• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
Trading Heroes

Trading Heroes

Forex Trading Education

  • Blog
  • Shop
  • About
  • Login

3 Simple Ways To Avoid FXCM And Alpari Like Broker Risk

The Swiss Franc announcement caught everyone by surprise, even some brokers. Find out how you can prevent yourself from losing your entire account when events like this happen. These three tips can help you hedge your risk.

Home / Trading Risk Management Tutorials / 3 Simple Ways To Avoid FXCM And Alpari Like Broker Risk

By Hugh Kimura

avoid-broker-risk

Whenever a broker goes down, it is usually a shock and many times traders don't get their money back. This happens every so often.

On this round of shocks, FXCM has secured funding, so it looks like they will be OK for now. Alpari was supposed to be insolvent, but they are now looking for a buyer. If you want to see real-time broker status reports related to the Swiss Franc event, check out this page.

This can happen to regulated brokers who are supposedly well capitalized. The aren't necessarily shady offshore brokers. Even if you are dealing with the most reputable broker, things can still go wrong.

Many traders concentrate on trading risk (by using stop losses) and psychological risk (by meditating), but they completely ignore broker risk.

I also talked to Kim about this topic once. She had a few friends who lost accounts when Refco went down and she was adamant about implementing the tips below.

So in this post, I'm going to give you three simple ways that you can hedge your broker risk. Hopefully it helps you minimize your losses, in the unfortunate event that your broker is one that goes down next time.

Discount for TH Readers: Get your Forex Tester 5 coupon here

If you have broker questions, you should consult with someone like Justin, who knows about a wide range of brokers.

1. Don't Keep All Your Risk Capital In Your Trading Account

Leave a portion of what you need in your trading account and have the rest in an online bank that pays a little bit of interest or in a checking account at a traditional bank. This is your holding account.

Only keep what you absolutely need in your trading account. You can still take trades based on the risk that you are taking on your cumulative balance, even if your trading account itself is relatively small. The great thing about Forex is that you can use leverage, so you don't have to have a lot of money in your trading account.

SEE ALSO: Forex scalping secrets revealed (full interview)

Broker risk can result in a 100% loss, so plan accordingly.

2. Clear Out Trading Profits Monthly

If you are a consistent trader, then profits will start to add up. It can be easy to just leave your profits in the account if  you don't need them.

Be disciplined and withdraw your profits each and every month. Broker failures are often sudden and unexpected. Don't get caught with your pants down.

3. Deal With Multiple Brokers

Finally, don't only trade with one broker. Have multiple accounts open at the same time, even if you only have a small amount of money at the two secondary brokers. Having the ability to transfer money back and forth between your holding account and your trading accounts can save you in an emergency. Opening a new account can take some time and you don't want to be stuck without the ability to trade.

This is also useful when something less than catastrophic happens. One broker could be having temporary technical problems or you simply may need to hedge your current position in another account. Having multiple accounts at different brokers helps you prepare for a multitude of scenarios that don't involve a broker going out of business.

Conclusion

I was happy to hear that Oanda make it through this incident fine. That is why they are my favorite broker. But who knows, something could happen to them in the future too. So even if you are trading with them, be sure to have a backup.

Trading is an unpredictable business, but that is also where profit opportunities lie. If you want something super safe, you might as well leave your money in an insured bank. Embrace the risk and be prepared for as many of those risks as possible.

So take a few minutes right now and start researching broker alternatives. If there was anything good about the Swiss Franc collapse was that it showed us the brokers that are doing well and exposed the weak brokers.

Related Articles

The Beauty of Sub Accounts in Forex Trading
How Figure Out Exactly Much to Risk Per Trade
How to Figure Out The Right Time to Move Your Stop-Loss to Breakeven

Category: Trading Risk Management Tutorials Tag: Broker Risk

About Hugh Kimura

Hi, I'm Hugh. I'm an independent trader, educator and researcher. I help traders develop their trading psychology and trading strategies. Learn more about me here.

Top

 

Share This Article


First posted: January 20, 2015
Last updated: June 22, 2020

Primary Sidebar

Trading Guides

How to Figure Out Your Trader Personality Profile

The Best Trading Books Ever

The Ultimate Beginner’s Guide to Forex Backtesting

How to Create a Precise Trading Plan (with PDF worksheet)

Footer

Company

  • Support
  • About Trading Heroes
  • Trading Courses and Education
  • T-Shirts & Trading Gear

Tutorials & Guides

  • Recommended Trading Resources
  • Free Forex Trading Course for Beginners
  • The Trading Blog
  • Best Trading Books
  • Forex Trading Strategies
  • The Trading Lifestyle Podcast

Community

  • YouTube
  • Twitter
  • Instagram
  • Private Trading Community
  • Contact
Trading involves substantial risk and there is always the potential for loss. All content on this website is for educational and informational purposes only and is not trading, investment, or medical advice. You should be aware of the risks associated with trading and seek advice from an independent certified financial adviser if you have any doubts. Some links on this page might be affiliate links, where we get a small commission if you purchase through the link. It doesn't cost you anything extra and we only recommend products that we absolutely love. This site uses cookies and using this site means that you agree to the use of cookies.

 

CFTC Rules 4.41 - Hypothetical or Simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, because the trades have not actually been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs, in general, are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Testimonials appearing may not be representative of other clients or customers and is not a guarantee of future performance or success.

 

 

 

 

 

Copyright © 2007–2022 TrueLiving Media LLC | Terms | Privacy | Risk