Ok, i know they make some on spreads, rollover fees, etc… but in a trending environment how do these brokers make money when they have to take the other end of the trade against the trend?
They are traders too. They offset their possible losses* on the interbank market.
So your saying they are taking the losing end of the trade in a trending market but offset these losses by trading with the trend as well? Who takes the other end of their trade? In a downtrend if there are more sellers than buyers, they are already having to buy because they have to take the other end, and they are selling as well with their traders, who is buying the other end of their trades and taking a loss?
Who says that taking the other end of an uptrend results in a loss?
(& vice versa)
You are looking at trading in too simplistic a form. You need to expand
your horizons by thinking bigger.
An example
Foreign exchange hedge - Wikipedia, the free encyclopedia
Not sure what the figure is now $75 billion traded everyday???
Yeah, i guess it possible with all the different trades coming in for all the different currencies your probably inherently hedged either way anyway. For example, I placed a trade last week using two different pairs with negative correlation. The end result after managing lot sizes was 57 pip loss but a 160 dollar profit. So i guess I can see how, without knowing the details, there are different ways to be successful in the foreign exchange other than just placing a buy order and hoping for green candlesticks. I guess I knew this all along and what the original point of the post was, was to maybe figure out the details of how they are able to be consistently profitable in a speculative market. Maybe some of those techniques could be replicated by the common trader to increase our odds. We all know the brokers have maximized theirs. Thanks for the post.
They make money by grabbing you by the ankles flipping you upside down and shacking you untill everything falls out of your pockets
^ pretty much. bad brokers arent happy getting their commission and go after your entire investment.
Hedging against the losses, yeah. Most brokers tend to do this for all the reasons stated above but thinking of it in a simplistic way, doesn’t it seem a tad unethical…just sayin’
If they do this, would it maybe be better trading with a market maker than a broker?
Just wish the whole process was simple and yes, on market makers to brokers, chances are we would all end up with market makers at the end of the day…if things continue the way it does.
For starters, you have the scam artists posing as brokers and if that’s not enough, the real brokers hide the small print [on bonus and other pertinent details] and by the time you opt to withdraw, you’re left wondering what the heck’s going on…
And then you have the usual wise ass answers to simple question on the % interest…
Go figure
Choose wisely for the brokers, at least read some of the reviews before putting money on them. Because there was once I couldn’t withdraw my money with a scam broker, and they change their terms and conditions when i wanted to withdraw my profits. So some brokers that promise very small spreads, they could be scammer.
So,which broker are you using now?
I am currently using 3 brokers, mig, dukascopy and fxdd. Pretty satisfied with their execution time and spread.
Before dealing with any broker i make sure that it is well regulated and has a good reputation with the past customers.
Choosing a good broker is the most important aspect if you want to become a successful trader 
Brokers make money from their customers. One of them is from people trading.
For example there are 10 clients. The 5 invested $10 that the EUR/USD currency pair will drop within the next hour. The other 5 traders invested $10 that the EUR/USD will rise within the next hour. By now, the total amount of money pooled on the EUR/USD is $100, $50 on Put and $50 on Call.
Finally, we find that the EUR/USD did fall leading to 5 traders to close in the money. Assuming the payout ratio for the EUR/USD is 70%, this mean for those who bet on the EUR/USD to fall, they will each get back $17. The broker has to pay out $85 to those who close in the money. If we subtract the payout from the total market pool of $100, there will still be $15 left in which the broker can get from this trading alone. This amount is just for a single trade on a single currency pair.
Usually a broker would be transacting dozen of trades in a single day with different assets, commodities, stock and forex. Thus a broker can earn hundreds of thousands in a day.
Brokers make money from spreads through [U]uneducated [/U]traders.
Brokers make money from larger lots through [U]educated [/U]traders.
This is how I come to perceive it.
A lot of traders trade against the trend so even market makers will still make plenty of money when this happens.