How did your broker do in 4Q 2010?

Earlier this week, brokers released another set of profitability reports, similar to the ones we saw late last year. The report covers the fourth quarter, and measures how profitable active, non-discretionary U.S. retail forex clients are. Active non-discretionary accounts pertain to those accounts that had at least one trade during the fourth quarter and are traded by none other than the account owner.

An account is considered profitable if the following equation has a value greater than zero: the sum of realized and unrealized gains and/or losses on all trades open at any time during the quarter; minus fees, commissions and other charges; plus all income or rebates, including interest paid. Of course, deposits and withdrawals of funds are NOT included.

Here are a couple of tables to help you compare the change in profitability and total number of non-discretionary accounts (data put together by awesome FX industry site: forexmagnates.com

Broker Q3 Profitable Accounts (%) Q4 Profitable Accounts (%) % Change from Q3 to Q4
Alpari 25% 30% 5%
FX Club 29% 19% -10%
FXCM 23% 23% 0%
FX Solutions 24% 27% 3%
Gain Capital 23% 28% 5%
GFT 33% 32% -1%
IBFX 28% 28% 0%
IG Markets 20% 26% 6%
MB Trading 24% 26% 2%
Oanda 51% 47% -4%
PFG 21% 21% 0%
Broker Q3 Total Non-Discretionary Accounts Q4 Total Non-Discretionary Accounts Change from Q3 to Q4
Alpari 1,563 1,547 -17
FX Club 4,245 2,465 -1,780
FXCM 15,023 18,362 3,339
FX Solutions 6,587 5,481 -1,106
Gain Capital 11,344 14,628 3,284
GFT 10,358 9,878 -480
IBFX 18,579 13,669 -4,910
IG Markets 464 378 -86
MB Trading 4,822 4,478 -344
Oanda 49,584 48,866 -718
PFG 2,098 1,791 -307

Looking at these sexy figures, we can see that both FXCM and Gain added around 3,000 accounts since October 2010. However, cynics think that their stats may be a little bit exaggerated because of some accounts that might have been transferred to them from non-U.S. subsidiaries.

On the other hand, IBFX, Interbank FX, and FX Club seemed to have misplaced their mojo as the year came to an end, each losing at least 1,000 accounts. FX Club got a double whammy when its profitability declined by 10%, being one of only two brokers that printed negative figures in the fourth quarter along with GFT.

The biggest winners in terms of account profitability were Gain and Alpari, each growing by 5%. IG Markets did score a whopping 6% growth rate but its 378 U.S. accounts pale in comparison to all the other brokers who are have clients in the thousands.

Overall, the average profitability increased by 2%.

You might think, “Oh that’s awesome, that means retail traders like myself are slowly doing better!”

Before you get all giddy like a donkey, you gotta remember that these figures come from the brokers themselves. They have an incentive to make the figures nice and pretty, in order to attract more business.

As for the small change in account growth, forexmagnates speculated in their article that CFTC’s recent moves to regulate the forex market has shooed away some investors. We tend to agree as I mentioned a couple of months back that further scrutiny from the authorities may just convince traders to move to non-U.S. brokers instead. If this continues, brokers may not be so gung-ho in the first quarter of 2011.

Yikes!

However, I still believe that regulation agencies obliging brokers to open their books and submit quarterly client profitability reports is a good idea. It promotes transparency and enables retail traders to make better informed choices when choosing a broker. Transparency is very important in this day and age as we continue to hear stories of forex scams and shady broker tactics.

If you are searching for a broker that you want to open an account with, make sure you check out our retail FX broker lessons and our FX Broker Comparison Guide. Don’t be so quick to make a decision – it’s your job to do your homework and find the broker that best fits your needs and trading style. Remember, it’s your money on the line!




  • JoshG

    Ummm…… Oanda had a 4% uptick, yet their Q4 profitable accounts is lower than it was in Q3? Please explain. :DDD

  • sergeyrar

    how about FOREX.com?

  • JoshG

    Ummm…… Oanda had a 4% uptick, yet their Q4 profitable accounts is lower than it was in Q3? Please explain. :DDD

  • sergeyrar

    how about FOREX.com?

  • MedicalChew

    @JoshG
    I guess it means more people joined OANDA, and more of them don’t get profitable accounts, but overall, the absolute number of profitable accoutns still increased

  • JoshG

    I don’t know…. I’m fairly confused now….
    (sic)..’The biggest winners in terms of account profitability were Gain and Alpari, each growing by 5%, followed by Oanda that reported a 4% uptick…’

    Yet,
    Oanda’s Q3 profitable accounts(%) = 51%
    Oanda’s Q4 profitable accounts(%) = 47%

    …I dunno, lost in translation???

  • MedicalChew

    @JoshG
    I guess it means more people joined OANDA, and more of them don’t get profitable accounts, but overall, the absolute number of profitable accoutns still increased

  • DollahWollah

    It’s very interesting to see these tables, but I think you need to be more careful in doing the analysis. For instance it is not correct to say that FX Club profitability declined by 10%. The decline was about 33% (from 29 down to 19) and it was a decline in the number of profitable accounts – it doesn’t tell us anything about the degree of profitability of those accounts or of the broker in general.

  • JoshG

    I don’t know…. I’m fairly confused now….
    (sic)..’The biggest winners in terms of account profitability were Gain and Alpari, each growing by 5%, followed by Oanda that reported a 4% uptick…’

    Yet,
    Oanda’s Q3 profitable accounts(%) = 51%
    Oanda’s Q4 profitable accounts(%) = 47%

    …I dunno, lost in translation???

  • DollahWollah

    It’s very interesting to see these tables, but I think you need to be more careful in doing the analysis. For instance it is not correct to say that FX Club profitability declined by 10%. The decline was about 33% (from 29 down to 19) and it was a decline in the number of profitable accounts – it doesn’t tell us anything about the degree of profitability of those accounts or of the broker in general.