Can someone explain to me how large brokers can employ the market making model even if they claim to not have a dealing desk? As according to this article: dailymarkets.com/forex/2010/05/12/a-bigger-forex-broker-doesnt-mean-its-a-better-forex-broker/ Much appreciated!
Be careful with STP brokers. Only one I’m familiar with is MB. The problem with STP, is they charge a commision. So, when you lose a trade you pay a commision on top of the loss.
Also, STP brokers still have spreads. And generally can’t guarantee a usual consistant spread like the market makers. So, when you lose say 10 pips, it’s -10 pips - commision. Win +10 pips - commission. EVEN WHEN YOU WIN you still lose a bit with commsion charges with a STP broker.
With a broker that charges the spread you only pay once. Beat the spread and win, and nothing is charged to your account.
About the casino comment… Yes, forex is gambling. But, let me qualify that remark. ALL trading is speculation. Speculation is making a bet based on probabilities and or tendancies that you see. You expect something might happen, but it is never certain. You can never be 100% certain.
Like a casino forex has players that are absolute amateurs on vacation in vegas and dont know really anything about PROFESSIONAL gambling. These types are just throwing money in and hoping to strike it rich and dont have a clue how to play the game…speculate, and do it in a way that is consistently profitable.
The thing about forex trading is that is has a very low entrance threshhold. You can literlly start a live account with a few dollars. So, in that respect it is very much like a vegas casion. You have a lot of, “vacationers,” passing through and throwing money at it without a clue about what they are doing, while the proffessionals are off in the high stakes rooms.
If you bought a house hoping it would go up in value in 1 year to sell for profit, that is speculation, which is gambling. You are betting it will go up in value and that someone will buy it from you for profit.
All traders should learn and accept the above. It would save many of them time trying to find the perfect method that is always right and never loses a trade. You can make any method profitable if you just control losses and find a way to let winners run so they outstrip losers.
[B]The brokers will NOT always take your money eventually.[/B] [I](And either will a casino if you know how to play cards or dice well) [/I]
The good brokers are NOT trying to take your account, they want you to trade because they make money on the spread or commision. If you stop trading they stop making money from you. If they were purposely taking peoples accounts it would easily be proven and they would be in hot water.
That said, the big money does stop hunt. The big money is banks and financial institutions. Why do they stop hunt? Because traders usually hang their stops all around the same places. PUshing price up just enough to trip 1000’s of stops makes them a lot of money.
I recommend those larger brokers you mentioned because from my experience (IBFX) and research (all the rest), they are upstanding companies who have won many awards.
As far as, “low spread,” I have to laugh when someone says 1 or no pip spread on anything other than EU. If they dont have a spread and they dont charge commission, then you can bet its a scam so a small company can take your account money.
Also, if you are worried about spread from the get go I can only assume you are thinking of scalping. [B][I] If you are new to trading. DO NOT scalp.[/I][/B]
It is one of the hardest things to do in trading AND be consistently profitable. If you are new learn to long term trade from daily candles first. Look for trades that will at the least start on monday and last a few days. This will allow you a big stop loss and big take pfofit and keep you from overtrading. With longer term trades the spread becomes a non issue.
When you get more experience then slowy go down in the timeframes if you want. Best pair would be EU, its the most heavily traded and has more consistent, slow and steady, movement than most of the other pairs. It also has a very small spread.
ThePHoenix,
Thank for your reply! I have learned a lot. I wonder how they measure the commission? And do you recommend Dealing desk or STP?It seems that they both have pros and cons, good and bad companies. Last…what are the main components you usually look when you are choosing a broker?
Again thank you very very much for your help!!
If you look at MB’s site they tell you how much they charge in commission and how it’s calculated.
Usually when someone is looking for an STP broker as their first it’s because they’ve read all the sour grapes traders horror stories about how they think their market maker broker stop hunts them. Such is not the case.
I would recommend a market maker, because with an STP broker, you have to beat the spread, win AND make profit past your commission to come out ahead. Thats three things going against your trade from the get go.
With a market maker, you just have to beat the spread and win the trade.
I look for reliablilty, honesty and good customer service in borker.
For me, as long as it is certified by NFA, it should be safe. I would want to sign up with a small but promising broker since they mostly give out more freebies to attract customers.
Money Is Everything. 
I did a lot of research on what broker to choose. Every time I thought I found the right one, I’d then find something negative about them on the net (usually in forums). I guess there are always going to be people who have had bad experiences for whatever reason. In the end I decided to go for an EU regulated broker and a good reputation for customer support (tadawul FX) – because that’s important to me.
So far so good 