upping your game & attempting to leg in, & more importantly out of larger than normal bet sizes, or (depending on your game plan) trying to tier orders around a busy level/zone.

In general, what account size are we talking about where you can start having that conversation?

They won't start taking you seriously until you're talking at least 7 figures & I'm not sure now how many of them actually don't require some kind of certification (CTA etc) before even opening negotiations.
More & more are tending to focus exclusively on servicing the small to medium corporates and/or the really large capped individuals, primarily to generate costs tied to transaction & volume throughput.
It's a shrinking market & they're all out for a decent share of it.

The easiest & less stressful route into that side of the feeding trough these days tends to be jobbing or subbing via an already established firm, similar to what I & a couple other on here are doing.
They supply the bank roll & the platform via a sub account access, share the costs & you get to keep a slice of the large bet sizes whilst trading someone else's cash, letting the client shoulder the risk.
It doesn't appeal to everyone, but it remains a viable option for those with the necessary skills & nous.

Hey Jack,
I note you use the past tense in your post when commenting on your relationship with Interactive Brokers.
Can I enquire if you're still using them?
If so, are you still satisfied with their offerings?

I still retain a relationship with them 2Taps, but haven't traded that account since early summer.
I'm working with Tess & Andre Mayer (colleagues of JimmyMac, Carll & jjay) for the next few months & they require me to route my bets through http://vcapfx.com/forex-trading/spot-fx-trading/

So my personal account is on ice for the time being.

[Joe T]

Thanks, Jack. This is helpful information.

It's somewhat interesting, in that I trade based on breaking a lot of the traditional rules. I have traded this way for 3 years now to a lot of success and in the meantime have been able to analyze the risks along the way. I am an actuary and have not broken the rules lightly, but just through historical analysis and analysis of the risks, I am comfortable with how I trade.

Basically, I trade a high volume of extremely small positions with no stop loss, taking profits when I can and letting losses ride. I have few concerns with "slippage" and execute all trades manually, using only trend lines as a guide in executing trades. At any given time i have a large number of orders carried. I was pathetic at trying to apply the much more traditional criteria that everyone echoed. Lost 60% of my account in a year even after I thought i knew what I was doing.

My analysis on ability to trade in this manner actually indicates I could increase my position size safely by nearly 100%, though I am not rushing into that at all, opting for a heaping measure of safety. The current level, though, is substantially higher volume than the three year experimental period while I gathered the data necessary to ensure that I was not taking undue risk.

So, in light of this and some of the concerns you lay out above, it would seem that I should just stay on course as I am with my current broker and not concern myself too much with all of this. And honestly, just looking to trade for myself, not others.