Main argument of B-book haters is that ultimately you broker will try to oust you if you are profitable trader, cuz your profits are their losses. However I don't see any possible option for a broker, besides, for example, giving you GBP/USD instead of EUR/USD chart or widening spreads, causing heavy slippage, which can be easily detected and made public property, though. Brokers won't definitely go to such crazy risk. For my 3 years with Hotforex, I even didn't know there are A-book and B-book types, just was focused on trading, fundamental analysis, enjoying economic masterpieces from Stephan Briese , etc. Maybe this is a yet another offspring of their cute marketing managers?
Sounds like one big excuse for those who fail at forex trading. I'm sure that these things happen but if you're a good trader, you can still profit in the forex market...or any market for that matter.
...but now we know that they just move the 10% of traders which are profitable onto their A-Book and hedge them, so it doesn't seem to me like profitable traders pose a threat. If anything, the more money the broker makes with B-Booking, the less they need to make money in other ways, so it sounds like it's actually a positive for their clients, at least in theory. Oanda for example has very dynamic and sometimes wide spreads, but at least they're totally transparent about them, which is why I'm considering them. My spreads are much tighter at I.B., but the counterparty risk is giving me second thoughts long-term after the CHF thing. That's my current line of thought as well: unless you're trying to scalp for tiny handfuls of pips at a time, the wider spreads shouldn't be a deal-breaker.
Yeah it is called hybrid systems it is not a problem for a profitable trader to live together with it.
usually if im not mistaken, brokers that loose from traders winning, are market makers right!! true ECN brokers are not affected by wins or loses right?
All that article says is that random trading is unprofitable, something even a lot of idiots have figured out already. Nobody needs a MC sim to tell them that only a small percentage of long sequences of coin flips are going to be significantly heads. Nobody needs a MC sim to tell them that only a small percentage of casino players are significant winners. Likewise nobody but a complete idiot thinks trading randomly has any hope of being significantly profitable. Sure, every now and then some mega-idiot posts here that money management is all that matters but even most ETers who can't find positive expectation know that they'll never be long-term profitable without it. First find an edge,then apply the money management. This is just another blog article killing time and space by belaboring the obvious.
This happens in equity options and cash equities. Firms like UBS, Goldman, Knight Capital, etc. pay brokers like Etrade, Schwab, etc to send their customer orders to them where they get first look to see if they want to take the otherside. If they don't then they send it to the exchanges to transact wit the open market. Interactive Brokers does it as well with their Timber Hill outfit.
we don't think money management is "all you need" we just beleive it is the foundation of trading. 90% is money management 10% is guessing right. You are correct, you need some kind of edge to improve your guessing to a point better than random, but I would not make my guessing the foundation and then try to build a money management strategy to custom fit my guessing. and overtime the money management and the guessing become seamless, you can't tell where one starts and the other leaves off, because 10% becomes guessing on the proper money management.
Not seeing why you need to build a money management strategy, it's already been built. The best public-domain estimate of your optimal trading fraction is Max[ 0, s1 ]*(s2*s2 - s1*s3)/(s2*s2*s2 + s1*s1*s4 - 2*s1*s2*s3) , where Sx == sum[ (Ri)^x ]_i=1toN ; x == 1, 2, 3, 4. http://www.elitetrader.com/et/index.php?threads/a-new-kelly-formula.291307/ Without an edge aka positive expectation (s1 > 0), your optimal trading fraction is zero. What other money management do you need? If you need the exact optimal trading fraction, then just solve the Kelly equation: 0 = sum[ Ri/(1+k*Ri) ]_i=1toN http://www.elitetrader.com/et/index.php?threads/kelly-for-traders.102205/