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Sellers of shovels are getting rich!


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Sellers of shovels are getting rich!

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  #1 (permalink)
Howard Roark
Oslo Norway
 
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It's been said that during the gold rush those who really made money were the ones selling the shovels.

I can't help think that it must be much the same in the trading industry, but I'm hardly saying anything that should be a surprise to anyone. Obviously, brokers are the ones earning money regardless of what's going on acting as middle-men and skimming a percentage of all transactions. Of course, exchanges and those providing infrastructure is making a lot of risk-free money as well.

In recent years, online proprietary trading firms have exploded. First out was Topstep, but I'm sure there are way more than 50 various companies operating at the present.

I'm not sure everyone is up to speed on the recent MyForexFunds debacle. I've done some napkin math earlier on what these firms could earn just on selling subscriptions, but I have to say the number coming out from MyForexFunds surprised me and far exceeded my expectations.

Allegedly, they cashed in $310 (!) million in fees since November 2021.

https://www.cftc.gov/PressRoom/PressReleases/8771-23

That's a ton of money and only one firm.

Then you have the educational business selling books and courses. Seeing the numbers from MyForexFunds I imagine somebody must be making substantial coin here as well.

I have at times wondered if I should simply write up and sell my own system (methodology + system + indicators). Maybe it would be an easier way to the money. With the whole world as your market place there seems to be a huge potential demand.

I probably won't, though, but these numbers make you wonder.

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  #2 (permalink)
 
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 deaddog 
Prince George BC Canada
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Once you figure out that the market isn't there for you to make money, it's there for the people who own the market to make money, it becomes easier to make money.

It's a stock market. Much like any other kind of market it exists to sell some product at a profit. Buy wholesale and sell retail or sell retail and then buy wholesale if you can. Your risk is that you can't find customers. You advertise by showing how an astute trader can make money by buying retail and then waiting until the price rises.
Customers flock to your business lured by the prospect of easy money.
The market always rises and where are the customers yachts?

"The days when I keep my gratitude higher than my expectations, I have really good days" RW Hubbard
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 SMCJB 
Houston TX
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WOW.

Quoting 
more than 135,000 customers have signed up for their trading program since November 2021, paying at last $310 million in fees.

Like you I would have had no idea.

edit: Worth noting it was the wild west Forex market and not regulated futures.

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 phantomtrader 
Reno, Nevada
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If you could look under the fingernails of companies like APEX, they're probably doing exactly the same thing.

"According to the complaint, the defendants, doing business as “My Forex Funds,” supposedly offered retail customers the opportunity to become “professional traders” by using Traders Global’s money to trade against third-party “liquidity providers” and share in any trading profits. They assured customers that “your success is our business,” and “we only make money when you do.” But, in reality, Traders Global—not a third-party “liquidity provider”—is the counterparty to substantially all customer trades.

The complaint also alleges that Traders Global actively minimizes the likelihood that customers trade profitably by using pretexts to terminate customer accounts, misleadingly assessing commissions that reduce customer account equity, secretly using specialized software to cause customer orders to be executed at worse prices than appeared to the customer at the time an order was sent, and handicapping the extremely small number of successful customers to decrease customer profits and increase customer losses."

The payout policies are a dead giveaway. You trade, but you don't get paid until they feel like paying you. In the meantime, they're working on finding every excuse not to pay you.
There's only a few companies that actually pay out without any bs - Earn2Trade pays when you earn. I think OneUpTrader does as well. Most of them are just like My Forex Funds - a fee scam.

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 Tymbeline 
Leeds UK
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SMCJB View Post
Like you I would have had no idea.

edit: Worth noting it was the wild west Forex market and not regulated futures.


I agree - but let's not forget that even the regulators' complaint specifies that out of that $310 Mil, they paid out $173 Mil in profits to their traders (not something any spot forex/CFD broker has ever had to do!), and that they employed a huge number of people, had plenty of expenses, etc.

Please don't imagine that I'm trying to "defend" them (far from it!!), but at the same time let's remember that the case hasn't even been heard yet: all that's happened so far is a temporary account-freezing order, pending a court hearing.

But the Fx market is indeed, as you rightly say, very much the Wild West.

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  #6 (permalink)
Howard Roark
Oslo Norway
 
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phantomtrader View Post
If you could look under the fingernails of companies like APEX, they're probably doing exactly the same thing.

"According to the complaint, the defendants, doing business as “My Forex Funds,” supposedly offered retail customers the opportunity to become “professional traders” by using Traders Global’s money to trade against third-party “liquidity providers” and share in any trading profits. They assured customers that “your success is our business,” and “we only make money when you do.” But, in reality, Traders Global—not a third-party “liquidity provider”—is the counterparty to substantially all customer trades.

The complaint also alleges that Traders Global actively minimizes the likelihood that customers trade profitably by using pretexts to terminate customer accounts, misleadingly assessing commissions that reduce customer account equity, secretly using specialized software to cause customer orders to be executed at worse prices than appeared to the customer at the time an order was sent, and handicapping the extremely small number of successful customers to decrease customer profits and increase customer losses."

The payout policies are a dead giveaway. You trade, but you don't get paid until they feel like paying you. In the meantime, they're working on finding every excuse not to pay you.
There's only a few companies that actually pay out without any bs - Earn2Trade pays when you earn. I think OneUpTrader does as well. Most of them are just like My Forex Funds - a fee scam.

My sentiments exactly, although I've often received some heat whenever I bring up these concerns.

I also think there's a bit of misleading marketing (not legal in Norway) here as they will boast about giving you a $150K account when in reality what you're given is say a $5K account (your maximum loss). And with the vast majority of firms like Apex which keeps you on the simulator even after you're funded you're not even given an account. It's basically a bucket shop. Nothing else. How can it be when your orders never hit the market?

I'm not surprised if we'll see similar smackdowns on these other firms as well.

For anyone considering these firms, I would stay with E2T or Topstep where you're actually given a real account when funded and there's no restrictions on when you can take a payout. A no brainer in my book.

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  #7 (permalink)
Howard Roark
Oslo Norway
 
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Tymbeline View Post
I agree - but let's not forget that even the regulators' complaint specifies that out of that $310 Mil, they paid out $173 Mil in profits to their traders (not something any spot forex/CFD broker has ever had to do!), and that they employed a huge number of people, had plenty of expenses, etc.

Please don't imagine that I'm trying to "defend" them (far from it!!), but at the same time let's remember that the case hasn't even been heard yet: all that's happened so far is a temporary account-freezing order, pending a court hearing.

But the Fx market is indeed, as you rightly say, very much the Wild West.

Agreed.

Let me however add that my intention with this thread wasn't necessarily a debate on these firms, but how much these firms were actually collecting in fees. I had never imagined it would be this much just with one single firm.

Adding together all the other firms it must be a huge, huge sum of money.

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  #8 (permalink)
Howard Roark
Oslo Norway
 
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Howard Roark View Post
I have at times wondered if I should simply write up and sell my own system (methodology + system + indicators). Maybe it would be an easier way to the money. With the whole world as your market place there seems to be a huge potential demand.

I probably won't, though, but these numbers make you wonder.

Seeing the huge amount of customers at MyForexFunds I wonder how easy it would be to sell a trading course.

Is 1000 a conservative number? Could one do more?

If I value it at $500 that's $500 x 1000 = $500 000.

If I could hit 2000 - that's serious money.

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  #9 (permalink)
 kevinkdog   is a Vendor
 
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Howard Roark View Post
Seeing the huge amount of customers at MyForexFunds I wonder how easy it would be to sell a trading course.

Is 1000 a conservative number? Could one do more?

If I value it at $500 that's $500 x 1000 = $500 000.

If I could hit 2000 - that's serious money.

Your example is like trading without any slippage or commission. Looks great on the surface, but misses a lot of the real story.

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 phantomtrader 
Reno, Nevada
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Howard Roark View Post
My sentiments exactly, although I've often received some heat whenever I bring up these concerns.

I also think there's a bit of misleading marketing (not legal in Norway) here as they will boast about giving you a $150K account when in reality what you're given is say a $5K account (your maximum loss). And with the vast majority of firms like Apex which keeps you on the simulator even after you're funded you're not even given an account. It's basically a bucket shop. Nothing else. How can it be when your orders never hit the market?

I'm not surprised if we'll see similar smackdowns on these other firms as well.

For anyone considering these firms, I would stay with E2T or Topstep where you're actually given a real account when funded and there's no restrictions on when you can take a payout. A no brainer in my book.

Yes, the size of the account is meaningless. It's the maximum loss and draw down allowable which is the real size. If your max loss is $3000, then you're trading a $3000 account. That would mean trading 1 contract (I personally calculate 3:1). They allow you to trade up to 12-14 contracts which is really digging your own grave and then letting you jump in.

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