Nice to hear. Post and comment wasn’t directed at you necessarily i.e. I tend to post with the idea in mind that somebody who has no clue may just stumble across the posts!!! LOL!!!
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Point here is I suppose (second response to your same post):
A lot of new traders will not understand nor want to hear about slippage and/or how things REALLY work in the actual market. I will bet that there were thousands that were caught on that day and many probably lost accounts. Those that had not done their homework would have been the first people to pop up on a site like Forex Peace Army and say that their broker was at fault and didn’t honor their stop and robbed them by only executing their stop at the dead low of that move.
By the way and something that also just occurred to me: SOME brokers (not all) allow you to place stops and to specify that they must be executed within a certain range (in Metatrader). In other words and in a case like that drop: the broker would not have executed your stop simply because it was too far away from where your stop was placed. That would have left the trade open (albeit at a big loss) and at least given you the choice of waiting for price to retrace (which it did somewhat immediately after the drop) or to just close out the position. Pretty much the same thing as not having a stop at all though I suppose. That’s why position sizing is important bud sadly a lot more difficult to calculate if you’re not using stops.
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hiya @dpaterso
I read this in your .pdf file and in my point of view flagged up my concerns as the broker in the story is a MM;
‘After one obnoxious day trader wiped himself out, Declan had a broad smile and whisky in hand and as he strolled out into the dealing room and shouted “Tommy’s wiped” and turned up the stereo and the queen song “another one bites the dust” blared out and everyone joined in the chorus’
but the guy worked in the back office is naive who do not know everything, only the CEO, Owner/Founder of the business and the head of software company who created some mechanism for the broker are knowing something that the guy in the story is not aware.
Giving example for above, the US has 17 security agencies, but how many guys have security clearance to know the truth about Area-51?
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You make a GOOD point!!! LOL!!!
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they are not such a big deal, as its offset from this gain. They broker don’t do by random/blindly, this can be a calculated attack.
I personally think a true ECN broker only should make money out of spread and volume commission only. While the trades leaving the broker platform(spot-forex), why broker need to hedge? Otherwise, the MM/SB broker is more like a Casino system that wins or loss is against the Casino owner’s fund.
Let’s assume again that the broker vastly increases their spread to 80 pips - market plus 40, market minus 40. At -40 pips they trigger Johnny Newtrader’s stop-loss and they make 50 quid from him. A great afternoon’s work.
However, they cannot possibly know how many of their clients who are long with no TP will see the quote is now 40 pips above where it should be and close their longs. Or how many were short with no SL and will now close their positions for a much smaller loss. Or maybe even a small profit. So what’s the point?
As far as ECN brokers are concerned, yes, they don’t need to hedge so aggressively. But many new traders who complain about stop-hunting aren’t using them yet, they’re using off-shore under-regulated brokers who are not clear that they truly aren’t ECN.
Honestly, using a SB firm for long-term trades, there is no issue with their price quotes going adrift from the market.
I stand ready to be corrected, I’ve never found it necessary to seek out an ECN broker.
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Pretty much what I already explained. Quite correct. Just depends really whether the casino is rigged or not i.e. whether they’re going to let you make your own mistakes or help you along the way. No different from a licensed (and therefore regulated) casino and some backstreet gambling joint.
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And all of the above being but a few reasons why you’ll still be around in a few years time posting and trying to help others as opposed to the hundreds of corpse threads that have been started by hopefuls, doubled their accounts in a week, and the rest is history i.e. never to be heard from again.
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I love those guys. Such optimism!
Ah, I remember those days so well, so well…
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Yeh. You and me both. I’m actually embarrassed when I read some of my own posts from ten years ago I’ll tell you. Fortunately they’ve all been moved off to an archive somewhere. But man: did I think I knew it all. Learned a lot though so there’s at least that.
Sad though looking back on it all. I really didn’t have to go through all of that to be able to do what I’m doing now. Guess that’s one of the reasons I post. Not that it seems to help though. Maybe that’s just it. Maybe people (myself included) just have to make mistakes and get burned before reality sets in.
Like somebody said, “My Dad used to be so stupid when I was 17. But later on, over the years, he got a lot smarter…”
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How funny is that. One of my favorite sayings (or whatever). Mine goes along the lines of “when I was 18 I couldn’t understand how my parents could be so stupid but by the time I turned 25 I was surprised at just how much they’d been able to learn in such a short time”!!! LOL!!! (Something like that anyway).
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More interestingly, do regulatory authorities like FCA,FSC,…(CySEC is not considered at all) ask for a huge amount of fund for letting a broker open a business? If the income source of true ECN broker should be made of Spread&Volume-Commission, why the regulatory body asking about this huge fund from brokers unless regulatory knows the business is overall a MM/SB/Casino model, but implemented in different eye-catching scenarios.
What proofs the Dark-Pool is really that dark,(is the interbank liquidity platform is open-source to be verified against anonymity claims?)
Well think about it this way:
Assume for a minute that somebody opened a brokerage with no capital and relied purely on the fact that most traders will lose their money and that the difference between the winners and losers would also be to their advantage. A sort of “closed shop” if you will. That’s a bit of a slippery slope i.e. always the chance that things would go the other way at any given point and if they were not hedging themselves then they’d have to cover the traders that were making money.
Not sure of my answer though to be honest.
In just thinking though: go back to the casino model. What would happen if a casino didn’t have capital and their very first punter walked in an got lucky and won $1 000 000??? They’d have to cover that bet somehow.
In Casino/MM/SB business model, the casino goes bankrupt and close the business. In terms of your .pdf file above, We can drink a shot of Vodka and shout ‘Broker wiped out’ and turn on the music lol
In True ECN broker, there is no difference as if someone makes $1-Mio or $1-Billion, True ECN broker makes their associated spread commission and volume commission. They are happy brokers and having happy customers walk in and walk out anytime with any amount of cash/capital.
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I see what you’re saying and getting at. Don’t have the answer(s) to be honest.
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Who knows. Maybe it’s just to ensure that not everybody can just open a brokerage and has to meet certain minimum requirements. Otherwise just about every new trader that’s ever lost money and seen the statistics would open a brokerage. No idea. I’m sure it’s far more complicated than that though.
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Tell you one thing: knowing what I know today and if I had the capital I’d open one!!! LOL!!!
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Well come to think of something that I’ve never thought of up until now:
The regulated brokers are required to state what percentage of their retail clients are losing money. So let’s say that percentage is 70%. It follows then that the other 30% are actually profitable. And the profits made by those 30% of traders may by far be in excess of the losses being incurred by the 70%. So if a broker isn’t hedging those positions they’d be in trouble. Maybe the amounts required are in an effort to ensure that the broker can make good on those amounts. Dunno. I’m just guessing here now.
Thanks for replies. Does anyone knows, does extreme loss caused by Spike can eliminated by putting SL?
Tnx