How do market makers work?

Do they just create a buffered market between their own traders or are they part of the wider FX market and simply act as go-betweens?

Do they look at who is long and who is short before accepting a trade?

Do they hold prices until they are in profit themselves?

I ask because I was in a trade and the price moved very nice in my direction on my chart but on my platform it only moved a couple of pips. My chart is provided by a different company from my broker and I was just wondering if this discrepancy was normal? Why would there be such a lag?

Well I think the problem lies in the fact that you aren�t using the same charts that your broker provides. If you don�t have a feed from your broker you will always have a discrepancy between your chart and your dealer platform. I recommend that you change charting packages or brokers so they are all in sync

Here�s the thing about market makers, they can change the price to where they want no matter how the market is moving. Be careful which broker you choose.

You want a broker that offers a non deal desk platform (e.g. InterbankFX).

A deal desk is basically a trader trading against a professional on a desk who can decide when and when not to sell to them. They offer a fixed spread platform where the desk makes their money in the spread trading against all of their customers.

This sounds creepy.

Which brokers do not use this “dealing desk” thing?

Oanda, FXCM, Interactive Brokers, MB Trading…

The best person to ask these things about brokers is Tess.

She is a total expert on these things and appears,to be the most knowledgeable person on this forum at present regarding these matters.

You would do well to take note of what she says.

Regards, Tymen Wortel, Perth, Western Australia.

Oanda and FXCM are both dealing desk brokers - or market makers to use the original term from superdupe’s question.

While I would agree that going the non-DD route is generally preferred in a lot of ways, especially for a short-term trader, that doesn’t mean a DD broker can’t provide a good trading experience. I have used Oanda for many years with absolutely no complaint. Nor have I heard any gripes from anyone else about trading with them.

then why do they both claim not to use dealing desks?

Oanda
https://fxtrade.oanda.com/trading-forex.shtml

FXCM
states on their homepage “No Dealing Desk Execution”

i also talked to FXCM regarding this isssue and they said there is no dealing desk

I’m having a hard time understanding this whole “dealing desk” business. I’m used to centralised markets like stocks and such. Can these dealing desks manilpulate prices at your broker’s platform, and make prices move in ways that diverge from those at other platforms?

If you’re wishing to trade currencies on a par with the experience you associate when trading stocks & indices etc, then just trade the currency futures @ the CME.

When you’re trading retail ‘spot’ - unless you’re striking thru an ECN such as Hotspot, EFX etc or via a Prime Broker outlet, then you’re punting via the deal desk of the broker who has your account.

He has the potential to shade his prices & bias his book to take out near term stop levels sitting on his triggers. He can also refuse to honor his bid-ask quotes if he feels it suits him (by re-quoting you).

He can do all this & more because he’s not operating from a centralized exchange, unlike the Futures Exchange clearing house.

He receives his prices (bid-ask numbers) from his supplier(s) & adds whatever he likes on top as his take, therefore inflating the price of the wholesale feed.

Dependant on who his supplier(s) is/are, & their ongoing liquidity at varying points throughout the day, will reflect in the quality of service cascaded down to his customers…ie: you!

Basically, he do can what the hell he likes, when he likes…as you’re trading with him (the broker), not directly with the market.

Market maker - Wikipedia, the free encyclopedia
The wikipedia description of a foreign exchange broker gives it away slightly.

Ok, that sounds fun… How will this affect you if you trade like once a day. Will they try to shake you down to your stops, or stuff like that?

So, it is not in the interest of a DD broker that you trade profitably?

Damn, this sucks. frustrated

Hi superdupe,

I think you’ll find this article useful, it explains in details how the forex market makers work.

Article
p.s don’t mind the affiliate link there.

Informative, Sir Forex.

Straight to may favourites.

Regards, Tymen Wortel, Perth, Western Australia.

Prices are jogging along handsomely, everything looks nice & calm on the sea then all of a sudden…Bang! prices skip 10-15 pips (or more) on a suspected rogue spike. A whole stack of lovely bright stops & related orders are triggerd & a few angry folks begin meticulously leafing thru alternative data feeds to suss out this strange peculiarity.

Thanks again Tess, I was always under the impression that this
happened, but I always put it down to my paranoia, even though
others have made the same sort of comments.

I feel though until I am in a position to make a change to ECN?? etc.,
with a larger bank roll, I will learn all I can here at the bottom then make the change.

OMG, this is so F#%@& irritating. I am sitting on the blueprints of what looks to be a very consistent and profitable EA, that Coder’s Guru said he will code for me.

Damn those dealing desk bastards.

Is there any none-dealing-desk broker that offers “EA”'s or similar services? I’ve heard that MBT/EFX was trying to create a partnership with MQ, but the Metaquotes people rejected or somethink like that.

I NEED a serious automated trading service…

No problem,

Glad I could help.

regards,

A market maker is someone who maintains a firm bid and offer prices, guaranteeing liquidity for a particular currency pair, and stands ready to buy or sell that currency at the quoted price.
He usually gets quotes for an instrument from multiple sources, such as large banks and exchanges.

Most online Forex brokers function as market-makers, meaning that the broker is on the other side of every trade. This means that – when you go long, you’re buying from the broker; when you sell short, you’re selling to the broker.

When the market maker is the counter-part to your trade, he has the option of either holding that position or offsetting it with other market participants, managing their aggregate exposure to their clients.

If a market maker chooses to keep a trader’s position without offsetting it in the market, the trader’s profit is the market maker’s loss and vice versa.

Most brokerage firms that are market-makers generally provide consistent liquidity and execution.