Business model, reliability and conditions. 3 decisive points for choosing a broker from Sergey Bulygin
Today Sergey Bulygin, vice president of Arum Capital, is a guest of the editorial board of Fortrader magazine. We will talk about trading opportunities and the right choice for beginners.
- Hello. Please introduce yourself. How did it happen that you got acquainted with trading in financial markets?
- Good afternoon. It so happened that since 2000 I have been working in various financial organizations. Basically, all this time my work has been related to managing clients' assets and creating various investment products. While making money for others, it is strange not to start managing your own money.
- Trading is becoming more and more a part of our lives - many people know about the foreign exchange market, binary options, cryptocurrencies, or are holders of certain securities. In your opinion, why has the popularity of speculation in Russia and the CIS countries developed so actively in recent years?
- Well, I would not say that many people know about various financial instruments except loans and deposits. The financial literacy of the population is still at a very low level. Only a few people hold packages of securities.
Of course, there are people who try to earn cryptocurrency, on the foreign exchange market or binary options. But they are rather players than traders. People have a poor understanding of the nature of financial instruments, they cannot assess the risks and the probability of winning. Hoping to get rich quick, they start trading binary options, making deals with 100 leverage. As the result they lose everything and very fast. It is not for nothing that in the financially civilized countries binary options are already banned, and there are restrictions on the size of the leverage.
The desire for quick wealth is, of course, inherent in every person in every country. But in low-income countries this desire is most pronounced. People do not have jobs that allow them to live decently, to make savings. That is why they hope to earn fast and a lot with the help of risky instruments, yielding to the promising advertisement of various doubtful managers and consultants. As a result they become even poorer.
- In your opinion, can anyone become a trader?
- No, not any.
- At the very least a person should have the patience to learn;
- analytical mindset, in order to build trading strategy;
- the stamina to follow your strategy and not give in to your emotions;
- be able to admit your mistakes and eliminate them if the strategy brings losses.
- What qualities should a trader have in order to become a professional?
- The most important thing for a trader is strong nerves that allow him to calmly survive losses. There are no traders who are not mistaken, who do not make losing trades. It is very important, after fixing a loss, not to start feverishly trying to get it back, making rash actions. If emotions overwhelm you, it's better to stop trading, go to the cash desk, move away from the trading terminal for a couple of days.
- In your opinion, what is the most common mistake traders make?
- There are many mistakes, and they are very different. But the most common one, especially for young traders, is that after making successful trades for a while, the trader begins to think that his strategy is perfect, or he has begun to feel the market, that it will always be so. He starts to increase trading leverage, stops setting a stop loss, borrows money and increases position. After a while the market punishes him. The trader loses money, but gains invaluable experience.
- Many people consider trading to be either a frivolous business or a scam. What do you have to say about it?
- Of course, trading is a serious business. There are professional traders who earn very serious money. You just have to understand how you trade, what instrument you use and who your broker is. If you have decided to trade, for example, binary options, then you better go to the casino, at least there you can get some cognac. Or if your broker is some company registered offshore, offering to trade without commissions and also crediting your account with bonus money, in which case it is very likely that you will be left without money in any case.
- Do you think there is a future for cryptocurrencies and the technology associated with them?
- I am not a cryptocurrency specialist and for me it is a very complicated issue. Of course, technology is developing, blockchain is being used in different areas of the economy and public administration. Cryptocurrencies, in my opinion, will also evolve and probably in time will become an alternative to fiat money. But it needs state regulation and a state-controlled issuing center.
As cryptocurrencies exist now, they are of no interest to me. Now for me it is just a tool for speculation. I don't understand how you can assess their real value, so I don't work with them.
- How do you feel about the introduction of regulation in Russia? Does your company plan to obtain the necessary license from the Central Bank of Russia?
- It is definitely necessary to regulate. Clients should be protected, fraudsters should not provide services. But professionals should work on regulations. Currently, the activities of dealers are regulated; in fact, they are "kitchens" that do not take clients' transactions to the outside market. In addition, the mechanism of reporting to the Central Bank is not worked out, there is no appropriate software.
If the situation changes, the rules of the game become clearer, there will be a well-functioning scheme of interaction with the regulator, we will consider the possibility of obtaining a license in Russia.
- Many companies in one way or another criticize the current legislation regarding currency trading in Russia. In your opinion, what could be changed or added to the law to make it as effective as possible?
- We can talk not only about trading currencies, but currency assets in general. In particular, when trading Eurobonds, one will have to pay tax on currency revaluation. This makes trading currency assets from the territory of Russia uninteresting.
In addition, foreign brokers should be allowed on the Russian market, but they should attract clients only through accredited representative offices that would perform the functions of tax agents. This would significantly increase tax collection and protect traders who continue to trade outside of Russia.
- Why should traders trade with you?
- Our target audience is very limited - these are experienced, established traders who have learned how to extract profits from the market systematically. And, of course, they have no illusions about various "bonuses", car lotteries and other, quite pleasant to the ear, but doubtful ways of attracting clients. Traders with experience themselves know, How to choose a broker and what to pay attention to. Therefore, the advice below will be primarily for beginners.
In addition to the difficulties of market analysis, problems with self-control, constant control of trading risks traders face another, no less important problem - the right choice of a broker. A mistake in this matter can be decisive. I would advise beginning traders to pay attention to the following 3 points:
- The company's business model.There is a pure B-book, dealing centers, so-called kitchens (for me they are just scammers). There is a related model, bringing individual client positions to the market. This scheme is the most popular. And the last variant is a pure A-book, in this scheme 100% of client trades are taken out to liquidity providers. Such companies are the real brokers who earn only on commissions and not on losses of their clients. This is the least profitable and therefore unpopular business model. ARUM Capital works exactly according to A-book model. You can see it if you take a look at our license on the site of CySEC regulator. All the types of operations that are allowed by the license are reflected there. And the function market maker (dealing own account) is not there. That means we can't trade against clients.
- Reliability.This is first of all the broker's regulation. For example, we are regulated by CySEC (licensed in Cyprus), with full compliance with Mifid-2. The regulator provides for a compensation fund of 20,000 euros per client. This protects clients from bankruptcy of the broker. In 2019 we are planning to obtain a license from the FCA. We are moving towards maximum transparency and reliability, for our clients.
- Trading conditions.Thanks to our liquidity providers (industry leaders: Lmax, cfh clearing, and in the near future swissqoute), we can provide excellent execution speed, the most competitive trading conditions, and an excellent product line. This year we will supplement our trading instruments with direct access to the American stock market, including futures contracts and stock options.
- I'm sure you've had some funny situations with clients in the course of your work. Without mentioning any names, could you share one with us?
- There was a funny case, of course, and not just one. Here is an example: we had a client who traded confidently and regularly withdrew profits. But after the next "non-farms" he incurred significant losses, losing most of his deposit. After that he called us and asked to "roll back" the trade, because his 1 year old son had accidentally made it! He allegedly crawled on the keyboard and "accidentally" indicated the maximum volume, of course, without the "stops". In this case, the client has stubbornly defended this version, but after a couple of days calmed down and admitted that he had done it himself. Inattention led to great losses.
- What advice do you have for newcomers to ?
- For beginner traders I strongly recommend not to believe in miracles, in the fact that you can make money on the market at once by pressing only two buttons. Or that there are magic robots that will constantly generate profits. There is no such thing. Trading in financial markets is a very serious business. Consequently, the approach must be appropriate.
And of course you have to be careful when choosing a broker, not to take advantage of "easy" profits, momentary "bonuses" and "deposit insurance". Everybody knows the proverb about free cheese, but at the same time many people are sure of their exclusivity in this story, but it's far from it...