Slippage occurs when you place a trade in the forex market, but your broker cannot fulfill your quote at they price you requested. For instance if you wanted to buy the EUR/USD at an ask of 1.4567, but instead the price filled at 1.4569 you experienced a slippage of 2 pips. This is going to affect your profit by 2 pips win or lose. Now sometimes you may request an order at 1.4567 and you will get a “re-quote” this means that your order does not go through because they can’t offer you that price anymore. Generally they will offer the 1.4569 and ask if you would like to proceed. This can also be frustrating, because you can get multiple requites before you can get an order through.

Things you can do. First most software packages have things called ,”bounds” or “Ranges” This means that you can select how much slippage you are willing to accept. If you accept a range of 3 pips. This means that if you wanted to buy at an ask of 1.4500 but the quote goes to 1.4503 you will be entered into the trade at that price as you allowed them to slip you 3 pips. If you are unwilling to tolerate slippage you can set the bounds to 0 and you will get a requote and can decide to proceed.

It is important to determine how much slippage your trading strategy and personality can tolerate. If you trade the news or other fast market moving events you are going to need to accept slippage to get in and out of trades quickly. However, if you are a longer term pattern trader you may be able to tolerate waiting to get the order filled at your quote. Please note there is nothing more frustrating than being re-quoted multiple times in a fast moving market. I have tried to exit a position and received multiple re-quotes until the price had moved over 10 pips past my exit. It would be my recommendation to make sure to allow the bounds to give a range of at least 1 pip slippage on each side. How high or low you allow is up to you. Happy Trading.

When selecting a forex broker many people are concerned with whether or not that broker is registered with the NFA (US National Futures Association). This is especially true of US customers. The critical misnomer that many people do not really understand is that the NFA will not protect your funds like the FDIC does in US banks.

The NFA does provide a watchdog service to make sure that the brokers are not cheating their customers with order execution and irresponsible handling of funds.

In today’s trading environment, which some economists have dubbed the Great Depression II, it is critical to protect your money. The dirty secret is that the NFA does not and will not protect your money in the event of your forex brokerage entering bankruptcy.

Since the fall of Bear Stears, Lehman Brothers, Wachovia, and Washington Mutual the risk of a financial institution going out of business has increased. In security trading accounts as long as you hold a stock you will be protected if the company goes out of business. However, in Forex you never have full possession of a stock or company. Therefore, in the event that the forex broker enters bankruptcy the customer funds are safe from the creditors.

The largest case occurred with a New York based Broker – Refco. In 2005 Refco was a growing broker with more than 200,000 customer accounts. The CEO was buying up bad debt with refco resources so they would not have to write down the losses. Once this was discovered the company’s stock dropped to below $1 a share from above $20. The customers could not access their money for months. When the creditors came through most of the debts were paid with customer funds. Once the creditors were satisfied, the customers finally could withdraw their money but only at about thirty cents on the dollar.

While it is possible to lower your risk of this happening by selecting reputable NFA regulated brokers and spreading your money between multiple brokers, you still have broker risk to deal with. There is one solution right now that can protect the Refco fiasco from happening to you. Brokers in the United Kingdom have something called Segregated accounts.

The regulating agency in the UK has actually encouraged brokers to setup accounts so that the customer funds are in a separate trust account from the broker. Therefore, if the broker has debt that needs to be collected the creditors cannot touch the customers funds to pay off the debt. This is an example of where the NFA needs to bolster their support and protection of US consumers.

The good news is that US customers can have a forex UK account even though they live in the US. This is because many UK brokers have office divisions in the US. If you currently have large balances in the forex market it may be time to explore the UK segregated accounts for extra insurance. A list of brokers has been provided below that offer this service.

1) North Finance www.northfinance.com
2) ODL Securities UKwww.odlsecurities.com/uk/index.html
3) ActiveTrades www.activtrades.com
4) FXCM Uk www.fxcm.co.uk
5) aleccohFx www.aleccohfx.com
6) EuroOrient Securities and Financial Services www.fxpro.com
7) Dukascopy Suisse www.dukascopy.com