I read the section entitled "STP Execution: How Forex Brokers Manage Their Risk”. I started wondering “How am I going to research if Broker ABC is an A-Book, B-Book, or STP broker?”
And the final sentence of the of the lesson sort of answered that, it stated “You can verify if your broker is one by looking at its registration listing on their regulatory agency’s website.”.
Okay, that’s helpful. But how do I determine where my broker is registered?
I’m assuming that brokers are registered in multiple countries.
How do I determine in which jurisdiction my account is domiciled?
Which regulatory agency is responsible for regulating my broker in that jurisdiction?
How does my broker manage its risk (A-Book, B-Book, STP)?
If possible, I’d prefer to avoid reviews (subjective) and focus on sites that could give me insight into where my account would be housed, and what the regulatory agency in that jurisdiction is.
You ask the broker “By which regulator is my account regulated?”
What the broker tells you about that doesn’t matter. As the Babypips school makes so clear, they are your counterparty whether they call themselves “STP” or not. Don’t let them fool you, or confuse you. Regulation is what matters.
Just read carefully the little thread linked to below (click on the green words), and click on the links inside it, and you’ll know what you need to know.
Yeah, I pretty much left the whole point of my question out of my question. I guess I could have asked better.
I am clear on the fact that the broker is the counter party and not a broker in the traditional sense of the word.
My concern was slippage. According to Baby Pips, how the broker manages their risk determines the speed of the execution, thus the slippage, of the trade.
I guess my first question should have been “Is slippage a theoretical concern, or a practical concern?”.
Followed up by, “If it is an actual concern, how do I determine the broker’s method of risk management and adjust my strategy accordingly.
Yeah, I pretty much left the whole point of my question, out of my question. I guess I could have asked better.
I am clear on the fact that the broker is the counter party and not a broker in the traditional sense of the word.
My concern was slippage. According to Baby Pips, how the broker manages their risk determines the speed of the execution, thus the slippage, of the trade.
I guess my first question should have been “Is slippage a theoretical concern, or a practical concern?”.
Followed up by, “If it is an actual concern, how do I determine the broker’s method of risk management and adjust my strategy accordingly.
If you’re a betting man (lol), I’ll give you big odds that the answer to that part will turn out to be something like “You change the financial instrument and the broker, not the strategy”.
If you’re new, slippage isn’t even remotely something you should worry about. It’s not going to be the difference between profit and not.
For me at the moment it’s a massive pain in the back side. I’m day trading from my phone during quiet times at work and the slow connection is causing huge slips. I should use orders but they’re difficult to do from the app.
Brokers will slow down execution during times of mass orders, so they can hedge without getting caught on the wrong side by informed traders. You’ll notice this when trading a trend line or S/R break, news events. It will look like lag connection or even temporarily “no connection” error.
If demanding liquidity, you’re at the hands of the broker. Slippage will be the cost of immediate execution. If supplying liquidity, you’re helping the broker and will experience no slippage.
