From all the brokers that offer fixed spread why did you choose fxpro as you dont mind market makers as i understood ?
Mrquickbuy, your opening statement is very controversial! I like it!
However, I feel obliged to play the devil’s advocate. Did you hear that after the unexpected SNB crisis, it was the market makers who survived, and the STP brokers who suffered or worse - went out of business?
While the STP brokers have the image of being more secure, fortunately or unfortunately it is the market makers who have the cash in their books to counteract any drastic market volatility.
Personally I’m not sure what my own standpoint is. I guess I just want my money protected and dont always know which way to turn. Market maker or STP? It’s a difficult question with possibly no correct answer, but the sad facts show that market makers may possibly be the safer bet.
If a trader says: “I will never trade with a market maker” then he cannot even trade New York Stock Exchange listings. There is no such thing as retail trading without a market maker or “counterparty”. Newbs are scared of market makers for no other reason than distasteful marketing by brokers. The all time high of such advertising has to be this:
What is hilarious is that if FXCM really does forward your order to the best priced liquidity provider via a no dealing desk execution model, then you have no idea who your counterparty is. They might as well have a ski mask on. And for all you know, and what is most likely, they are a market maker.
-Adrian
I have chosen fxpro because they have negative balance protection and are authorised and regulated by the financial conduct authority here in the uk. I was mistaken about activtrades and what happened to me during the nfp, they didnt not activate my buy eur/usd on purpose, i was just extremely unlucky in the fact i missed out on it opening by 1 second due to a lack of free margin,once one of my positions closed they then opened two trades but my buy eur/usd was cancelled one second earlier.
FXCM offers traders No Dealing Desk (NDD) forex execution. That means we offset each of your orders one-for-one with the best available prices from competing liquidity providers: myfxbook.com/forex-broker-spreads
Since we don’t take the market risk on the other side of your trades, we don’t profit from your losses or lose from your profits. Instead, we make our money from your trading volume. Therefore, we want you to be profitable so you will continue trading with us.
By contrast, with a forex market maker, their dealing desk could be taking the market risk on the other side of your trades. That means a loss for you could be a profit for them, and a profit for you could equal a loss for them which results in a conflict of interest.
Ha thank-you, That statement was written in slight-anger, i did hear about market makers making money during snb crisis, i was a victim of it, alpari uk my broker lost £25 million in one day then went bust. Market makers made money because most people were long usd/chf and they hedge their clients trades so they would have made a lot of money that day. Yeah it’s one of those questions where there is no right answer.
I think the main reason retail trades dont want to trade with a market maker is because of the huge conflict-of interest, where you lose they win and when you win they lose, these type of brokers would hunt your stops etc.
So when a NYSE designated market maker provides liquidity for a stock I am trading I should be concerned about a “huge conflict of interests”? When he wins I lose and when I lose he wins? Really? Are you sure about that?
I get the feeling some people don’t know what a market maker does or what market making is. You could be winning a fortune and not take one red cent from the market maker. And you could lose a fortune and he could turn up with just a tiny fraction of your loss. In fact, he could have a loss too.
When I go short an instrument, I sell it to the market maker and I take cash from the market maker and hold it in my account. The market maker doesn’t hold the instrument until I come back hours, days, weeks, or months later to cover my short. He sells it to the very next buyer without a care in the world. He is not watching my short position for days, waiting for me to cover at a loss so he can book the actual opposite side of my trade on both entry and exit. He sells that instrument to the next buyer and now THEY are hoping to see the price move up against me (although they don’t know me). And if they change there mind and sell back to the market maker he turns around and sells it to another and another and another. He does not sit around holding the opposite position of each trader. That is not how market making works at all.
He is making the spread. His hope is to be net flat. He wants to make the pip or two or two point four or whatever is in the spread and that is the best he can do if he is lucky. He wants to be neither long nor short and if he gets stuck one way or another he will raise the bid or lower the ask accordingly. But in FX he doesn’t even do that because he can buy or sell with other liquidity providers if he needs to.
Am I really supposed to believe that a designated market maker on the New York Stock Exchange should be distrusted and avoided if possible because he has a “conflict of interests”?
-Adrian
Carefully worded… “could be”. Yeah, for a millisecond.
-Adrian
I see…kind of, so what is the difference between a no-dealing desk broker and a market maker? is it just that ndd doesnt trade match with other clients with that same broker whereas a market maker matches trades between their own clients. ps i wouldnt trust anybody in new-york, two words bernard madoff
Anyone who has encountered a re-quote or had restrictions placed on stops and limits by a market maker knows they don’t offset client orders as often as you suggest. That’s why scalping and news trading can present a challenge for such brokers.
The difference with NDD is that the broker is not taking the market risk on the other side of your trades and therefore has no incentive to manipulate your orders. Furthermore, with multiple liquidity providers, there is price competition for your order, so it gets filled at the best available price. Additionally, your orders are anonymous to the liquidity providers meaning they can’t see where your stops, limits, or entry orders are set.
By contrast, a market maker knows where your stops and limits are and has the ability to quote you a price to trigger them or not. Furthermore, unless they offset the risk on the other side of your trade, a loss for you means a profit for them, and a profit for you means a loss for them. That presents a conflict of interest.
Hmmmm…
If I put my trade through Scottrade for a stock on the NYSE, Scottrade simply forwards my order to the market maker on the exchange. I am dealing with a processor that forwards my order through to a market maker. Now, are we saying that an STP/ECN fx dealer is any different from Scottrade in this example? Are we saying that the “liquidity providers” used by these dealers are not market makers? Then what are they? How are they providing liquidity? Are the liquidity providers used by FXCM not market makers?
-Adrian
Hi Adrian,
The key point is that with our No Dealing Desk (NDD) forex execution there are multiple liquidity providers competing with each other to fill your order at the best available price. That means no single LP has all the power to determine the market price. Furthermore, these LPs don’t know where your stops and limits are since this information remains on FXCM’s servers. Since FXCM does not take the market risk on the other side of your trades, we don’t profit from your losses or lose from your profits. Therefore it’s in our best interest that you be profitable, so you can continue trading with us.
By contrast, with a market maker or dealing desk broker, there is only one source for your price, and they happen to know where your stops and limits are. Furthermore, they can profit from your losses and lose from your profits which can present a conflict of interest when it comes to the price they quote you.
Its the dealing desk brokers that can be the problem not the MM. Its like Adrian says the NYSE uses MM.
So r u saying fxcm isnt a MM.
I don’t doubt the FXCM wants their traders to be profitable long term. I have love in my heart for FXCM. But these accusations leveled against market makers are just a play on fear and ignorance. Market makers do not have “the power to determine the market price”. There are three types of prices to be concerned with here: bids, asks, and transaction prices. Market makers cannot force anyone to trade with them at any given bid or ask they put out and they cannot control anyone’s bid or ask but their own. They are just like any other trader in the market. They cannot control transaction prices.
I am sorry but this is straight up incorrect. They are not the only source for price in the market they are making. They get hit everyday by the market and are forced to move their bids and asks accordingly or suffer losses like anyone else.
While they can end up profiting from a trader’s loss, they can only do so if the trader happens to trade in such a way so as to give them that.
Sort me out. What am I not understanding?
The market maker is flat and has an ask at 1.0015 and a bid at 1.0013 and I am long and have a stop loss at 1.0000. If the market maker runs down and fills my stop he must go long to do so. If there are a lot of limit orders to buy between 1.0013 and my stop at 1.0000 then the market maker would have to take on a lot of shorts to sell down to my stop and fill it. So he made money on me but now has a big short position. Thus, he has to have a really good reason to get really short. Now why would he do that? He must think the price is heading lower. If it is, then it is a good thing my stop was filled. If it is not, then the market maker may be losing a lot here.
You can suppose the market maker was really long going into that scenario. That would mean a lot of selling came into the market previously and the only reason the price didn’t come down to my stop was because the market maker supported the market and KEPT ME IN THE TRADE.
You can suppose the market maker was really short going into that scenario. That would mean a lot of buying came into the market previously and the market maker got short but why? If the price is headed higher he doesn’t want to get short. He is either right about the price going lower and I better be glad he can easily fill my stop or he is going to lose a lot and I am going to win.
Suppose that there is nothing between his bid and my stop. He could fill my stop and go long while I take a loss. But was it the market maker that moved the price when there was no market between his bid and my stop? If there was nobody there then the market was already at my stop. In fact, if the market maker filled any orders above my stop then he KEPT ME IN THE TRADE for a bit longer.
Explain to me, in detail, the situation wherein the market maker “moves the price” to “take out my stop” and bag my loss.
-Adrian