Serj Panchuk
Happiness is not a target, but a way of life, as the saying goes. These days international forex market can easily turn your target into a way of life. At any rate, thousands of successful traders have made sure about it, aside from such personalities as Buffett, Trump, Вильямс, Soros, Elder, and others. However, all of them, in addition to talent, singleness, and ambition, deal with proved and reliable business partners and companies that provide high-quality services.
Their less experienced colleagues are often seriously “stuck” even despite possessing all the abovementioned qualities. Why does this happen? The reason is one: beginning traders, doing their best to earn quickly and seeing no difference between grains and weed, sign agreements with “kitchens”, where they “are boiled”, having no opportunity to enter real market.
How to avoid the web of dishonest DCs? What is “kitchen” like? How to distinguish it from a good broker? These and many other not least topical questions will be answered by leading financial market specialist, Director General of large international broker company GKFX Dmitry Rannev.
Kitchen is the place, worth not looking into
“Forex market is characterized by three schemes of work: kitchen, half-kitchen (with risk hedging), and broker (agency),” says Dmitry Rannev. The peculiarity of “kitchen’s” is the fact that its clients “are boiled within DCs”, having no opportunity to enter real markets. In other words, their transactions are not forwarded to suppliers of liquidity; they are provided with "broker” quotations, restricted by numerous limitations, including limit and pending orders, stop-losses, take-profits, and much more, up to non-payment of profit to traders.
By the way, speaking about non-payment of profits, this has been informed about by the “Market Leader” on numerous occasions. The most recent case, followed by disruptive reaction of Masterforex-V Academy forum attendants, can be read about in the article “New Case of Non-payment of Profit to a Trader is Fixed”. The previous cases concerned scandalous “Broco” company (no longer exists), “famous” for its kitchen schemes as well as several pseudo-brokers, whose activity is targeted against brokers, and thus banned and heavily fined in numerous regions worldwide.
“It is clear that a “kitchen” presupposes a brightly expressed conflict of interests between DC and its clients,” explains Dmitry Rannev, “to put it more simply, following such schemes, companies earn their income owing to their clients’ collapse. Otherwise, if trader’s trading activity is profitable, broker loses the opportunity to earn. Moreover, when clients start gaining more profit than loss, DC enters the way of bankruptcy. Therefore, no “kitchen” will not provide you with an opportunity of gaining regular profit.”
How does a “kitchen” work? Rather simply. After a certain period of profitable trading, clients’ trading conditions are made worse. Rather frequently “sand is thrown in the wheels” of not only those who gain profit, but to all clients. As a rule, worse trading conditions mean setting more time for orders’ use, higher spreads, intentionally higher number of slipping, etc.
Often DCs resort to open non-payment of earned profit to its clients. In such cases companies’ arguments are rather ridiculous, such as technical failures, application of forbidden means of trade, violation of contract rules, and so on. However, the companies forget that when their clients were trading with a loss there seemed to be no violation of contract rules, exclusively allowed methods were used (actually the same as when profit was earned), and no technical failures occurred. “Kitchens” may even delete their client’s transactions from the history of trading transactions and make up other factors that would hinder money payment.
Consequently, major peculiarities of trading with “kitchens” include:
– Extremely long order execution;
– Frequent requites, especially when you want to close a position with a plus;
– Unreasonable, made-up slipping, which are always set against a client;
– Contract with a company does not include the point on transferring transactions into the real market. But even those who do may fail to fulfill their obligations (which is a separate topic to discuss);
– When you start earning regular profit, your trading conditions get worse.
Therefore, as the specialist says, if you desire is not simply to trade at forex market, but to regularly gain high profit, do not sign agreements with “kitchens”. Otherwise, having talent and great opportunities, you will inevitably lose even despite using most effective trading strategies.
Half-kitchen is a DC with risk hedging of clients that gain profit, or transfer of such clients to a different type of account. By the way, many “half-kitchens” hedge even large-scale clients, whose input into a trading account is rather high.
According to Dmitry Rannev, half-kitchens start hedging a trader when he becomes a client that earns a profit. This means that your achievements usually turn to worse.
Half-kitchen companies frequently transfer clients that earn profit into another – market – type of account. At the same time, the quality of service gets worse, as well as trading conditions, you start trading with negative results more and more, as these companies are not targeted at transferring their clients orders to the market, neither do they have high technologies.
Agency scheme – broker works to your benefit
The best variant for any trader is to develop own TS at market account, for it is here that he encounters no conflict of interests, unlike kitchens and half-kitchens. Moreover, market accounts are suggested only by such brokers that work by agency scheme.
“There is no conflict of interests,” highlights the expert, “in agency schemes because of one reason: the company transfers transactions of all its clients directly to suppliers of liquidity. Broker’s earning is made up by the difference on commission and spreads. Consequently, the higher profit the client earns, the higher his trading volumes and turnover are, and the higher income the company earns. As a result, such broker is interested in profitable trade of his client and will do its best for you to have such trade. Therefore, the company regularly suggests innovative ideas and technologies, directed at support of high-quality trade of every client. Consequently, all parties of the contract are satisfied.
I have to admit that companies working by such scheme are not many, but they are starting to conquer their market segment."
Characteristic features of brokers working by agency schemes are the following:
– Market execution;
– If there happens slipping, it is not always set against a client;
– Market spreads;
– There are no limitations on time, size of profit, setting limit orders, stop-losses, take-profits, etc.;
– Limit orders may be set even within a spread;
– The system provides an opportunity to can see not only somebody’s but your own orders too (this point concerns the companies that suggests True ECN).
Consequently, by working with a broker that provides access to real markets to suppliers of liquidity you will manage to realize your potential and earn regular profit at forex market. “In my opinion,” says Dmitry Rannev, “one of the most effective variants of market operation is provided by brokers suggesting progressive system ECN, which makes your trading most convenient in all references. For example, exclusive technology of GKFX company, GKFX system ECN, which combines best opportunities of standard ECN and innovative decisions of large-scale western broker GKFX.”
“Market Leader” has previously informed about characteristics of the system in the article “GKFX ECN – Financial Market Breakthrough”. We will briefly remind that, according to its developers, the most attractive feature for traders is the fact that the technology is provided with multi-module system with powerful and failure-proof architecture.
GKFX ECN system is provided with unique analytical method Tactica Adversa, which, according to GKFX Director General, enables predicting price developments and general market trends with extreme accuracy (For more details see “GKFX: Tactica Adversa as Means of Controlling Future”).
The system may be joined to an unlimited number of suppliers of liquidity, joined into a common flow; according to latest testing GKFX ECN may deal with over 30 000 orders in one second.
“Besides having unique parameters that lower the load of suppliers of liquidity,” says Dmitry Rannev, “the system enables every trader to realize any trading transactions at quickest and most convenient terms by choosing the best suppliers worldwide; in other words, to trade at best prices for a trader. Moreover, there is market depth (Level II), instant execution, one-click trading option, no limitations on display of pending orders and size of profit, etc.”
How to avoid “kitchens”?
“When working with “kitchens”, traders often notice that as soon as they have set a stop-loss, price starts moving against them. When the price reaches the level, it moves backwards right away. In such circumstances beginners suppose that they have done something wrong or made a mistake,” says a leading financial expert of Masterforex-V Academy in Canada Evgeny Olkhovsky.
In fact, this is not so. Your trading system is absolutely normal, and you have most probably made no mistakes. At the same time, pseudo-broker, tries to impose fake obstacles, as it acts against you. Consequently, you receive worse quality of services on access to forex market trade; these services are not objectively, but subjectively worse, which is a characteristic feature of all “kitchens”.
“Today many DCs in Russia,” says the expert, “where forex market is not properly regulated, use kitchen or half-kitchen schemes. As a result, their clients suffer, especially those who invest big sums, for none of such companies will spoil its reputation because of several thousands dollars – your account is emptied when it has considerably increased, and your balance replenishment has initially been rather high.”
“Therefore, in order to avoid dishonest DCs, one should pay attention to independent rating of best European studying project . It has been created in order to clear the difference between grains and weed,” explains Evgeny Olkhovsky, “its basis is made up by 20 independent criteria, including feedback and voting of traders.
Using MF Academy rating of best forex brokers worldwide is very convenient. It includes upper, second, and third leagues. The upper league includes recommended forex brokers, which have positive results by all criteria and are leaders according to the number of collected points. They have high-quality service, serious licenses, provide innovative technologies, focus on effective trading of their clients, etc. The second league is represented by companies, which “fall behind” best companies by some criteria, which may result from objective or subjective consequences; they have average-quality of broker service. And finally, the third league mostly includes little-known companies and DCs that follow “kitchen” schemes.”
“I would like to draw your attention to the fact that in the West brokers, following “kitchen” schemes would be, at best, fined heavily; at worst – their activity would be totally banned,” highlights the expert, “Regular Western practice is such that broker companies work on the basis of licenses, issued by serious regulators, such as FSA, CFTC, NFA, etc. In rating presence of licenses is one of the main criteria, which proves the company that owns such document is unlikely to be outrageous.”
“Therefore,” sums up the expert, “in order to be trapped by dishonest brokers, one should study the broker carefully before signing an agreement. Independent rating of will be of great help; in many circumstances it will help you to choose the company that meets your demands.”
Serj Panchuk
