Who Wins Who Loses

[elchopo]

Hello everybody,

I joined this forum a couple of days back and I am a beginner.

Started reading about Forex.

Can the broker lose when you triumph?

Seems to me but correct me if I am wrong, a broker is somewhat like a casino.

They (broker) understands that the majority of traders lose.

Who or where does the money come from if you triumph?
Brokers account??

Is the broker constantly taking the other aspect of your transaction? (wager )

Thanks!!

[itsbyanka]

I am no expert on brokers, but I think various brokers utilize various egies to profit. Like you say they know most of the traders will lose money.

[elchopo]

So that they command their own mini-market?

Imagine if your in a major profit scenario and you would like to close your trade?

Imagine if the broker does not have sufficient vendors?

He's controlling his own market from what your saying.

I figured the broker makes his money (commission) off the spread.

Do all brokers also have dealing desks where they hold your trade execution till they earn x $$ amount.

[Alexandra]

and what about an ECN broker?
Someone enlighten me on how exactly an ECN functions? Same questions as that made the thread,
Thank you,

[pdrusko]

So they control their own mini-market?

Imagine if your in a major profit situation and you would like to close your trade? That's the market maker's problem.


Imagine if the broker doesn't have sufficient vendors? Ditto

He's controlling his own market from what your saying. Yes, uless you're using a brokerthat hasdirect touch InterBank (or what ever it is, I have had a few beers )

I figured the broker makes his cash (commission) off the spread.

Do all brokers also have coping desks where they maintain your trade execution till they make x $$ amount. Yes, and possibly. If they don't create the trade they do not get the spread. They are a lot more preapared and informed (read better in this) than the ordinary trader, their occupation is even more serious than we can comprehend as'non professional' traders, ie, they perform to nothing!
The bottom line is they makethe market, if you would like to play, you play it by their principles. That does not mean that you can't win though
cheers.

[snergle]

Read three sticky-threads here https://www.cliqforex.com/general-forex-discussion/2792-safe-today-trade.html

A lot of valuable info there.

[elchopo]

If brokers control our transactions then why can we trade in the first other than try to create money with our investment and should do we risk our funding?

Are their brokers out there which are not our for their own best interests and the brokerage house they perform for?

Anyone here have a broker that they genuinely believe is honest?

Just asking questions.

Thanks!!

[Jankius]

Steve, hi.

For sure, trust and honesty are critical elements into the client/broker relationship. No revelation there.

A lot of traders certainly refuse to utilize coping desk brokers. Store is the derogatory term that is favored. They insist, with good reason, ECN brokers are the only (relatively) secure way to trade retail fx. Trust is still an important factor, despite an ECN, for motives other than just price manipulation issues.

Btw, these three threads Peke5 pointed to're essential reading

[christaynavarro]

Steve,

You might want to explore trading currency futures listed on the CME. This orders flow though a exchange. Fantastic luck.

[miiri28]

There's quite a little discussion on this, as well as difference of opinion regarding how brokers operate.

There are a number of things we understand, such as, the broker doesn't run to the interbank each time that I trade my portion of a mini-lot. In fact, any trade on the actual inter-bank market greater than a few million $ is an annoyance.

So, what do they do with our little trades? There are only two choices - choose the other side of the transaction , or pair them up along with other transactions in the opposite direction.

They need to do it in such a way as to minimize their risk exposure.

Thus, lets assume for a moment they match up ALL trades. As long as trades match equally, everything's fine, the broker has no risk. When things get out of balance, then the broker assumes the risk of carrying another side of a few of the trades. They then can either purchase a choice, or wait till the transactions get out of balance by a few million $ and proceed to interbank to offload the extra.

Now, on the flip side, let us assume that most new traders DO blow their accounts. The 95% collapse figure is another item of endless discussion on FF, however, I'd lay my money on newbies' accounts being discounted instead of growing.

Why would a broker supply service to a $1000 account (platform, bandwidth, client service, etc. ) ) for your pennies they would collect in spreads? That's a lot of investment and problem for a little money.

For only a little more effort (programming) they might have all the money. Instead of earning maybe $50 in spreads from the time the person blows the $1000 account, they might have the entire $1000 simply by taking the other side of the transactions . That is a lot of money for slightly more trouble.

Furthermore, if the transactions matched up against other newbie accounts' transactions, then there is absolutely no RISK to the broker. They simply sit back and let the newbs blow accounts and the money is theirs. The interbank market need never find those orders.

Some say this doesn't happen, but the brokers need to manage the trades somehow, and they're in business to make money, as all of us are. It would be a very simple matter to keep track of who's profitable and who is not, and decide whether or not to choose another side of the trader's transactions (that is what computers are for). It would be rather stupid to not, can there be any simpler money? Further, I think that it's rather naive to believe the broker would not do this.

[Andlovar29]

Oanda....


If brokers control our transactions then why can we trade at the first other than attempt to create money with our investment and why should do we risk our capital?

Are their brokers out there that are not our to their best interests and the brokerage house they work for?

Anyone here are a broker that they truly believe is fair?

Merely asking questions.

Thanks!!

[samu]

I have been asking myself the exact same question,
so I found this with google.

And I also found a broker who produced this the headline of it is ads:
tired of betting against your broker
In addition they were and that's why they formed their
business within an ECN-broker.

What will a market maker broker do, if they know that you
are running a prosperous EA?

Hedge the rankings somehow? Encourage you to quit?
Boost the spreads or waits for you until you quit on your own?

What, if you tell the market maker broker that you've got a level
in mathematics and programming, will they accept you as client?

[ragomi]

And I have my view also:

If you currently a long-term trader (I mean at least 100 pips of TP or around ) - and you trade by yourself, not with EA - I can say that no one broker can keep you. Except cases when they don't draw your balance in any way.

BUT if you a competitive scalper using super-profitable EA - you'll lose with almost any broker. So choose broker that can give your egy to attract some profits

[bolindri]

The broker doesn't lose anything, whether you make a profit or a loss. Oh yeah, there're way too many college of thoughts on the way the broker operates. A broker makes his money out of the spread difference or commission. .

[itsbyanka]

I am only relatively new to Foreign Exchange also but from what I understand it's like every other derivative/instrument in that the broker'makes a market'.
In other words the broker likes to have a buyer for each seller and he makes his money from the spread on the transaction.
It is quite a lot more complex than that (they have the power to move the market for various reasons that you will shortly become conscious of) when they have enough capital to fulfill the orders.
Basically they run a book, like a level two display which includes both buy and sell orders and...
which is not true, Per se.

Currencies are not Stocks, and you will find various Market players.
There is not 1 failure to a single winner, Some Market Participants are not in it for profit.

Central Banks govern according to Authorities interest if the currency is doing exactly what they need. They set rates, money supply etc..

Some pensions, Capital, Businesses, are more interested in offsetting their risk by means of hedging when holding global assets.

The speculators, such as proprietary trading in Banks, Hedge Funds, etc are in it for profit on trading activities, and possess the capability to move the market Temporarily taking a lot of risk in the procedure. Consider it.... They move the market = becomes inefficient/imbalanced, another huge hedge or combination of players will Hit them difficult to make the most of that= the market mover gets their ass handed to them.


Now the broker provides an agency I am not exactly sure how they trade since there is not a lot of literature out there but here is my a priori perspectives on it.

They DO NOT proceed nor quote prices as they see fit that they must quote Interbank rates (some brokers occasionally will freeze the platform, delay the feed, or stray in the quotes....these are clinics you should report to NFA or anything governing body)

ARBITRAGE is the thing that keeps brokers and traders, Banks etc Honest.
Try quoting a rate which strays too far from other traders and you will get hit, finally you've got to return to spot prices, some shade price somewhat but it is better to have 2 brokers and receive two feeds, or check interbank feeds via internet you can see this.

As soon as you execute your ordersthey choose the other side, if you're a trader that usually makes profit they might cancel it upon aggregate, or simply off set their general exposure by means of a bank.

I am sure they run statistics on functionality and if you're a liability to them they'll stop taking the other side, but if you lose consistently, why don't you take your money? Makes sense to me.

They create a market
they're in it for profit
that they cannot be overly unscrupulous otherwise they lose customers, get sued, and all that would be capital reduction.

[Aitana2231]

The broker always win - be sure!

[Oxnzanares]

It is really important which broker you've got. You will find egies for example that could theoretically make an adequate profit but due to brokers requote policy, wide spreads, etc it would not be possible to make profits.

Try to opt for the brokers where you have tightest possible spreads, no requote policy, NDD execution model, etc.. The new trend is FX swap model, where trades are delivered straight to a foreign exchange bourse. One of these brokers is Armada Markets for example. I am currently testing their demo, so far looks pretty OK.

A lot of people talk about ECN brokers. Personally, I believe that ECN is going to be history in certain years. The future will probably be together with the exchange connected FX brokers.

[pdrusko]

I am only comparatively new to forex also but from what I know it is like any other derivative/instrument in that the broker'makes a market'.
In other words the broker likes to have a buyer for every seller and he makes his money from the spread on the trade.
It is rather a lot more complex than that (they have the power to move the market for a variety of reasons that you will shortly become conscious of) when they have sufficient funds to fill the orders.
Basically they operate a publiion, like a level two display that includes both buy and sell orders and they try and fit them up since they arrive in.

This is a very easy view but think about it for a bit and it'll make sense.

Basically, for every winner there is a loser'on the flip side' of this offer.