How do dealers see the orders that retail traders have and want to take?

Beginner Questions
1

Referencing from here: Never Make the First Move - BabyPips.com

BlockquoteRemember, dealers work for banks, so they’ve got two “advantages” (more like tricks if you ask us!) up their sleeves.

First, they can see the orders that retail traders have and want to take.

Blockquote

How is this possible? And given that they see the orders of us retail traders, aren’t we at a great disadvantage that it’s almost improbable to win?

Thank you.

2

Flash Boys is a must read for any trader getting started and relates perfectly to this question.

This book explores how HFT trading desks run by large institutes like ICAP paid for flow (the ability to see order flow). With superior execution, these companies could front run brokers placing trades for their clients.

With order flow details, you know significant volume trades can move the market (remove a large amount of liquidity) to effect the price moments before it happened.

My question is in 2018, does anybody think a broker would want to front run a $10,000 trader entering 1-10 standard lots in the market?

In global forex markets, you need to drop some serious weight in the market to move in more then a few points.

3

Great question and an eye opening for everybody. Here is my opinion.

Yes we are at a disadvantage because they see our positions and it’s also worth mentioning the CFD brokers out there who see our stop loss positions and keep hitting it while our take profit positions aren’t getting hit even if the price is dancing back and forth already.

Improbable to win, not necessarily. What we as retail traders should do is know their schemes and “trade differently”.

Good luck on you forex endeavor. :slight_smile:

4

To find out the answer, we need to distingush two spheres:

  • stock market - specialists and even professional traders with advanced data subscription can see our orders in Level 2.Plus, they know there are always a lot of ordrers near main levels (so called figures, like 50.00, 35.50 and so on).
  • Forex market (as for retail traders) and CFDs - as it stated in the agreement with the broker, there are know real market, you trade with your broker. Of course, market professionals could not see your orders, because any of your orders is there, but the broker, who is your counterparty to the contract knows where your order is.
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5

Yes they can (and no they can’t ! ). And yes it places you at a disadvantage - especially if your stops are at the same level as everyone else’s.

They can’t actually see YOUR stops because YOUR stops are for such small amounts that the “Broker” doesn’t even bother passing your bets through to the market. The bets sit inside HIS computer. Which means of course that if you win, he loses ! And it also means that HE can see your stops !

Just the way it is :smile:

Some of the you-tube “price action” vids talk about “stop-levels” and the way some of us believe that the Banks deliberately trigger stops to give a move “Impetus”

Forex is not the “Lovely fluffy place” many would have you believe !

Now you just have to “think your way around” the implications of that ! :smile:

6

I’ve heard/seen a former trader at a bank explain that and also do believe it is true. When they are committed to establishing big positions, that’s how they do it. Seems counter-intuitive, but the way this guy explained it, it made sense. Now, with that being said, nothing we, as retail traders, can do about it, short of joining his service(think it was +$1500 plus a monthly fee.)

7

Watch some of the vids - There’s lots of free stuff on there. In honesty, it’s not that hard to see what they’re talking about and to work out where the clusters of stops will be. There’s no need to go chucking money at people so they will tell you.

Even if you never use that knowledge in your trading, it will perhaps help to explain some of the price movements.

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