Successful day traders

[Yanbiao]

Is it true that successful day traders are banned by brokers?

[anon98339083]

No, not at all.

Brokers like and welcome successful daytraders because they earn more commissions from them, they're good customers, and the successful ones are the ones who stay and continue to be customers.

The people who don't want successful daytraders and will even ban them aren't real brokers. They're people trading against their own customers.

Forum conversations on this subject are often awfully misleading, because the people posting in them often don't quite understand what "brokers" are and how they earn a living. It pays brokers to keep customers who win, and especially those who win and trade often. Successful daytraders are therefore among the most welcome customers a real broker can have.

[campione]

If your broker has a TRUE business, they like profitable traders. If not, they ban you or do 1000 tricks to suck your money or close your account for xyz reason. So its important to find a good broker, if exist in this world

[ForexGump]

It's important to understand whether your broker is an "A-book", "B-book" or hybrid broker.

When a trade is passed through to a liquidity provider (LP), this is A booking. This broker simply acts as the intermediary between you and the liquidity provider(s). Brokers make money by marking up the spread or charging a commission.

If the brokers keep their customers' trades on their own book, that's B booking. Since something like 90% of retail forex traders lose 90% of their money within 90 days, operating a B book can be extremely profitable. Think about it. If you know someone is putting on a losing trade, might as well take the other side of the trade.

Most brokers operate both an A and B book (aka hybrid model), selecting which trades are placed with an LP vs. internally.

In the bybrid model, the broker will most likely hold the trades of losing traders for themselves and pass the trades of profitable traders through to the market (or at least hedge against these trades).

[anon5370623]

Where did you get those statistics on losing? I think its too much overrated when we talk about regular traders, but not sure for newbies, the percent may be even higher.

[ForexGump]

Brokers often talk of the “90-90-90 rule”, by which they mean that “90 percent of clients exhaust 90 percent of their funds within 90 days”.

[anon88459104]

I'd be curious to know if a broker has the right to tell you if they are A-Book or B-Book, I'd be keen to know their business model either way.

[ForexGump]

If a broker doesn't want to explain how they process client trades, especially from a high-level, may want to look elsewhere

[anon88459104]

I agree, my point was how 'honest' do they actually have to be - as ever retail brokers are clouded in a low level of trust.

[MEX_Exchange]

Not true. I run my own brokerage and welcome successful day traders. Most honest brokers usually have an A book which means they make commissions from both traders who earn and lose money, as long as they trade. Ideally, you want a trader to be successful as that would mean he trades more and lasts as long as possible.

For dishonest brokers who are attracted by B books (taking the opposite side of positions), they generally like traders who lose money as when they do, it means they have made money.

So do your due diligence before you find a brokerage. The best option is to find a pure A book client (ECN/STP/DMA) brokers who don't meddle with your trades

[anon88459104]

Essentially you've just regurgitated what had already been discussed - no disrespect intended.

As for running your own retail brokerage/middle person/risk taker...the list goes on, I'm sure you would equally appreciate that retail brokers do not have to tell you which business model they run (at least they don't have to be totally honest). No level of due diligence will uncover a potential clouded truth, unless you have some internal information to hand, unlikely on both counts.

Secondly, I don't see anything wrong with a broker operating both A-Book and B-Book - the reality is that most brokers do indeed use this hybrid approach. As discussed in many trading books (ones of which are endorsed and incredibility well published) retail clients tend to all start under B-Book status. This makes sense as most traders lose, it's easy money for the broker - without the need for the broker to manipulate any aspects of your trade.

Only when you become profitable, net aggregated, does the retail broker push you on to A-Book status. As said, this is when your orders are either past to market or the broker hedges against any open risk that you have. The ethical problem you run into with A-Book is that of retail brokers front running their successful traders (makes logical sense when they know that these elite group of individuals happen to know what they are actually dong. A rarity in this industry)

So going back to the original question, there is no way in earth that any pure retail broker is 100% A-Book. It's an inefficient business model, and with margins so tight for the broker they are not going to ignore this additional element of income. It's not illegal, it's also openly discussed by some of the biggest retail brokers on line. These brokers suggest that at a retail level they will off-set all client net-longs against net-shorts (these trades never hit the REAL market). It's up to the retail broker if they then want to pass to market any exposed risk.

We all know that you never buy or sell anything when using a retail broker - a clear fine cut distinction between that of a commercial broker, hence True ECN. Lets not fool anyone here, True ECN does not exist in retail brokers. Retail brokers simply 'fabricate' an account to reflect ECN. The costs are too high for a retail broker to offer True ECN given the pathetic deposit amounts that retail traders make.

Finally, there is nothing wrong with a retail broker having a hybrid of both A-Book and B-Book. What is wrong is when they start to manipulate trades.

Two different aspects that NO level of external due diligence is going to answer

Edit: A little birdy has pointed out that I am actually wrong, at least on a technicality of how I defined a 'retail broker'. When I say 'retail broker', I am talking of the many many brokers whereby you can [perhaps open an account with less than $10k]. Interactive Brokers (IB) is classed as a retail broker, legally, even though I'd push it more into the realms of a 'professional/commercial' broker; they are however a retail broker by definition and A-Book only - contrary to what I have argued above!

[MEX_Exchange]

I do agree that it is a profitable business model. And we all know how it works with the off-setting of orders. The simple question here is that with an ECN or A Book model, you are definitely left in no position to manipulate trades. With a B Book model, you are left in a position to manipulate trades. Traders and clients are concerned about that possibility to manipulate more than whether you manipulate their trades or not.

Retail brokers can offer true ECN inclusive of which liquidity provider took your trade at the exact point of time it is filled. Most bucket shop brokers don't, though.

[PanchoVilla84]

Brokers often talk of the “90-90-90 rule”, by which they mean that “90 percent of clients exhaust 90 percent of their funds within 90 days”.

So true.

I contributed to that statistic 2 or 3 times early in my career. 2 weeks into my first live account, I found out the hard way what a margin call was lol

Im happy to say its taking the market alot longer these days to take my money

[pip2hunt]

Manipulate trades? Like stealing half a pip? Don't scalp and do trades with at least 30 pips profit and they can try to steal from you what they want but you won't even notice if you are a winner

[pip2hunt]

2 weeks into my first live account, I found out the hard way what a margin call was lol

that's gambling and has nothing to do with trading. Experienced traeders will tell you you need 10k to open a 1 lot trade. It's a gulden rule

[Suryadi]

agree for that strategy

[PanchoVilla84]

2 weeks into my first live account, I found out the hard way what a margin call was lol

that's gambling and has nothing to do with trading. Experienced traeders will tell you you need 10k to open a 1 lot trade. It's a gulden rule

I couldn't agree more. When I first started trading I was 100% clueless, I had no concept of risk management and I was pretty much gambling. The market has given me plenty of spankings but i've managed to learn from my mistakes over the years.

I was using micro and mini lots btw