I’m not sure if i asked this question a while back, so please forgive me if i have, it may have been on another forum, just this subject seems familiar. I ask why banks take the opposite position to retail traders, ie stop hunting as many people talk about, why is this?
Thanks
the banks are pure evil, that’s why
—just kidding—
google “forex smart money trading” and a couple of answers might pop-up
First you need to know what orders going. And that’s your trading a million-dollar lot size it’s probably not going to a bank at all. More likely than not it’s never leaving your broker. Most retail traders trade in the B market. As opposed to the markets from bank to bank. Since the majority of retail traders lose it’s a win-win situation for the broker. Your order is only sent off to a bank when your broker for some reason is unable to cover it.
Because banking is a business and they are concerned about making money (and not losing it to speculators) is the shortest and most succinct answer.
As mentioned above your orders likely never leave your broker and if you trade with a market-maker your broker (often) takes an opposing position to you. Many retail orders are way too small to be send to the A order book. Banks are not hunting your stops, sophisticated traders have a much better understanding than retail traders and different entries plus their risk management looks different.
Read the post by Clint on this thread, best and simplest explanation of what happens to your order.
http://forums.babypips.com/newbie-island/67020-we-really-trading-spot-forex.html
You’re backwards here.
The question is, why do retail traders always go opposite of the banks?
And the answer is, retail traders are largely lunkheads.
It would be a massive over-simplification to say that banks do the opposite to retail traders. There’s no one specific thing that any one bank does consistently, let alone all of them. Banks are complex operations, with many different sorts of exposures. They might be trading to hedge their own currency risk after purchasing securities in another country, for instance.
It’s all very complicated, and not readily comparable to what you do.
The post linked to in post #6 above is well worth reading for more information about who counterparties your orders.
Hope that helps!
Nick
I don’t really think there is a reason to be worried what banks do as long as you are profitable and you don’t have any problem with your broker withdrawing your profits.
This is right on the money!
Traders do the opposite and keep paying the price.
That really is the more interesting question isn’t it. I don’t know about lunkheads being accurate, I mean I wouldn’t call a baby a lunkhead for not knowing how to drive a car 
I doubt about them.
i dont know what to say about this, my broker is a bank or is a sub-entity of that bank at least, the only belgian broker i found out exists is a bank as well so …
???
unless you trade $1000000 or more lot size your order likely never leaves the market maker/your broker.
something 95% of forex is traded at the interbank level. there for interbanks don’t run your stops its likely they don’t know you exist.
As funny as that statement was, it unfortunately pretty much sums it up completely = Never-ending win/win for the brokers and banks.
Just your broker bro. How many times and how many people have to say it. The banks just don’t give a rats ass about us. They play a different game to you n me. Its the marketing arm of you broker that fills our head with this misinformation for the sole purpose of seperating you from your hard earnt cash and adding it to their bottom line. Banks good broker bad
I wouldn’t expect a baby to have a forex account either.
Do you really think there’s a difference between a bank and your broker?
Psssssssst… Newsflash: There isn’t one
Also, brokers aren’t interested in people that lose money and quit. They want someone that at least breaks even, or if they lose, it’s a slow drawn out process. Contrary to most beliefs, they also like consistent winners. Their ideal customer can maintain an account balance, and makes lots of trades, because the spread is their bread and butter. Someone that blows out an account in three trades is of no interest.
I’d largely agree with this.
Although this also require that you take liquidity from the market. If your own aim is to make the market, then it doesn’t matter how long your account lasts, they won’t much like you!
Nick
There’s plenty of bucket shops and downright scams that give brokers a bad name. But they are actually your business partner and they do a lot of the work, for a relatively small cut of the profit.
They give you live market information, they give you tools to analyze the market pretty much any way you wish (with platforms like MT4), they find someone to take the opposite side of your trade, and they collect from that someone if your trade is a winner.
That’s a big chunk of the work, you have to admit. and what do we pay them? 2-3 pips per trade. If our net expectancy is about 20-30 pips per trade (and I think it should be around that for a successful trader), then we are only paying the broker ~10% of our profit.
Try finding a partner like that in any other business…
