Squeezing the pips

I prefer not to trade personally,” says Iskandar Najjar. Given that Najjar heads up one of the Gulf’s fastest-growing foreign exchange brokerages, this is somewhat surprising. But he quickly qualifies that statement.

“The reason for this is that you are always emotionally attached to a position you take in the market. If I bought the euro, then subconsciously I’ll have an emotional attachment to euros and that could translate into discussions I have on the market. For me this is an ethical position, it helps to better service our clients.”

In the lightning-fast, high-risk world of forex trading, it’s good to know that one of the top players is sticking by the rules. By any standards, Najjar is doing well. He’s about to get his MBA from London Business School, and his wife is due to deliver their first child in the next few months. On top of that, he is also in charge of the regional division of Alpari, a global forex, precious metals and contract for differences (CFD) brokerage, headquartered in London.

There’s no doubt that forex today is pretty big business. Worldwide, the market has passed $5 trillion worth of trading in one single day. Any trader can leverage their stake a hundred times, while institutions are the end risk bearers. But if there’s been one criticism of the market, it is that forex trading is inherently risky. Needless to say, Najjar disagrees.

“It’s risky in its own ways, you’re limited on the downside to your stake,” he says. “You have automatic liquidation set to ensure that if the market goes against you, your maximum downside is the investment you have put in.

“The way that markets operate is that you take a position in the market and make a bid. We will match your price with a bank or an exchange. I’ll take your price, we operate a matching engine with the bank’s price. And that’s where technology plays its role. How fast can we match your price? If we have 20,000 orders a second coming in, we have to lay those prices off immediately. The challenge is having the technology to deal with that”.

Najjar goes on to explain that the market operates in the same manner for institutions as it does for retail clients.

“On a global scale, brokers such as ourselves have bridged the gap, whereby banks and hedge funds are trading on spreads that are very close to retail spreads, the spread being the cost of taking a position in the market,” he adds. “Over the years, we have clients who have made substantial amounts of money. One of our clients has made a million on his million over the course of a year and a half. Inexperienced. New to the market. We introduced him to the market.”

If it’s success stories that you’re after, then Najjar has them by the hatful. He recalls one recent short trade that took place during a period when there was a record low on the euro. The client saw the potential upside, and bought in at €1.21, sitting on it until it hit €1.31.

“He had a leveraged $5m position and he sat on a profit of a million,” Najjar says. “Because he bought at that price and was still holding that position. He had made 1,000 pips and at that point, I’d have walked away, other investors will choose to hold it for longer”.

Najjar admits that forex trading can be addictive, particularly given the massive liquidity in the market, and the levels of technological sophistication.

“There are wide jumps on the euro, but it’s more stable than it was two years ago,” he points out. “Nonetheless, when there is big news it jumps to very wide ranges. Wide movements in the market offer a great opportunity for profit taking. Once you catch a good trade and the market goes your way, you feel the buzz of trading. Through online platforms, this buzz has become so much easier to get access to. You can trade anywhere, from your phone, your office or at home.”

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