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Tuesday, January 3, 2017



There are always costs associated with trading and it doesn’t matter who you are; from the very largest HFT and/or primary bank to the lowliest retail spec on the planet, nobody gets a free ride when it comes to trading. 

While very good in terms of providing us with markets to trade, and the flexibility of volume sizes from the lowest to the highest, the MT4 trading platform, along with the brokerage house “middleman” acting in concert with the liquidity provider bank, saddles us with extra costs. Futures contracts are the standard bearer for financial products, and it is from there that costs escalate when you go into CFD’s. The $64,000 question is, “how much”? Directly below is a table of the popular U.S. stock indices from the futures side and also from the CFD side via LMFX. 

Let’s assume for hypothetical reasons that a retail spec trader has $1,000 in his/her account; after you do the math, anybody trading the above U.S. indices is paying from $3.00 - $7.70 per 1 lot CFD over and above what futures markets are priced at; this isn’t an indirect cost, as this cost is real in terms of your pricing and execution in addition to slippage [which I have ignored].

Compare this to USDJPY; it doesn’t matter that the CME has reconfigured its futures contract to allow trading in ½ PIP increments due to offshore bank competition, the fact of the matter is it still trades in 1 PIP increments. Spot interbank trading, even with the scumbag LP standing in the middle with the brokerage house, still offers the absolute best deal around with costs averaging approximately $1 per 100,000 traded over and above futures trading. At the end of the day, if this is the reason you lose money, then you need a new approach.

So, let’s look at the costs; 5 trades per day in USDJPY versus 5 trades per day in any of the stock indices. Your cost to trade the U.S. stock indices PER YEAR [240 trading days per year] is $2,400 - $8,400 MORE THAN IF YOU TRADED USDJPY OVER AND ABOVE where the market is actually trading! The DOW30 is at the low end, the SP500 is in the middle, and the Nasdaq 100 is at the high end.

Now think about this for a second; you have a $1,000 account and you’re paying thousands more to trade. Does the NDX100 have 800% more volatility than USDJPY? Does the SP500 have 500% more volatility? Does the DOW30 have 240% more volatility? Except on occasionally rare days, the answer is a resounding, “Hell no!” Now think what you’d be paying with a $5k or 10K account, and you would have to be insane to keep this up.

By the same token, with USDJPY [or gold for that matter to an extent], I can be as large as I want to be and I’m not paying but about a buck per 100,000 stuff; one hell of a difference over the years if you dare to add it up.

From a PAMM perspective, where pooled money is being managed, the differences become even more egregious due to regulatory issues that prohibit the splitting of futures contracts among managed accounts; in short, you can’t do it. In order to be able to do it, you have to create your very own hedge fund [with lawyers, accountants, and trust administrators], subject yourself to the scrutiny and cost of the various “alphabet soup” regulatory agencies, and employ a staff of dozens to make it work smoothly.  All in all, your cost to initially set things up would be right around $150,000, and then of course the continuing expenses of running the thing would be your next disaster du jour. 

With gold [since it’s considered “FX” and treated offshore like a currency pair, thus the symbol XAUUSD] & USDJPY, I can create and manage the world’s largest PAMM and have almost NO COSTS … AS IN VERY CLOSE TO ZERO AS YOU CAN GET … WITH NO REGULATORY HASSLES … AND NO NEED FOR LAWYERS & ACCOUNTANTS because the brokerage house [LMFX] does everything from opening the account, collecting the cleared funds, and then pooling the money in the “master” account which I trade. I never ever “touch” the money at any time, so 100% control over a customer’s funds is always in their total control with 100% transparency on a trade-by-trade basis daily; I only trade the account.

Since I never “touch” [i.e. literally, physically take a check from anybody] the money, there are no regulatory requirements; and that means not being hassled by apparatchiks looking to substantiate their existence. Even though I consider USDJPY to be its own “asset class”, it is still considered part of “FX” right along with gold, and that means more money “bigly” in your pocket; it’s “Yuuuuge”!

This is why I have always said, and will repeat here again, “I’d trade dirt futures if the conditions were right; I’m about making money with the most volatile market (s) that also have the absolute lowest costs. Nothing else matters; I’m not in ‘love’ with any market. It either gives me what I want or I leave it alone, and I’m not about to throw money away to the LP bank and/or their brokerage house middlemen”.

Take everything I have commented on today and bundle it with the fact that “offshore” [defined as simply outside the U.S.] brokerage houses are typically domiciled in jurisdictions that have no tax authority, or any regulatory regulations to report any activity in your account to anybody, and you are as close to anonymous, private, and secure as you are likely to ever be. LP banks most often use “Secure Anonymous Protocol” [SAP] with their brokerage house clients; this in effect wipes clean any personal information about your account when you trade. When you trade, your order goes through various protocols of their own [e.g., margin requirement, etc.], and by the time it reaches the LP for execution, they know nothing about what account it came from, how big the account is, or who controls or owns it; it’s all numbered accounts.

There’s a reason practically every offshore brokerage house does its LP business through London banks; it’s because London is its own “city state”, and for financial regulatory purposes, London is not part of the U.K., and therefore has its own rules. And the only rule you need to know is that in London, a bank can pretty much do whatever the hell it wants short of stealing customer money.

When you add everything up, it makes no sense whatsoever to trade through U.S. brokers; especially the FCM’s that are registered by the CFTC, NFA, and restrict your ability to trade all the while issuing 1099’s on your futures trading; and besides, “where were the regulators when REFCO & MF GLOBAL went down the drain and tens of thousands of people got screwed royally”? There is inequality and then there is being stupid; don’t be the latter!

Turning to USDJPY today … well, we certainly got some movement after the NY open … ditto gold, as the range again expanded to almost $18 … more on these tomorrow. This is a welcome sign for gold, and hopefully, it foreshadows better ranges in 2017 than we saw the latter half of 2016. Frankly, I’m tired; been up since about 4 A.M. and missed capturing the USDJPY & gold moves in real time for everybody … see what market Holiday’s do to you sometimes? Anyway, I’m outta here. Until tomorrow …

Have a great day everybody!




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