Alex du Plooy is a professional forex trader from South Africa. He keeps on posting good forex trading videos on his Youtube video. First he posted a video on how he turned $5K into $1 million in a few hours using a scalping EA. I eagerly watched the video. Scalping EA worked very well and was able to turn $5K into $1 million in a few hours in a live video. You can watch the video below!
Very interesting video. Near the end of the video Alex du Plooy reveals that he had been trading the Scalping EA on his demo account. Very interesting. You should know that the demo account is very different from a live account. An EA working on a demo account is no guarantee that it will work on a live account. The major problem with a live account is slippage. Slippage means the price slips and the trade executes at a different price to what your EA This is a major problem. Watch this Institute of Trading and Portfolio Management South Africa documentary.
On a live account, when you open a trade, broker is supposed to work as a market maker and execute the buy/sell order by taking the counter side of the trade. Broker pools these orders and when the pool has got sufficient volume, the pool is off loaded in the Interbank market. Interbank market works on big orders so the broker has to pool the orders before offloading the orders in the Interbank market.
Now when you watch the video, you can hear Alex du Plooy saying that he is not sure whether his new Scalping EA will work on a live account or not. He says that he has successfully turned $5K into $1 million in a few hours a multiple times on his demo account. So this natural thought will enter into the mind of anyone watching his video. Why not try the Scalping EA on a live account? Watch this Million Dollar Trading Program Caribbean Documentary.
This is precisely what Alex du Plooy does in the next video and says that he has been robbed of his $5K. You can watch the video below in which Alex du Plooy shows how his forex broker steals $5K in just under 3 minutes by creating spikes in the price feed. You can watch the video below!
Now this is something good that Alex du Plooy did. He recorded the demo account with the Scalping EA and the live account with the Scalping EA on a video. In the above video you can see the demo account showing no price spikes whereas the live account shows a price feed. So the Scalping EA fails miserably on the live account and within 3 minutes, Alex du Plooy loses $5K and receives a margin call from the broker.
Brokers have many tricks up their sleeves. You should also understand the difference between the dealing desk and non-dealing desk brokers. FXCM is one of the biggest brokers. Beginning this year FXCM was banned from operating in USA by the regulatory authorities. Commodity Futures Trading Commission (CFTC) one of the US regulatory bodies found the FXCM has been consistently taking opposite positions against its clients and making them lose. FXCM was fined $7 million and banned from operating in the US market. After reading the Forbes article you will understand the problems that retail traders are facing. Hats off to the US regulatory authorities that they try hard to safe guard the interest of US retail traders. FXCM was claiming to be a non-dealing desk broker where as it was operating as a dealing desk broker.
But those retail traders who live outside US have little protection. This is precisely the reason why you will find most of these brokers registered at Cyprus or British Virgin Island that have very weak regulatory mechanisms to enforce the complaints made by the clients against the brokers. Alex du Plooy has very beautifully shown in the above video how a broker can easily steal your money by causing price spikes that you will not find in other price feeds. These brokers work from Cyprus and British Virgin Island, places that have poor regulations as said above.
My first forex broker was Gallant Capital Markets. I started trading forex around 2010 with Gallant Capital Market with a deposit of $500. In March 2017, Gallant Capital Markets filed for Chapter 11 Bankruptcy Protection in a US court. This is another tactic used by forex brokers. Filing for bankruptcy. Suddenly one day you find your money gone when the broker files for bankruptcy. Did you read the post on how to trade Headline News and Magazine Cover stories?
This is a practical advice that you should take seriously if you really want to become a full time forex trader. Never deposit more than $500 with the broker. If you are a good forex trader, you will be above to turn that $500 into $50,000 into a few months. Withdraw all the money leaving just $500. Start over again. This is how you can reduce the chance of you losing your money. In short keep on withdrawing your profits and never leave them with the broker. Now this problem of broker is prevalent in other markets as well like the stock market and the commodity market.
Now broker dishonesty should not deter you. There are good brokers as well. Markets work very differently to what they did one decade back. Today flash crashes are a common feature. Just last year, GBPUSD suffered a flash crash in which GBPUSD went down more than 1000 pips in just under 1 minute and then recovered in the next few hours. So you can well imagine how volatile the market can become. When there is no counter party price will start falling and it will keep on falling as long as buyers don’t start buying. Watch this Million Dollar Trading Program Thailand Documentary.
On 15th January 2015, Swiss National Bank suddenly announced removing Swiss Franc peg with Euro. Suddenly within a 2-3 minutes USDCHF fell more than 2000 pips. Market had just freezed. There was no market for the next few minutes. CHF price appreciated drastically. USDCHF fell 2000 pips. Traders had stop losses that didn’t trigger. There are cases in which traders had placed the USDCHF buy orders and went for work. When in the evening they checked their accounts, they found negative balances like $30K. FXCM suffered $300 million loss on that day. Saxo Bank a forex broker repriced all the executed trades and passed on the losses to the clients. So you should know how risky markets are. Sometimes market just freezes and stop loss orders stop working.
As said above, the best option is never deposit more than $500 with the broker. Learn how to trade forex. Turn that $500 into a few thousand dollars. Withdraw the profits and start over again with $500. This is the safe strategy that will help you avodi catastrophic losses. Designing EAs is a challenging job. You will find the price feed with each broker a little different. This is the result of over the counter nature of the currency market. Unlike the futures market that is centralized and controlled by a central agency. Another example is that of New York Stock Exchange which is a centralized exchange. Even central banks sometimes find it difficult to control the currency market. Read the post in which I explain how Reserve Bank of New Zealand was shocked by the response of NZDUSD.