I am just trying to understand how important it is to a broker whether or not you are making a profit. Im hearing a lot of stuff about things like stop hunting or traders making the exact same trades on a broker’s demo and live account where the live account will lose money but the demo will profit, even traders complaining about a broker closing their account if they are profiting too much. How much of this is true?
Say I open a live account with a broker and I hypothetically win on 85% of my trades and make a ton of money, does this mean they are losing money by working with me? will the broker work against me to prevent me from profiting more?
Is it possible for a broker to profit when you profit too?
What incentives are there for a firm to become a forex broker besides profiting from traders losing money?
Essentially, the broker makes his/her money from the spreads but yes, a few brokers do trade against you…But looking at it logically, from your example listed here on the 85% prof, the broker would not be the one at the end of the losing trade. And yes, there are a few reviews doing rounds about how a certain broker jigged the demo and the live platform wiped out the account overnight.
You can either chalk these up to a case of sour grapes or there’s some truth to this…
Only brokers that don’t trade against their client and are neutral are STP and ECN brokers that make profit by charging comission on number of lot traded instead of spread. thus having no interest in manipulating price or making their client loose, more details explained here: Difference between dealing desk and ECN brokers
they make money whether you lose or not: in the form of spreads, commissions, and/or slippage. (and other stuff )
They make money as long as you trade with them.
If a broker is a market maker, it always plays against you. As [B]nerdsurf[/B] already mentioned, STP and ECN brokers are not market-makers since they are just intermediaries and have profits in the form of spreads, swaps etc.
Unfortunately, to trade with NDD brokers you have to lay out a lot of money, much more than with market-maker.
Thinking that with the majority of traders the mm type broker doesn’t need to manipulate anything to make you lose money. Generally the bid ask feeds on anything under the 15 minute time frame are so dynamic that there will always be differences between brokers so I’m not quite as paranoid about manipulation, especially since I now only trade on 1hr charts as a minimum.
I think that dealing desk brokers are all that brokers which offer their clients to trade on the platform which has a hidden feature named Virtual Dealer Plugin. Search out in internet about platforms which have such function:10:
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