Registered: May 2004
01-02-06 07:49 AM
Quote from roberk:
I personally don't trade forex with stops because they are a tempting target for a pip hungry broker. However, the forex brokers have no reason to try to blow up your account. Provided they can make a pip (or more)off each trade then it is all good for them.
Forex brokers do have a reason to try to blow up your account. It is one of the fundamental purposes of any business. It is the obligation every business owes to its owners or stockholders. It is, very simply, the need to maximize profits. The faster you, the customer, loses his money, the faster the broker makes money. Think of it like this. Has your home ever been burglarized? If so, did the thieves only take half of you silverware, half of your cash, and half of your jewelry? No, of course not, they cleaned you out. The industry of retail spot FX brokers, with very few exceptions, is in business to clean you out, and then replace you from the endless supply of fresh meat recruits, rushing to throw themselves off the cliff like all the other lemmings before them.
Why? Well, it is often written that when the famous bank robber, Willie Sutton, was asked why he robbed banks, he was said to have replied, "Because that's where the money is."
Go with a broker that does not profit from your trading losses. Go with a broker that profits from your commissions, instead of from your trading losses. This way, your broker will be on your side, and will be motivated to get you the best possible execution prices, instead of the worst possible execution prices. This way, by taking only commissions, your broker profits best when he helps you to profit, and then, via the commissions you pay, your broker shares in your profits, instead of reveling in your losses.