How to beat the market makers?

Far from it!

When I look around me, I see exactly the opposite, throughout the trading world - and have done so throughout my entire career.

All the markets in which people pretending to be “brokers” are actually making their own markets independently are the ones with the highest dealing costs, as can be seen with spot forex “brokers” and binary options “dealers”.

All the markets in which there’s one centralized exchange, in which genuine brokers deal on behalf of their customers on a commission-only basis, without themselves being market makers, are the ones with the minimally low and most competitive dealing costs, as can be seen with futures brokers.

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My original point exactly…its taken a lot of posts to get here…but I think you have arrived…

As stated in my first post… this could be the reality of Retail Forex…only the MM’s really know… You really have to think about this in depth to understand the incentives for the MM

See, now you boys are starting to think outside the square and realise just how diabolical this market could be…

[quote=“ontario, post:40, topic:126495, full:true”]
So why do you afraid of them? Are they rigging quotes? Charge higher spreads or intentionally distort market data? There is no point of concern unless they execute unfair practices but competition in this industry is so high that such dirty players will be squeezed quite quickly. [/quote]
Yes, these are some of the potential risks when one’s broker is also the counterparty and through which one has to also close the position. But there are also other worries, as the OP originally raised. One of the biggest worries concerns difficulties in getting withdrawals.

I am not so sure that wayward brokers are so easily and quickly eradicated but certainly those that are sufficiently monitored by regulatory authorities are a much safer choice.

[quote=“ontario, post:40, topic:126495, full:true”]
Market making makes trading costs cheap and its the only way to deliver forex services to your monitor with such lower capital threshold
Cheers.[/quote]
I would certainly agree with you in absolute terms that trading is extremely cheap for retail traders with small balances. It is not just the spreads available but also the leverage which allows traders to deal in amounts way beyond their actual available funds.

It has surely never been so easy for private individuals to have (almost) cost-free instantaneous direct electronic access to markets with spreads almost at professional interbank levels and with substantial sums equivalent. But this scenario is both the benefit and the vulnerability…

Yes, I do agree with you. It is precisely, and only, this counterparty aspect which is the source of real risk and not actually the MM activity per se. But I consider this only to be a potential area for problems and is not maybe so easy or worthwhile from the broker’s point of view to exploit as many may believe.

When one opens a trade then we do have a true MM situation. The broker is continually offering a constantly changing live bid/offer and the broker does not know when, or on which side, you are going to hit.

Similarly, if one chooses to close a position at market then the broker still has no knowledge of when you will hit his current bid/offer which is constantly showing there.

However, the situation changes when one has pre-set stops in the market, and this is maybe the one major area where there is the opportunity for practices such as stop trawling, for example.

Whilst the broker is the counterparty, I think it is a fallacy to state this as the broker is “trading against you”. Their counterparty role is more just a passive state and I really do not believe that a broker feeds different price feeds to separate individual clients in a sense of actively trading against them. Certainly, the spreads can and will vary depending on the client type and account type and source market spreads. But it is not the broker who is trading against you, it is the market as a whole.

When a broker has a mass of open positions that are changing all the time, they are only interested in monitoring their overall net directional exposure, As long as their net exposure remains neutral (or within specified limits and directional objectives) then they really don’t have to care which individual trades and clients are gaining and which are losing.

I doubt whether there are many traders here on BP that actually trade more than 1 lot sizes and I suspect that there are many trading maybe only 1-5 microlots? In these cases I think it is ridiculous to suspect that a broker would be interested in targetting individual trades (but I don’t know that, it just wouldn’t make much sense to me!). They know that the vast majority are going to end up losing through their own incompetence anyway and if in the meantime their account balance goes up or down a thousand or two is it of little consequence in the long term and they just collect the spread/comms income in the meantime.

However, if they do have clients that regularly trade significantly large positions then it is a simple matter for their systems to flag these, or other single large risk events, and hedge them out automatically.

We all know there are rogue brokers, but there are also many that are long term business concerns that are trying to work with their clients to help them grow into high value customers with substantial funds in the accounts. Their contributions in training, trading ideas, market information, customer help, etc are all geared towards this mutally beneficial business relationship.

The horror stories are the ones that get onto forums like this, but there are also, surely, many, many, traders who are just comfortably and trustfully getting on with their business with no problems at all?

Problems can lead from your “Market Maker” being your Counterparty…Problems can lead from your “Counterparty” being your Market Maker…

It’s pure semantics which of the upstream entities has the most to profit from retail losses (all roads lead back to Rome )… the Broker (MM’s) are merely a gateway to the micro-market, which up until recently was an untapped resource. The symbiotic relationships being very beneficial for all parties.

Retail Forex may well be a similar structure to the CDO markets of a decade ago… All legal, and fostered by the regulators until it all fell down…

Remember, " It’s only fraudulent if your not in on it"…

I have a project underway ATM… measuring tick feeds from the markets and comparing it with brokers tick data that filters through to various platforms… this will make for some interesting reading somewhere down the track.

Agreed with others here - look at how retail brokers operate before trying to arguee facts.

The only exception to this is with DMA retail brokers, which *99% of the retail traders [speculators] can’t afford.

*perhaps 99.50%

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I am very interested in your project, I think it’s a great idea. One of the thing’s I keep reading about is how some brokers completely screw data during a news announcement, not just adding crazy spreads but also freezing the platform and even inserting completely false ticks. If there was a way to compare brokers by their tick quality we could have some kind of broker benchmark.

[quote=“ZoraEggs, post:47, topic:126495, full:true”]
One of the thing’s I keep reading about is how some brokers completely screw data during a news announcement, not just adding crazy spreads but also freezing the platform and even inserting completely false ticks. [/quote]
You are wise to study the possible pitfalls that may, and do, sometimes occur and to do due diligence concerning your eventual selection of a broker. But at the end of the day it is a leap of faith as to which one will be safest for you.

But if you spend too much time concentrating on seeking out devils on the walls and ghouls under the bed then you will certainly find some and there are plenty of scaremongers willing to help you with this.

But it is strange how you mention these types of broker issues but, like so many others, ignore the one ogre that will for sure, if you are not careful, rip out your financial intestines and feed them to the market vultures within a few months of your starting your scalping and news straddling - and that ogre is you.

It doesn’t take much to read through the tons of postings here how “95%” of new traders fail - but the reasons discussed about why this is are rarely related to the broker. Certainly, there are regularly various posts on specific “scam” instances, but the reasons for traders completely blowing the accounts are almost entirely due to a lack of education, understanding, training, knowledge, awareness, greed, inconsistency, risk mismanagement and so on.These are the areas you should be focusing on.

If you decide to buy a new car and read all the reviews, you will probably not find one mass-market model that does not have some bad reviews, and if you then read all the statistics about accident risks and injury/fatality occurences, you will probably conclude that one should not drive at all. But the best one can do is select the most appropriate car for one’s purposes and abilities and then concentrate on developing one’s own driving skills and road experience as much as one possibly can - even so the risk of accidents and repairs cannot be entirely eliminated - this is basis risk/consequence analysis.

But if you are really so scared of these risks from your broker then you would do better by forgetting trading and doing something else with your money - and you will probably ,at least statistically, end up better off as well! :slight_smile:

…but this thread is now starting to repeat itself and I guess the main meat of this topic has been laid on the table. It is up to you to help yourself to what you fancy…:smiley:

well im happy to reply to you at least




that it guys all of it

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Thank you so much for clarifying this @anon46773462. I am a newbie here myself. Reading the original post, I was very discouraged. But, because of this reply, I feel a bit enlightened. :slight_smile:

So there you have it… ZoraEggs & ria_rose… Invest your time and money for a 5% chance of success…

Problem with Forex… is that it is made to look winnable… when the reality is so far from that fact…

As you both will find.

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Yep I have to agree, statistically the chances of consistent success is that small… But it is not inevitable… It just demands a huge amount of effort, work and dedication. It can be done!

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What’s the difference? They are no different to me, as a mini retail trader, no broker market maker or real market maker cares about my existence, as they don’t need to. But I do need care about their behavior in the market, no matter it is a robber or a police is making the market. This market needs money in and out to maintain its liquidity, retail traders are like cushion for big traders, are necessary to exist in the market. As retail traders don’t play that important role in the market, I do not expect to be treated like a god. If not happy with this broker, change to another one, though you think they are same coz those accept minitrader are not real broker, but I do found some difference that makes me happy with the alteration. The general scinories and root problems are too far to a minitrader’s daily trading, A minitrader will only believe what she believes during trading. Though it is good and worth time to know how my counterparty plays me in the game, and if they do play well, I would not mind to clap my hands for them.

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This is duly noted! I just have to ask, is it possible to go beyond that 5% chance of success? Have you done it before?

Also, thank you so much for answering questions from a newbie like me! I really appreciate it. :heart:

I will keep this in mind. :slight_smile: Good thing I’m very patient! :grinning: I just hope you don’t mind me asking, how long did it take before you achieved a successful trading career?

Hi ria_rose. Unfortunately No, I think 5% is the best odds for success the FX market will offer most traders.

Some traders are definitely making a living, some a small amount to supplement their income… but most are on the FX merry go round… Profit $50 this week, lose $60.00 next week, profit $25.00 the following week… so on and so on. Consistency is what the grail quest is all about…

I trade the daily charts, the 4 hour charts and even have bots that trade the tick charts with some success. It is a constant battle to stay profitable…it’s not like a job where you know you’ll get your $1000 on Friday. Some weeks are very profitable other weeks are break even. It took longer than I expected to move my accounts forward…

Once you start on a Demo account (please start on a Demo…), the thread will make much more sense.

Don’t be afraid to ask questions on these forums… if you don’t get an acceptable answer, search until you do. BP is a good starting point, but real information needs to be found elsewhere on the internet… information and knowledge is everything.

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Absolutely right - and a very good summary of the situation.

Retail traders with smallish accounts have no alternative but to use a counterparty martker maker: what matters is to choose with care, look at their regulatory history and try to choose a better one, avoiding the obviously unethical and dishonest ones, and the ones clearly trying to attract the most naive and gullible customers because of what that tells us about how they choose to work.

Also completely correct. :sunglasses:

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I got this, Trends! (Is it okay if I call you that? Hahaha.) I have been warned by my uncle about this kind of situation too. Sometimes, it makes me wonder why traders continue trading, especially given the “FX merry go round” scenarios. :cold_sweat:[quote=“Trendswithbenefits, post:56, topic:126495”]
BP is a good starting point, but real information needs to be found elsewhere on the internet… information and knowledge is everything.
[/quote]

This site has been so awesome for a beginner like me! But, if you could recommend other places where I could find more information, that would be a great help. :blush:

We (MarketMakers) deal in averages, we love it when it is 50%long and 50% short, only a fool enters an order at market, and we gladly will take the other side of all your trades all day and make you for the spread at least :Þ

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We (#MarketMakers) also place pending orders to take the other side of RT’s trades INSIDE the spread, we raise the bid quote (inside bid quote) & we lower the ask quote (inside ask quote).

We are not evil, nor so we need to “cheat” to get you to give us all your trading dollars with your silly “loss stop” orders.
#CLooPHONE #we make 90% of our money off your “stop loss orders” LOL

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