Broker taking the other side?

Greetings one and all. I am new to here, and new to Forex as well. My question is this: it seems most of the time I open a trade it immediately goes against me at least a little bit. And I mean IMMEDIATELY! Doesn’t matter if it was in a big down trend or not, it will swing up just to spite me it seems. Sometimes it comes back my way, and other times not. I can see this happening some of the time as per chance, but not most of the time. I have a mini account with CMS and a micro account with FXCM, and I understand they both will “take the other side” of the trade. Sooooo, if what I am thinking is true, what are the tricks the dealing desks use to get a trade to go against me? What techniques can I use to battle this? OR, am I just your typical beginner with paranoia??

Potaire

Contact the customer service of the broker you are using and ask them who the counterparty of your trade is. They usually don’t take the opposite side of your trade [I]themselves[/I], they will counter your trade position with another customer’s trade that’s on their books.

It sounds like you have to work on your entry a little bit. I thought the same thing when I started. You have to consider spread to. The spread combined with a movment against you can equal a good amount of negative pips. So, if you are scalping a pair with a high spead isn’t recommended.

On MT4 at IBFX I found that sell stops and buy stops worked best for setting a trade and then it coming in postive from the get go. I set the entry three pips ahead of the current price as it’s moving so I can potentially catch the momentum in my direction.

I’m not familiar with your broker. You say they are deal desk? If they are then they do trade against traders. Frankly, I wouldn’t trade with a broker that flat out admitted to being a dealing desk, they hold all the cards and you’ll lose if they want you too. A broker can be market maker without being a dealing desk.

Have you tried IBFX? They claim to be a market maker non dealing desk. I havn’t had any problems. By and large my losses have been because of my own mistakes and part of the learning curve.

when you buy a long position, you are buying at the ask, and selling at the bid, so one of the things you are seeing is simply the higher price of the trade going through at the ask ---- which is NOT to say that the broker is not RAISING the price by a pip or so just to give you a more disadvantageous price, but UNDERSTAND THAT IS THEIR JOB !

YOUR JOB is to beat them at the game, knowing how they play it, and therefore turn it to your advantage.

if youre short term position trading or “swinging”, a pip here and there is of no matter — it only comes into play on the shorter timeframes or when scalping the 30 second or one minute charts.

if the “disadvantage” is too great, quick look to the 5 minute or higher charts to see if there is resistance up there at a higher point, and set your tp for that — you should come out just smelling like roses !

otherwise, learn to set limit buys which have to be hit as the price moves up, while youre still mindful (as Phoenix states) of the width of the spread and that you will have to “make the spread” before you see profit !

its all part of the game, and once youre used to it, becomes just another facet — except in tight moves with large spreads (as stated by Phoenix) you should be ok !

enjoy and trade well

mp

[B]Within the great hall at Elfinore stands a wondrous coffer, precisely four cubits square and securely latched against the outside world. Inside that repository, shut away from impertinent eyes, abides many an intriquing trading secret garnered from around the world and over the ages !

As a child, i used to watch from the darkness as the secrets were debated and annotated by the elders. No one there held a single thought of my presence – BUT I KNOW WHERE THEY HID THE KEY !![/B]

Hi everyone,

I’m a total newbie to Forex and am rather confused with the concepts of non-dealing desk, dealing desk, market maker or straight through process. I was going to start a new post asking these questions but then I saw this post here… my question is, isn’t a FXCM a non-dealing desk broker? why would they trade against you? :confused::confused:

Cheers,
Bloodshade

I havn’t checked out FXCM personally or traded with them live so I can comment as to what they claim to be or not to be.

As far as any broker that happens to be a dealing desk, wether they admit it or not, the reason they would trade against you is because when you win they lose, if their is not another trader in they are also a broker for who is losing. It’s my understanding that dealing desk automatically trade against or with traders to hedge themselves.

A market maker, who doesn’t trade against you, would need some other third parties to provide liquidity and do trading for their market that they create. This would be done usually with a pool of banks. Someone is almost always trading against you. It’s just that you don’t want it to be your broker because they hold all the cards, control your data, can see your trades as they are placed on their server, and can disconnnect you from the server.

This a pretty hot button issue, I’m sure you can find skads of posts on ECN vs market maker vs deal desk.

I am pretty sure CMS has a dealing desk—they have a button that says “Chat with the Dealing Desk”. lol As far as FXCM, I believe they have a dealing desk for their micro-accounts only—standard accounts do not have a dealing desk. Would I be correct in thinking the ONLY advantage for the trader a dealing desk offers is more-or-less instant execution at the requested price–in theory (except during news releases, etc.)???

OK, at any rate, are there tricks a dealing desk can use to swing the price against you for a short period of time? Perhaps buying a billion lots when you sell one lot, getting the crowd to buy mass and raise the price??? I once sold a pair, and set my stop about 20 above my position. I then watched the price rise one pip at a time, pip after pip, until it had risen EXACTLY 20 pips, picking off my stop. Then it quickly retreated and headed back down the way it was before I entered. It sure looked to me like someone knew my stop was there, and wanted me out! lol

So, what is really going on here? Let us assume there IS a dealing desk–whose job it is to “sweep off the floors”, so to speak, of traders who will cost them money. What do they do to achieve this, and what can we do to counter?

Potaire

:O! market maker = non-dealing desk, since it doesn’t trade against you?

but i read this on the fxcm website…:

FXCM does not take a market position�eliminating a major conflict of interest. A dealing desk broker, which acts as a market maker, may be trading against your position. With our No Dealing Desk execution, however, we fill your orders from the best prices available to us from the banks…

Forex Trade - FXCM Execution Advantage

I’m quite confused now… haha~~ thought market maker = dealing desk, ECN or straight through process = non-dealing desk. humm… am I wrong?

I’ve also read some brokers offer non-dealing desk to their standard accounts only… but how can you tell? they dont often advertise “non-dealing desk for standard accounts only”. O.O

sorry didnt mean to change this thread into a discussion on brokers! >.<

Here is more info in regards to brokers and their works of art.

Bill Williams has an indicator available on all MT4 systems, and is
one of the most reputable forex traders anywhere. I have been
pointing out much that everyone who trades forex needs to know.
But don’t let all this scare you out of trading forex – it’s just part of
the things you really need to be aware of, and then go ahead and
trade.

Charles

This admonition reputedly comes from Bill Williams himself. Food for
thought.

WHEN TO NOT TRADE FOREX
Because so many people bombard us with requests
about forex, we teach people how to trade it.
Better to teach them the right way than to let
them commit financial suicide. Nevertheless, we
do not advocate forex trading unless you have a
particular reason as to why you need to trade
during the middle of the night, or you have a
specific need to trade in currency pairs that
do not involve the U.S. dollar. If the U.S.dollar
is involved and you are able to trade during U.S.
market hours (7:20am-2:00pm U.S.Central Time) you
are much better off trading currencies in the
Chicago currency futures markets. Here is the
reason why:

  • Brokers deceive you about there being no com-
    missions. $30 minimum/round turn(called spread)
    is in reality a commission that eats up your
    capital at an astonishing rate. Even winning
    traders lose money and end up with negative
    results because of this outlandish overhead.
    Trading futures, you never have to pay a broker
    more than $10/round turn, and usually quite a
    bit less than that.

  • Guaranteed fills. True but… The only way a
    broker can guarantee fills is for the broker to
    become the buyer or seller of last resort. That
    means the broker is running a bucket shop. All
    forex brokers are the buyer and seller of last
    resort.

  • Brokers do not tell the truth about volume.
    They show the volume for all forex trading,
    which doesn’t even come close to the volume
    they truly have at their own brokerage, which
    is where you are trading. Volume in currency
    futures is considerably higher than the volume
    traded at any single forex broker, often great-
    er by a factor of ten.

  • Leaning. Brokers say they are charging you a
    3 pip spread to trade the popular currency
    pairs. But in reality a broker may be making
    as much or more than 10 pips on your trades.
    He does this by skewing prices. Since you are
    not trading at an exchange, the broker can
    feed you any price he wants to feed you. He
    can buy at the bank for perhaps 7 pips less
    than he sells to you. He then charges you 3
    pips for the privilege of being ripped off for
    a total of 10 pips.

  • Unregulated. Forex may sound like an exchange
    but it isn’t. It exists entirely in cyberspace
    with every broker and every bank having diff-
    erent prices for any particular currency.There
    is no regulation,even for brokers who register
    with the CFTC and the NFA. Forex brokers do
    not have to mark to market each day as do
    futures brokers. If your forex broker files
    for bankruptcy or absconds with your money you
    have zero recourse.

  • No guarantee. If a forex broker does go out
    of business, you could lose all your money.
    There are no guarantees and no one standing
    behind it. Futures brokers are required to
    mark to market every day. They have to put up
    cash to cover every open trade on their books.
    Future brokers have gone broke, but no future
    customer has ever lost one cent of the money
    in his trading account because of a failed
    broker. Nor have they had to wait for their
    money. It is immediately available.

  • You can get exactly the same action in the
    euro fx futures as you get in the"Euro" forex.
    Commissions are as low as one tenth per round
    turn depending on volume, through a regulated
    broker, trading electronically at an exchange
    where you know the true price of the currency.

  • What is the true price? A forex broker can only
    give you the price of a currency as quoted to
    him by the bank through which he trades. Banks
    have diffeing prices for a currency. You never
    know what the real price is because there is no
    central exchange through which all prices flow.
    Besides not knowing the true price from the
    bank, you can also be deceived by “leaning” or
    "skewing" of the real price at the bank. Forex
    brokers comonly lean the prices.

  • Forex brokers are not truthful. They lure
    people in with hype and false advertising: “No
    commissions!” “Guaranteed fills.” “24 hour
    trading:” Who in their right mind is going to
    trade in the middle of the night unless they
    have a special need. While it is true that
    total forex volume is greater than in the
    futures, futures volume at the exchange is
    greater than the volume at your broker for the
    most popularly traded currencies. The only
    place where the liquidity differential matters
    is in currencies like the Mexican peso, the
    Brazilian real, and somebody’s drachma. Those
    thinly traded currencies may be more liquid in
    forex. But if you trade anything but the few
    most liquid and popular currencies, you are
    going to be paying at least 5 pips, and often
    more. Unless you have a particular comercial
    need to deal in Polish ziotys, Indian rupees,
    or some other thinly traded currency, you don’t
    need forex.

  • You are told by forex brokers that there is
    little or no stop running. This is one of their
    biggest and boldest fabrications. The truth is
    there is far more stop running in forex than in
    futures, and possibly as much stop running as
    in the stock market. I have friends who work in
    forex as well as many traders who of necessity
    have to trade forex. One of my students is a
    market maker in forex. These are people who
    should know, but in case you don’t want to
    believe me or them, simple observation of forex
    trading will reveal the vast amount of stop
    running that takes place there. Who is it that
    runs the stop? It’s your friendly forex broker,
    that’s who. The broker has a vested interest in
    seeing to it that your orders are filled. Stop
    running is nothing more than order filling.
    The broker sees to it that everybody’s orders
    get filled.

  • Probably you have heard that if your are win-
    ning regularly in forex, you may be barred from
    trading. Is this true? Yes it is. The fact that
    is true is just another proof that when you
    trade forex you are trading at a bucket shop.
    In the book, “Reminiscnces of a Stock Operator,
    ” we are told that Jesse Livermore was banned
    from trading a certain stock brokers because
    they couldn’t stand him beating the housel. The
    same thing is true with many forex brokers.
    Since they are the ones guaranteeing you a fill
    they in effect the buyer and seller of last re-
    sort. The truth is that most forex brokers have
    precious little liquidity at their firms. In
    order to give you the impression that there is
    liquidity, it is the broker who gives you your
    fill. It is the broker who does the stop run-
    ning that supposedly doesn’t exist in forex.
    But if you are regularly beating the socks off
    the broker, he will ban you from trading at his
    firm.
    Now you know the truth about forex. I challenge
    any and all forex brokers to prove that I am
    wrong.


The Trend may be my friend, But the SWAP is my Lover

PRECISELY !!

ive always said that we deal with a crooked market, and i tout the “no stop loss” philosophy that people wish to wring my neck over, BUT once you know the tricks and what is done, you simply go out and trade, using that information FOR you and not letting the broker use it AGAINST you !

only important things in forex is a broker with plenty of money and a learned knowledge of trend and support and resistance, brought about by experience !

enjoy and trade well

mp

I can only speak for the one broker I’ve traded live with, IBFX. They claim they are a market maker, but do not trade against you. They claim to use a pool of banks as liquidity providers and only make money on the spread. They claim it is in their best interest that you keep trading, so to trade against you and cause you to quit would not be good for their own business.

The only complaints I’ve read on them is from noobs who don’t understand why requotes happen and think the broker is trying to bone them.

So, far they seem fair, the spread on my pair only goes past 4-5 pips during news times. I’ve had some regular winners and some nice big winners and the same with losses. Looking over my trading log I don’t see any evidence of any shenanigans. I also trade with a mental stop loss to avoid stop hunters and sudden reversals, where I feel price will eventually go in my direction.

Regardless of where you trade someone has to make some sort of pool by gathering participants and making a market.

Bloodshade, IBFX is a confusing exception to the retail market maker with a dealing desk vs no dealing desk ECN.

They are kind of inbetween. They are like an ECN except they allow for fractional pricing. The only way - as far as I can work out - they can do this is by aggregating their customer orders to send them through to real market maker; therefore acting like an ECN but with an in-between stage. I have no experience of them but looked them over a while back

But don’t knock dealing desks. The grass isn’t greener with ECNs. It’s just different grass. As for that Bill Williams stuff above, I’m sorry but half of that is total BS. He should know better.

to second what is being stated, a dealing desk is ONLY an accepted part of trading from the retail side — in and of itself it is NOT a horrid situation as long as one has some idea of what theyre doing at the moment.

if the top of a move is 1.5000 for instance, THEY HAVE TO GET YOU AT LEAST WITHIN A FEW PIPS OF THAT PRICE. If your broker ALWAYS is short by 2 pips, you simply set that into your tp point and get on with it !

the BIGGEST problems with mm’s, bucket shops and a large majority of forex retail brokers is they could simply go broke, and theres NO WAY to get your money back.

so choose a well backed broker, watch your stop losses and TRADE — all the discussion in the world wont change what the realities really ARE !

so LEARN the realities and simply move forward armed with that knowledge — plenty of people making money in this market and theres simply no reason, once you have the experience to trade, that you cant be one of them

enjoy and trade well

mp

Cheers to everyone for the invaluable information and your encouraging words. :slight_smile: I guess Forex is all about learning and the more I learn the more confident I become. ^.^

Based on the Bill Williams excerpt, I assume once you have a lot al money at stake, it would be best to go with trading Currency future on the CME. Of course this is probably more for the long term traders and not the scalpers, but it seems like this is the safe route to go.

Looking into it, the downside is margin. The margin requirements are somewhere around 20%, not the 1% we are accustom to.

So am I reading this right, or am I leaving something out?

Thanx to everyone for all the info. However, I still did not hear of any strategies the “opposing side” can use to get a trade to go against me. Perhaps there are none, and I am worrying about nothing??

Potaire

THEY CANT !

they can “headfake” you with an opposite move that may have you close the trade either manually thru fear or with a tight sl, and then you suddenly see the dang thing reverse and go right back in the correct direction and make profit, but they cant actually run downtrends when a currency is going up, or vice versa

mp

I guess we all got confused here with all the terms. I read something that sounded really interesting about what you think of your broker taking a side on your trades, and I also think is all about your entry.

Yes, I am doing better now with more thought put into my entries. A lot of my problem may have stemmed from “going with the flow” when the flow has already been going in that direction for a while. It was bound to change sooner or later–I seemed to prompt the “sooner” part. lol Scored 80 pips yesterday on one trade–I sold when the price was still just inching upwards–and I mean barely moving—and it reversed my way within a few pips,and off we cruised to 80 pips! Was nice to see my sell at the top of a curve that was heading down, instead of the bottom heading up.

As far as the headfake, how do they do that—a few big sells/buys to briefly change the direction? I do realize that any manipulated changes–if even noticable–will not last very long at all. Forex is too huge for any one entity to have a lasting effect on prices. I guess another thing I have to change is quit bailing out the second a trade goes the wrong way. I need a transfusion of ice water I guess. And give a little time to make sure it is a true reversal, and not just a “headfake”. This is why I want to get 1-min charts of several months ago–study my first few trades to see how I [B]would[/B] have done had I stayed in some of them longer.

Thanx everybody for the advice/info.

Potaire

hey potaire ----

there are tons of “systems” out there, but i like to start with the bottom and move up so - - - - -

again - - - - -

SHI_Channel_true
barrys support and resistance (TRO version will also work if you turn off the fibs)
zigzag — will tend to give you “true” reversal points, although it repaints which is a “problem” on one hand, but gives an EXCELLENT place to check your fibs from and which reason i use it mostly.

stochastics – easiest for middle time frames and lower is 8/3/3 BUT you can also include another at 14/3/3 ON THE SAME PANEL and work with the crosses. 5/3/3 works well on really small timeframes !

CCI ---- not anywhere near as good as you might think BUT when youre working with the one minute chart, and the currency drops, it will show you the bottom of the move and whether the price is coming back — a really good “piece of mind” indicator when things head south !

moving average x-overs — try the ema 2 and sma 5 for scalping — even if the price drops, you DO NOT EXIT unless you get a cross opposite to what got you into the trade to begin with !

MORE on my own thread — its where the most flies are buzzing or ask “sweetpip” cause she handles all my business affairs !

anymore than that requires a complete class, and everyone knows i got no class !

enjoy and trade well

mp

[B][I]Within the great hall at Elfinore stands a wondrous coffer, precisely four cubits square and securely latched against the outside world. Inside that repository, shut away from impertinent eyes, abides many an intriquing trading secret garnered from around the world and over the ages !

As a child, i used to watch from the darkness as the secrets were debated and annotated by the elders. No one there held a single thought of my presence – BUT I KNOW WHERE THEY HID THE KEY !!
[/I][/B]