I tried Zorro with FXCM demo account and was impressed. Very reliable connection/re-connection when even FXCM's own software crashed from time to time due to weekends etc. Thanks for the great software.

Hopefully what I'll discuss below is not off topic.

It is clearly documented that current Z systems are not optimized for IB, and IB's low leverage seems to be a major reason. However, just when I was researching which FX broker to use among FXCM, OANDA, and IB, I stumbled upon this piece: Exclusive: Q1 US Retail Traders Profitab...ders in the US.

It shows that for Q1 2016 and nearly every quarter all the way back to Q1 2012 (see links to Previous Reports at bottom of the report webpage), IB ranks 1st in terms of the proportion of retail FX accounts that are profitable - the percentage hangs around 45% which is pretty decent, considering it is often said that majority of retail traders would lose. OANDA is often ranking #2 or #3 (for one time, Q2 2014, OANDA was #1, beating IB by 1.4%). FXCM is usually further down by several positions.

I cannot verify the technical accuracy of this report; nor do I have any idea why this would be the case: is it because IB has on average lower cost for its retail customers? Or IB has better execution? Better risk control? Or lower leverage actually helped in the long run (so less customers blow up their account and never come back)? Or IB accounts have lower volatility so they stay positive more often but actually they could have worse compound growth rate? Or maybe the reason lies in the customers themselves - those who trade at IB are statistically different than those who trade at other brokers?

But anyway, if we can take this report at face value, wouldn't it be meaningful to develop some new Z system(s) that favor IB? Or, if some of us want to develop systems using Zorro for IB, what suggestions/advice could we use to improve the chance of success?

An extra thought: the Swiss Franc scare in Jan 2015 did give me pause when I think about trading at FXCM, which is FX only and allows very high leverage, therefore the whole company was at brink of collapse and required external rescue at that time. If the company did collapse, my understanding is all retail accounts would sink with it (we wouldn't rank high in the queue to get repaid from the company's liquidation, would we?) OANDA seems more conservative and even forgave some negative accounts during that event, but it's not publicly traded so there's less transparency about its financial health. IB on the other hand is publicly traded, huge and diversified (therefore I believe with all the stock and ETF brokerage and other pure service business IB's total exposure to leverage must be way below any FX-only broker). So in terms of financial stability during a black swan event or full-blown financial crisis, I'd think IB should be much better than both OANDA and FXCM.

Thanks!
-Zhong

Why IB accounts lose not as much as Forex broker's accounts has a simple reason: IB clients trade mostly low-leverage instruments and thus crash their accounts less often. - But we will add in the future more systems like Z8 that do not trade currencies and are suited for IB.

jcl, thanks for your reply and the wonderful job you guys did in creating Zorro.

I agree with you that it's quite probable IB clients' low leverage is a main reason behind IB's high ranking in the cited report.

However, if I understand it correctly, the report only compared retail Forex accounts. Other types of trades at IB are not included. Therefore, retail Forex alone, lower leverage seems to benefit (at least for the average traders).

While I understand with a statistical positive edge and proper capital management, higher leverage helps, I'd rather start from lower leverage and build my confidence in the mere existence of a positive edge gradually. That alone I can achieve by using less margin relative to my capital. However, I'd also like to start in an environment that my fellow traders at the same broker also have lower leverages, so their mistake won't blow up the whole broker and screw my account (I might have worried too much after the Swiss Franc event I admit :-))

So my key question is: Do you think it's possible to develop viable Forex strategy under IB with lower leverage and large lot size, and why?

P.S. Just to clarify why I still want to trade Forex without the very high leverage: Forex trades 24 hours a day for 5 days a week, which gives me a nice (almost) continuous price history to analyze, and the freedom to get in/out whenever an opportunity/risk arises. The only other instrument coming close to this is futures, but the granularity of risk management is quite coarse there. For example, one single ES contract value changes by $12.5 with 0.25 change in the price (that's only 1 tick); there are smaller contracts but they are not liquid enough.

Thanks!
-Zhong