I am learning forex slowly but today I am feeling really demotivated after someone told me the truth about brokers, that they want you to lose and gain 4 commissions doing so, betting against you and if you win they still get 3 commissions. The ECN non dealing desk brokers are supposed to solve this but there is no such thing for small retail traders and any broker advertising this are just fake disguises.
I am not sure how accurate any of this is since I never traded but the person who told me this has been trading for over 10 years.
The question is, how can we survive in this system? someone suggested taking regular small withrawals since a broker can just deny you a withdrawal at any time for no reason and blame it on all sorts of thing’s or accuse you of something you did not do.
I just really want to hear some successful traders opinions on how they deal with this type of thing? I am especially interested in opinions of people doing scalping or news straddling as its something I eventually want to try.
My goal is just to make monthly income that I can eventually live off with a good risk management system and non greedy trades, but I don’t want a scammer broker to just deny me my earnings.
I think, @ZoraEggs, that you are mixing up a lot of different issues here.
Firstly, brokers earn their commissions whether you profit or lose from the trade, it is simply a price for the trade. The broker has no wish for you to lose since he will no longer earn commissions from you.
Secondly, MM brokers are not “trading against you”, they are just taking the other side of your trade. They cannot move the market against you, the market will go wherever it is going to go. The main reason why people imply that the broker is somehow the “enemy” is because, quite frankly, most retail traders just simply get it wrong themselves!
Also, brokers have huge numbers of clients and they will inevitably have various clients with open trades in different directions, some long, some short, which actually match out in terms of exposure risk from the broker’s perspective. Unless you are a major player, the broker is only concerned with his net exposure. If too many positions are open in the same direction then they will hedge that risk with their own positions.
Thirdly, there is the separate issue of reputable brokers who are well regulated and other brokers that may indulge in malpractices against their clients such as delaying withdrawals etc. This is obviously a major concern in its own right but is not the same thing as comms and trading direction.
Fourthly, there are broker practices that may not strictly speaking be malpractices but can catch out unsuspecting retail traders. A typical problem in this category is the (excessive) widening of spreads under certain market conditions that trawls in stops that are nearby. Another problem could be sudden changes in leverage levels causing a sudden increase in margin requirement that reduces you available equity to below the minimum equity requirement and results in all positions be closed automatically and realising losses (and profits). But this would probably mean that you had too big exposure for your account size in the first place!
I guess all major brokers have clients with bad experiences to tell about, but one has to just be selective in checking who the broker is and start small and see how it works out. I have had accounts with three major brokers for various different purposes for many years and I have never had a single problem with any of them except one small example of (in my opinion) an excessive spread.
I think there is no way to avoid market makers, because there are almost thousands online broker are available in this market and most of them are found to be scams. The common problems you have shared are not found in top brokers but we the traders who are particularly beginners can’t trade freely those kinds of platforms because their minimum deposit is too much high and don’t have lowest trading spreads. as a result beginners always fall a great trouble when choosing a broker to trade.
Yes top level brokers are generally regulated by the high authorization and they don’t ensure comfortable trading environment for beginners level , as like scalping and hedging are not allowed in top brokers . So, beginners have to choose an ordinary brokers most of them time. no way
Yes I like hedging and scalping. In scalping we can get good amount in very low time. And quick trading supports me most of the time . With hedging I can manage my loss in better way . I face less loss while hedging positions . That is why some brokers not allow scalping or say remain open position for certain time. to get profit.
Yes, that’s the strategy that I followed! By the way, broker is a great issue here so, new traders need to concentrate more on their brokers quality!
They’re two of the few things that retail forex-traders should never do, because they can’t profit from them, so it’s entirely consistent with the rest of your posts here that you’d like both.
Nice point. Top regulated broker as like UK or US they are not comfortable for newcomers due to many restrictions. so, new Forex trader have to choose the trading platform which does not restrict any kinds of trading techniques with scalping , hedging and others. Generally for using scalping approach first of all have to ensure most narrowest spreads that cant make sure a regulated broker.
Hi ZoraEggs, what you have been told is the reality of retail FX… retail traders are betting against the very brokers (Market Makers - MM) they are trading with. This fact has been hidden from the average retail trader for many years… sometime in the last 18 months it has been slowly revealed that ALL retail accounts (except STP) traders have been trading against their MM in one form or another.
When you open a position on your platform, lets say a Buy of 0.05 lots… your broker uses an algorithm to find another traders Sell position of 0.05 lots to place against your trade. Hence your trade is supposably countered in the market by another trader. This might be the case every time, sometimes, never… no one really knows (except the broker and their liquidity providers)… anyone on BP is being disingenuous if they tell you they know for sure.
To open a true ECN (STP) account requires very large amounts (~50k - 100k) to get access to this market.
You will read a lot of waffle in these forums that it doesn’t matter and you can make money…the Brokers only make profit from your commissions, we need you to keep trading… yada, yada, yada…the reality is when you start to research the subject in depth yourself, read statements from ex-broker employees that this is an industry fallacy to keep the money pumping into machine… the sheer turnover of traders coming and going after losing to the market is what is driving profits and the massive expansion of this industry in recent years.The turnover of BP members alone gives an indication of this fact.
I’ve been watching my city’s FX Job Adverts for the past 6 months. Every week they are advertising for FX account managers, FX account sales etc. etc. Every week!! All indicating that sales (fresh accounts) is driving the market.
Expansion of OTC markets has caused the prominent countries involved in FX (UK, USA, Australia) to contemplate closing access to the markets for retail traders due to the high financial risk traders are exposed to in these particular financial markets.
You will have read that 95% of traders will lose in this market… it’s 100% your fault, under capitalised, not enough knowledge, yada, yada, yada, while these conditions are definitely causing a large percentage of traders to fail and lose money, trading against a counterparty that may have access to your positions and strategies is truly insidious.
Everything I have stated above is correct, some of it can even be found referenced on various threads here on BP.
So don’t take my word for it…Do your own research outside of BP on this subject and find out more information on the realities of the OTC Markets.
This post will be shouted down by some in this forum (but that’s another discussion)…
Thanks for the excellent post, you are a true hero spreading the truth in a world of lies, no doubt a lot of people will try to shout down this post, maybe the people who have IB contracts with the brokers pushing the inversion narrative. Now the real question is, is it possible to use a regulated broker and still win? I heard that they don’t like you withdrawing large amounts, that kinda messes up compounding, but maybe there is still a way to earn smaller monthly income and keep the brokers happy. I would really love to hear some figures. My plan is to diversify my portfolio to be like 20% forex and the rest futures and stocks etc. Right now I have nothing, but even like $2k a month from forex and I can already live off that in a cheap area of England.
You need to use a well-established, well regulated broker with an impeccable regulatory record, that automatically offsets their own net liabilities in the underlying market, makes its own living primarily from the spread, and has no incentive for any specific customers to lose.
There are some. But you need to understand how the industry works and do some research to identify them.
In my opinion Oanda is one, but I can’t prove that and neither can anyone else.
There are unquestionably people making their full-time livings trading spot forex through ethical, honest, regulated brokers.
I don’t know many, because most of the successful retail traders I know are former institutional traders, and most of those trade futures, not spot.
If you have a choice, and also have enough capital to trade futures, there’s no point trading spot, but there are also people trading spot forex because the instruments they like to trade don’t have futures available. (This is why I still trade spot a little, myself.)
That’s very unlikely to happen.
The only people who have an incentive to state/claim/demonstrate figures are those with something to sell or promote, aren’t they? And there’s no objectivity, that way.
That sounds a very good, sensible plan to me.
There’s a tiny minority of retail, spot forex traders steadily averaging about 5% per month from their trading. (I can’t prove that - it’s my well-informed impression, belief and opinion only).
On that basis, you’d need to be one of them and have about $40,000 trading capital available, just for your spot forex account. And that’s after you’ve developed the skills and experience needed to do it successfully, which takes most people some years.
I am curious as to how you see this as a problem that apparently reveals the “evil” side of brokers,
If one’s position is counterpartied by another trader’s position or by the broker themselves, I do not see how you can feel that the counterparty can somehow have an edge over you and cause you to lose money. The counterparty does have an opposite exposure but this does not mean that a single trader or a single broker can move the entire forex market against you such that you lose. If the broker’s prices become significantly out of line with the market in general then they would be open to arbitrage abuse - unless you are claiming that they quote individual prices to each client for each position in whatever direction. I hardly think this is the case.
Equally, if one’s position is matched against another trader’s position, it does not mean that the other trader is your counterparty otherwise when he closes his position it would automatically close yours, too. These positions are not counterpartied, they are matched back-to-back, and both against the broker - and as such neutralises the broker’s own open risk. Therefore, it is irrelevant to the broker who wins or loses in that matched position, they just collect their well-deserved commissions from both.
Brokers can practice a number of doubtful, even illegal, practices, but they cannot move the market price. They can manipulate spreads.
If you consider the volume of trades being continually opened and closed through the broker then it is clear that they do not single out individual clients/trades in order to scam them handful of bucks through price movement - they may indeed though have other means for this…
It does not take much reading here on BP to see how many inexperienced traders lose through their own failures and not at all through being ripped off by their broker. And if a trader is routinely and significantly profitable then his trades can be matched off by the broker any time.
Whilst brokers in general do have a reputation, and history, for various nefarious practices, this does not mean all brokers are intentionally scamming all the clients. And it is pure sensationalism to claim so.
It is far more important for traders to concentrate on developing a strategy that works according to the way the markets move than think that success or failure is only a question of picking the right broker. You may certainly lose money and have withdrawals problems with a dubious broker, but you will not automatically win just because you go with the very best of brokers. Ultimately, success, even with a good reliable broker is down to you, the trader, and only you…
Hi Manxx.Let me start by saying that the OP had asked a question and I have mealy answered his question.
Points raised in my post are facts… and they are undisputed. Now, let’s answer some of yours.
Over the last 3 decades, most retail financial products that quickly increased in activity have had dubious outcomes. Stock Markets in the late 80’s, Boiler Rooms in the 90’s, Subprime in the 2000’s, with cataclysmic results and reverberations that are still being felt nearly 10 years on…
Over the last decade, the explosion of retail FX Brokers (tip of the iceberg) has turned the Currency and Futures markets into the largest business on the planet. One can easily deduce that this must be an extremely profitable enterprise for the Brokers and LP’s alike.
Forex and OTC Markets have literally exploded in the last 5 - 10 years, estimated at… 7 Trillion dollars a day.… with over a third of that chunning through five of the world’s most notorious financial institutions. Citigroup, JP Morgan, UBS, BOA (Merrill Lynch) and Deutsche the largest players (LP’s) for 2017.
Front and centre are some the of the same institutions that brought you the GFC. As we now know, the GFC was caused by fraudulently rated bonds made up of low quality (subprime) loans, right under the noses of our ratings agencies, regulatory and government “protectors”.
History repeats… always has, so you can be sure that regulators and Institutions (and governments) have once again Joe Public’s fiscal safety at heart…
When you really read how the FX market works, you will be aware of how much money and for how long it takes the big players (LP’s) to move a pair a few pips or widen a spread…
Why are so many Brokers setting up in Cyprus, Schecyelles, Belize, Caymans etc. etc? The costs of being affiliated with a “Regulated” Liquidity Provider is unsustainable for the smaller, possibly more dubious FX Operator…
Any forum readers wish to extend on why this might be?
Your trade is countered in the market by another trader. “This might be the case every time, some of the time, never… no one really knows…” Say your Broker deems you too profitable in your trading, generating losses for them, do they eventually take positions against you with their own book?.. No one really knows… How many traders complain of broken strategies… winning streaks followed by a complete reversal of fortune…
Why is it that ALL traders would prefer a true ECN (STP) account?? Yes, so you can be assured there is no Dealing Desk intervention involved in your trading. With any digital platform the opportunity is there…
Why has the fact that ALL retail traders have actually been dealing with MM’s, obviously an industry secret (read deception) until recently? Any forum readers wish to have a go at answering this?
I agree with Lukas comments (See above) here, Yes. But let me put it this way…
If you were to walk into an Investment advisor tomorrow (That’s right Xmas day :-)) and plonk down 2000 of whatever currency you use, sound in the knowledge that you have a 100% chance of losing a large percentage… 95% chance of losing the lot… and your advisor… YOU… has little investment knowledge… would you do it??
That’s right… no chance…
You walk into a Casino…anywhere in the world, sound in the knowledge that the house edge is so great that you have a 100% chance of losing a large percentage… 95% chance of losing the lot… and that Gambler… YOU… has little gaming skills… would you do it??
That’s right… no chance… Merry Christmas and welcome to Forex.
Interesting read @Trendswithbenefits!
But forgive me if I, for one, do not consider all your points as facts nor indeed as undisputed (not that my disputing them is of any consequence! ).
Firstly, one should recognise that the real forex world of the commercial and investment banks, pension funds, investment funds and vast mass of huge corporations and companies (many of which are bigger in forex than many banks), and not to forget, the private high wealth individuals, is a totally different world to the broker/retail trader business that we are involved in. Our world is totally a phantom structure of non-existent foreign exchange “transactions” that do not actually exist in real terms - if it did then we would also require a back office structure tansferring funds between the counterparties’ various bank accounts in all the various currencies in which we trade.
The retail community always seems to imagine the commercial/investment banking world as just a bunch of high-powered, superhuman individual traders just spending their days swinging huge amounts of money around and cleaning up all the poor little retail traders along the way.In fact purely speculative forex trading is a relatively small portion of banking business. For large, multinational corporates and finance institutions, foreign exchange is merely the liquidity that facilitates the functioning of their core own business and corporate development such as mergers and acquisitions developing production facilities, etc.
In many situations, companies and institutions are just looking for the “right” level in a foreign exchange transaction that works for their desired business transaction, what happens to the forex rate after they act on that level is no longer relevant since it that underlying business transaction that is their profit generator, not speculating on the forex rate. The last thing these enterprises are interested in is our little retail “trades” - that really is not their business interest.
I agree there are many examples of bad practices and scams in the financial market but the direct impact of these on the trades of individual retail traders is minimal. A similar concept could be the revelation of the falsified exhaust emissions by major car manufacturers. This is a major event in the automotive industry with massive financial and other repercussions for both companies and certain individuals within that industry - but the impact of its ripples that filter through to the guy on the street who has bought one of those cars is considerably diluted. And the ripples of scams in the real finance world are even less than in that example.
This is not true. Your counterparty in a MM broker is your broker not another trader. If it were another trader then his position would also be close when you close yours…and vice versa. Also, this would be a chicken and egg situation because if a broker wanted to match your trade against another trader then that other trader’s position would have to be “free” and not already counterpartied to another trader.
Also, if my position were counterpartied against another trader I would be very happy about that since the broker would be neutralised out of the equation since the gain by one of us would be a loss by the other - in effect this would be a ECN type situation - but unfortuantely it does not, cannot, work like that.
The broker is always the counterparty. It is a very different matter that he may match “exposures” between client positions. The broker is really not interested in following individual positions, nor does he have the resources to do so, nor does he even need to. His only concern is his overall net exposure to market direction.
Of course, there are brokers that commit nefarious business practices that work against the individual trader but trading direction against them is not one of them - afterall, if the broker himself was that good at trading direction he would simply trade the markets. Indeed whenever a broker supposedly is trading against “your” position until you lose he would be simultaneously trading in the same direction as all his other clients who have opposing trades - and losing against them…
I regularly and routinely keep simultaneous price feeds from two or three brokers open on my screen whenever I have a significant position open and I never see a significant deviation in price quotes occuring in response to my positions. But I HAVE seen very significant changes in spread quotes between brokers.
I don’t think anyone would claim that the financial markets are squeaky clean, and the broker fraternity is no doubt even more suspect from a retail trader’s perspective. But the risks are from practices other than simply “moving the price”.
One should always remember that price charts (more or less) record the market prices that have historically occured and when one analyses these one assumes that the future prices will also reflect market prices and not a specific broker’s own deviations from it. The broker is a bridge between the real market and the retail trader who wants to speculate on it. His starting point is the price from that real market that comes from the liquidity providers. He then adds to that whatever spreads/commissions he feels appropriate. Whether these are reasonable or not is how we decide which broker is most appropriate.
But one should never lose sight of the fact that, especially, with longer term trading, whether you profit or not is ultimately a question of whether you can sufficiently anticipate direction correctly and apply risk/funds managment aptly to keep more than you lose.
it is so easy to blame the"markets" and the “Large Players” for our losses, but before doing so it is worth taking a serious look in the mirror…
this is not true , all the orders return to interbanks unless the broker is cheap and not reputable that any time can rip you off , and most of the positions in any range , all has an effect directly or not direct you changing their book balance and slowing down the momentum
give me a demo account and i turn it to trillion
sorry but dont be parasitism write something instead of just calling this and that a rubbish , you bring no value at
ps , every trader have to trade the average size of position or contract to make living of it , if you are trading a minimum smallest size of position and turning 100 $to 500 a year then what you think of it the broker can pay from his own pocket if if they want to but then if you trading with average size of position it suppose to be hedge and you try take advantage in short term day trading then they treat you as day trader they setup the volatility as they making the market for next move , also i couldn’t care less if some one on internet say he has an experience , their trade is what you see on forum here
The problem is that some of the beginners here, for whom the forum exists and is designed, may understandably have difficulty distinguishing between the professional views of members like Lukas and Manxx, and the bullsh!t you post yourself in your complete ignorance.
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