50 Words on - Why you can go broke with Dukascopy?

When a woman is pregnant, everyone touches her belly congratulating her, but no one touches the man’s ankle spanker to say “good job”. The moral: to do great things you need to be in two. When you trade with Dukascopy, the stop loss orders seems to be hunted and the slippage helping to get you out of the business, while no one thinks that is you that is not doing a “good job”. The next section will show you how to be in synonym with Dukascopy.

 

How can you avoid going broke with Dukascopy Bank:

Dukascopy is one of the few brokers that I know personally but I still needed tens of hours of research in order to write a fair review about them. Let’s just say that my experience with Dukascopy was like one of those marriages that falls apart because you asked your partner to marry you before knowing him enough. Dukascopy has a lot to offer and if you know how to manage this relationship you gonna be a happy trader. Here are a few tips for you (remember that we are talking about my ex here:

• On the Dukascopy website, on the client protection area, they speak about the Slippage Control Functionality. You should use it, despite the fact they warn you that reducing the tolerance to slippage, increases the probability of an order reject. It also increases the probability for you to be profitable [1].
• Do not trade during important news releases. Is then when the “market conditions” triggers the slippage.
• Making a bigger deposit than their minimum 100$, will allow you to have wider stop losses and avoid the “hunting”. If they are really doing it, Dukascopy cannot follow your stop loss order endlessly.
• Although long-term trading seems to be the perfect strategy to apply in order to avoid a stop loss hunting, if you adjust your money management, intra-day trading and scalping could work as well.
• I recommend opening trades using limit orders instead of stop orders or “buy/sell at market”. The benefit to these order types is that you are guaranteed not to see any slippage or even to obtain a better price then you requested.
• Use longer time frames to reduce the noise when the things get hairy in the market. Place your orders only after the noise is out as also the “hunters”.

 

 

The Good, the Bad and the Ugly Speak

To be or Not to be…an ECN broker! That is the Question! 

I assume that after many years, the Dukascopy are still asking themselves this question. Every time they are accused of NOT being an ECN broker – as stated on their website – their answer is containing the definition of what the ECN means and I’d say that they accomplish the requirements to be considered an ECN Broker. However, their behaviour is more like a Market Maker and the funny thing is that they do notify the traders about this, but they do it in a place that most of the traders don’t look at: the papers that you need to sign when opening an account with them. On the page 7/7 of this document, you will find the following text: “The Client understands that the business model of the SWFX Swiss Forex Marketplace consists in ensuring best execution for the transactions of the Clients and matching the transactions between any of its Clients or Counterparties, each trade being instantly hedged with a countertrade. In that respect, on the SWFX Swiss Forex Marketplace, Dukascopy Bank SA is counterparty to each trade and counter trade. In some circumstances, Dukascopy Bank may not hedge entirely or may not hedge at all certain trades. In such cases, Dukascopy Bank may have opposite positions towards Clients.”You can find the full document here.

Many traders noticed this on their own. Their comments are saying that Dukascopy’ s behaviour is far away from an ECN Broker. Two of them, John Dillinger from US and Christian Riedl from Switzerland, offered some details[2] in their remarks about their experience with Dukascopy.

In the first part of this review, I told you how you could avoid getting broke with Dukascopy. I know it might seem hard to believe that you can be profitable with this broker after reading the “Ugly” part but there are many traders, who seem very happy and satisfied with Dukascopy. For example, “mastergunner99 [3]” from Babypips.com and “some guy [4]” on Forexpeacearmy.com website would tell you to screw the negative comments and to open an account with Dukascopy.

I have no idea if sharing publically your bad experience with a broker makes you a dumb (as “some guy,” said in his comment) but this characteristic is not far from the truth if you don’t gather all the informations you need and weight them, before opening an account and make a deposit. In my opinion, this market is divided in two categories: Forex Brokers and Forex Scammers. In the Forex Brokers category, you will never find the perfect broker. Everyone has something to offer and something to take of the table. Dukascopy Bank is definitely a Forex Broker who has a lot to offer. You only have to decide if their offer suits your needs.

 

Need help? You Better be a Patient Guy

Whatever their complaints are, almost all the time, the traders add some words about a bad support. Too long time needed before they get an answer to their emails, never get the promised call from their account manager or not getting a proper answer to their questions. I’d say this is unacceptable from a broker who looks mostly for traders with big deposits. Seems like you need to have a lot of patience and to send them more than one single message with your problem before getting an answer. By getting it, does not mean you will get the proper answer, so you might need to start all over again with the messages.

As stated on the website, in their willing to differentiate from other brokers, Dukascopy Bank chose not to offer an MT4 platform. From the multitude of tools they could have pickedto apply their strategy, unfortunately they chose the wrong one, in my opinion. Almost all indicators and EA are built for MT4 platform and most of the traders use these tools. As good as their other 5 options are, they still cannot compete with the professionalism that the MT4 trading platform offers. However, they come up with a solution for this: Third Party Bridge to MT4 platform. Well….they think is a solution but I don’t. Using Third Party Bridge, forces the clients to pay a fee for “renting” the MT4 platform. If low spreads plus the commission makes theDukascopy very competitive, the low spreads plus commissions plus MT4 fee, makes the competiveness of the Dukascopy, to vanish.

 

Low Spreads and Exclusive Capital Protection

Although Dukascopy charges a trading commission of $35 for every 1 million USD traded, for deposits lower than 5000$, they remain very competitive with their spreads as for example 0.2 pips for eur/usd or 0.4 pips for usd/jpy. Putting it another way, a 35-cent charge is applied when you trade just 0.1 of a lot (10,000 currency pairs). The commission prices get lower the more money you deposit [5].

Should your funds be managed by a money manager or by any other third party, Dukascopy gives you the unique opportunity to limit the possible losses on your account through its “Stop-Loss” functionality. Should your account reach the Stop-Loss level set by you, the trading would be instantly deactivated and all open positions would be closed, to protect your remaining capital against further losses.

Speaking about the capital protection, the deposits of clients who joined via Dukascopy Europe are protected by EU Regulation – up to 20.000 euros for each client while larger deposits, up to 100 000 CHF, are protected by the Swiss Government because before being a Forex Broker, Dukascopy is a bank and your money are covered by the local banking laws.

 

 

Editor’s Note - Is Dukascopy Bank a Scam?

Definitely not! I don’t know the laws regarding the banking sector in Switzerland, but I am sure the Swiss Government doesn’t just give the licence to operate in the financial markets to anyone that comes and asks for it.

 

Bottom Line - Would I Trade with Dukascopy Bank?

The ECN liquidity and transparent pricing make Dukascopy a worthwhile trading platform for an advanced forex trader. Large volume trading is handled well at Dukascopy with traders having the capacity to make trades going up to a couple of million U.S. dollars. There are better discounts in addition to nicer platforms and top-notch services available to traders with account balances running more than $100,000 USD. Therefore, Dukascopy is better suited for active and professional traders, banks and hedge funds and as I am not ready to through me into the market with 100 000$ or more, I will just walk away and look for another broker.

 

References

1. Dukascopy Client Protection
2. FPA review for Dukascopy
3. Forum Babypips.com review for Dukascopy
4. FPA review for Dukascopy
5. Dukascopy Trading Commissions