Imagine im very good trader who can make 1000% return on my account each year. I start with 100k and in the end of year i have 1mil i leave this money in my account and start 2nd year with 1mil making 10mil by the end of the year, and in 3rd year i have 100mil IN MY ACCOUNT. What my forex broker would tell me? will they go bancrupt and take all the money or what?
Worry about just breaking even first.
And a good broker won’t care. You’ll be paying massive dollars in spreads.
Also, 1000% compounded isn’t 10 times your account starting balance, it’s actually much more.
1000% annually starting with a $1,000.00 is this:
1 : $1,441,774.09
2 : $2,078,712,533.35
3 : $2,997,033,876,032.97
But again, don’t worry about that. Just try to keep the money you put in there at first…
I agree with master tang. Regarding if the broker will steal your money I think depends on the person/persons in charge of the broker, or if the broker is truly legit etc.
If you are a very good trader who has 100K to start with, I would not recommend any retail forex broker. You would be better off going with a U.S. registered futures brokerage, and trading commodity futures as opposed to spot forex. They trade almost identically, except currency futures are superior in a variety of ways (including a federally required bonds posted by each broker to guarnatee funds will clear. More regulated and more secure than U.S Banks in general)
Why don’t more people trade futures? because a very experiened, solid trader would need 10K minimum to make it in this marketplace due to the high per pip contract value. A single futures contract in say, eur/usd is $12.50 profit of loss per tick.
Furthermore, once you reach a six or seven figure sum, you would be advised to open a prime brokerage account, or work directly with one of the major banking firms who support direct access to the interbank market… or at least one that is out of the retail forex arena (dukascopy is one that many traders use…a registered swiss bank that is so secure they provide a pin number than changes with every log in for customers, in addition to passwords, safeguards, checks and balances…etc. Guess that’s why the swiss are the tops in banking)
if i am understanding your question correctly, you are wondering if your broker will go out of business if you earn a lot of money from the forex markets? no, because you and others pay for their services with the pip spread on each transaction (some are also rumored to make money off of their clients in other backhanded ways), but your broker is not the party who is paying you when you trade profitably. the many people in forex who are losing money…are the ones who you are profiting off of. and would the broker take your money? well, i am sure that there are some who would. you need to research and pick legitimate brokers. sorry if i am being presumptuous or getting off topic - but this is how i interpreted your questions.
Yes brokers are only there to provide you with a service to buy or sell your specific instrument. Although some MMs do take the other side if you are trading that large amount then only trade regulated instruments. Where brokers truly are brokers not some mm trying to bucket your order then hedge your order on a higher tier. Even if bucket shops did start to take huge losses due to your trading if they were reputable in the first place, I dont know why you would deposit that large of a sum with someone youdidnt feel wasn’t. Then they will just have to bite the bullet and do what they are supposed to do, profit solely from the spread they offer. Instead of all the extra gravy they get from losers. Assuming it’s a MM of course. ECN you will trade directly with other parties whom don’t know your identity just see your order in the ladder like everyone else. Then you pay a commission to your broker and he couldn’t care less how or why or what happens to your trade. Well losing a big commissions check might suck but you busting your account would suck more for you.
Yup, lots of brokers just make the spread through your trades so they aren’t losing anything. Those that are acting as MMs keep an eye on the big accounts - like the ones with 100k plus and check whether they are winning or losing. Those that are winning they just trade with and make the spread, the ones that are losing they just laugh at. Thats why you have a specific guy that looks after your account in case you make it good.
I guess if he is that good they would rather trade with him instead against him, lol.
Then I do think not many bucket shops trade against their clients. If they are not crazy. The issue rises from another point: Order execution. Here is why:
A driver of a bucket shop is likely not a good trader, because if he would be a good trader, he wouldn’t need a bucket shop. Brokers do make money with spreads, commissions, etc. etc and that makes excellent money, because it is safe money. What drives commissions and order fees? Bad order execution! Plus it saves expenses, because they do not need reliable servers. The worst things what I’ve heard and experienced with those is that they have looong execution times and that leads to the requote game. That gives them a huge artificial spread, which nobody mentions on their homepage. Plus some of the worse use other techniques like spread widening, etc.
If you want to trade without headaches in the spot fx, then use an ecn and even there look far and for a long time until you make your decision.
Well, there’s no sense dreaming about what could be. What you really need to focus on like others said is just being able to break even, then you can focus on making a profit.