50 Words on – Why you can go Broke with LMAX?

Oh, guys, that’s a tough question to answer. Have you ever heard the saying “The dog that barks doesn’t bite”? That is true for most brokerages that scream loudly how amazing they are, how good their execution is, their spreads… their everything; but when you deposit, you realize that it’s mostly just barking, without biting. Well, LMAX is almost at the opposite end: their marketing is not aggressive but they are widely considered the best in the business when it comes to providing FX solutions. LMAX is “la crème de la crème” and other than a few minor slippages, I don’t see that they could do to get you broke.

 

How to Avoid Going Broke With LMAX

• Learn to trade! Sorry for being blunt, but I don’t believe this company is out hunting your stop loss or denying your legit withdrawals, so learn to trade and don’t blame the broker if you lose.
• If you see sudden price spikes, usually I’d recommend checking the price feed of other brokers to see if that fluctuation is present on their platforms as well. But considering we’re talking about LMAX, I cannot recommend you to do that. If their price feed shows a spike, that’s not price manipulation, it’s just the real behavior of the market.
• Avoid trading at news time because spreads may widen and slippage can occur. Again, this is normal for a real market. Of course the cost of buying something will go up when everybody wants to buy.
• Read and understand their Terms and Conditions. It will save you a lot of trouble later.

 

 

 The Good, the Bad and the Ugly Speak

Lightning Fast Execution… Literally

LMAX is based in London, UK and it’s the first MTF for FX regulated by the FCA. MTF stands for “Multilateral Trading Facility” and if you want the fancy explanation of what it means, Wikipedia is the place to go; just follow the link at the bottom [1]. If you want the simple explanation, here it is: an MTF just matches the orders of buyers and sellers and doesn’t have any interest in the result of the trade. In other words they don’t lose if you win and they don’t win if you lose so they have absolutely no reason to give you a hard time, to hunt your stop or to do any of that stuff we traders hate.

The second game-changing advantage is their execution speed: between May 2014 and November same year, 97.81% of the trades placed with LMAX were executed in less than 4 milliseconds and 99.53% were executed in less than 5 milliseconds. I think those numbers speak for themselves. If you need fast execution, LMAX is the F1 car of brokers. Their platform is also able to sustain about 40K trades per second and 400 million trades per day so I think there’s no reason to fear that your order will not be executed. I am sure you want to know about their spreads: take a look on their main page and you will see the real time spread for EUR/USD (you can choose another instrument). For about two days the highest spread I could see was 0.00007 while the average was a lot less. They also have a little tool that shows you historical spreads so don’t take my word for it, use it and see for yourselves. Commissions can vary depending on your trading activity so you will need to speak directly to their customer support, but an average sum is $25 per million traded. Although this commission is charged once upon opening the trade and again when the trade is closed (for a total of $50), it is still a low commission compared with the industry’s standards. By now you’ve probably realized I have a lot of respect for LMAX’s professionalism, but this doesn’t mean that I will not highlight their weak points as well and this takes us to our next section:

 

Nobody’s Perfect

Although we don’t have a Live account with LMAX so we cannot vouch for this, there have been complaints about news trading. Apparently this type of trading is frowned upon by LMAX and traders have been asked to stop doing it. Personally I don’t see this as a major issue because my worst experience is with news trading so I’ve stopped doing it completely. Let’s be honest here: if Mario Draghi coughs it can be interpreted as a dovish attitude – “Oh, why did he cough? Is he afraid of inflation? Ah or maybe the QE is not going well? And during the last press conference he didn’t cough… the Euro is going down.”

LMAX offers a Meta Trader 4/5 bridge which can be “shaky” at times and their web platform is pretty basic, but I guess it ultimately comes down to what type of trader you are, because if you don’t need a lot of features and complicated order types, their platform is more than satisfying. However, what I don’t find satisfying – keep in mind this is a personal preference - is their leverage of only 100:1 and the fact that their minimum deposit is 10,000 USD or equivalent. It is clear that LMAX is not your average broker and their target clientele is serious traders, not guys who want to try their hand at Forex by opening a 200 bucks account. There’s a little “gimmick” which will allow you to deposit less: if you open an account through some of their Introducing Brokers, the minimum deposit can go as low as 1,000 USD. So far I can’t see any major issues with LMAX but as always, there are people who throw dirt left and right and we wouldn’t want to hide that from our readers, so without further ado, let’s move on to The Ugly.

 

Whine More?

Remember when I said that if I ever see a broker without any complaints I will think something is fishy? Well, to me LMAX is probably the best brokerage we’ve reviewed, but they still have complaints… can’t satisfy everyone. For example Vitor from Portugal complains about the fact that LMAX only offers the headers for the news, not the full story [2]. An LMAX representative explained that showing the full story was not a part of the service and I agree with that. If you want to read the news, go to Bloomberg, Reuters or any other news portal. In fact just a row above his news comment, Vitor says that LMAX offers “real low spreads”, the MT4 platform is always available, without interruptions and the withdrawal process is smooth. Ok, that’s what a broker needs to offer, not full story news.

Lorenz V from Germany [2] complains about the fact that LMAX doesn’t allow news trading and says he received an email requesting that he stops such trading. People are often too lazy to read the Terms and Conditions or to simply ask a support representative if their trading style is allowed. I mean, it’s simple: if I know my trading revolves around news trading, then I am going to ask before opening an account if news trading is allowed. If I want to scalp, I am going to ask if scalping is allowed; same with EAs, same with hedging. LMAX is good but no broker can be loved by 100% of the traders worldwide. People are different and no brokerage can please all of them.

On the bright side, here is what other traders have to say: Paul from London [2] says they have fast execution, small spreads and no re-quotes. What more could you want? Gap, a professional trader from Italy [2] says that after the first 50 – 100 contracts he had just 1-2 decimals (5^th position) slippage and that LMAX is by far the best broker on the market. I have to agree!

 

 

Editor’s Note – Is LMAX a Scam?

I’ve spent lots of hours over the course of two days, reading about LMAX and doing research. If LMAX is a Scam, I will never write a broker review in my life because I’m probably an idiot. If they are a Scam but I consider them one of the best in the world, then I don’t deserve to give you my opinion anymore. So to answer the question: No, LMAX is not a Scam!

 

Editor’s Note: Would I Trade with LMAX? YES!

Are you kidding? Of course I would. I think it’s clear after reading this review that I hold them in high regard. I am pretty satisfied with my current broker and I consider LMAX’s minimum deposit too high and these are the only reasons which keep me away at the moment, but believe me, if my broker starts giving me any trouble, the next thing I do is close my account and open a new one with LMAX through one of their IBs so I get a lower first deposit.

 

References

1. Multilateral trading facility - Wikipedia
2. LMAX on FPA