Hello, there are so many misconceptions, rumors and stereotypes out there regarding forex trading. The FX landscape has been changing drastically around the world and especially in the USA. If anyone has any questions regarding the industry, brokers, or the role of the IB ask away!
What is stopping a broker from frontrunning big orders that their clients give to them? Can this be done without being caught?
If you look at the statistics regarding profitable retail traders front running an order would probably be the last thing a broker would want to do! That being said most brokerages model isn't trying to look for orders to front run. They are either trying to build up their volume and earn a small markup on the spread or they operate a dealing desk where they are the counterparty to your trades.
Thanks for the reply, "If you look at the statistics of profitable retail traders" Where can I find these statistics? I could learn a thing or two from this thread Thanks
fxvipservice, Welcome to ET. It is a well known fact that the dominent platform in FX is MT4. This platform is built for dealers and the marketing is geared towards the benefits to the dealer, not the trader. Boston Technologies has marketed plug-ins to the dealer to utilize, which is great for the dealer, but not so great for the traders (clients). Knowing this and understanding that there is MORE profit to be made by the dealer than just relying on spread mark-up... how would you explain the recent CFTC actions taken against various dealers? ES
Any chance the recent rules will get changed back? I used to be able to "set and forget" by setting stops and limits beforehand. Also used to be able to go short and long at the same time. Wondering if you've heard anything about the legal landscape.
Hello and thank you for a great question and allowing this thread to continue. I'm hoping we can openly discuss these topics and all learn and explore FX related topics. I agree that MT4 is the most widely known and accepted platform for the retail trader not necessarily because "it is geared towards the benefits to the dealer, not the trader" but because of the ease traders can automate and incorporate expert advisors(automated trading robots) and if you switch brokers you still have the same platform(just a different logo in the upper left) and the EA you've invested time and money automating can be transferred and used without interruption. As far as virtual dealer plug-ins etc that is a function of the integrity and honesty of the broker a trader chooses. That is the real value of using an introducing broker, selecting one of the few honest brokerages to trade at could be one of the most important decisions traders make. Even if the virtual dealer plug in did not exist if you are trading at an unethical broker they could stop hunt, spread widen and manipulate the price feed to generate off quotes, etc to impede your strategy with real dealers. With the increased regulation and evolving/consolidating industry there seems to be a bigger push towards the broker/dealer model of brokerages having fiduciary responsibility to provide best execution and no interference with their clients trading. This is a trend but by no means law and there are plenty of brokerages out there still engaging in these practices and unfortunately it is still up to the trader to avoid opening there. The good news is that there are actually honest Forex brokerages out there that are truly straight through processing their clients flow and are allowing a fair playing field for their clients to execute their strategy without ever manipulating the price feed or execution.
This depends on where you live in the world. Hedging(being long/short at the same time) is legal outside the USA. As far as entering stops and limits beforehand, this is possible depending on what platform you are using.
fxvipservice, I have nothing to do with the content of threads other than watching for spam. I am first a trader and second a moderator. I can make mistakes and your handle was troubling to me at first. But I think you will respect the rules of this forum and I look forward to your posts. Lets make this thread all it can be and cause ET to be a reference place for the hundreds of thousands of Forex Traders to turn to for industry information. As far as your response to my points, it was weak. MT4 targets marketing for dealers in the growing industry of Forex. Naturally traders are needed for it to work, but usually the dealer gets the clients. The fact that Boston Technologies (Boston Technologies is Metaquotes USA Distributor/Sales agent) offers software that provides the ability for dealers to make more money off the sweat of the backs of traders is the point. Why would they do that?...and then say well it is HOW the dealer uses it that is the violation...I say that they could simply not offer this software period. Oanda has chosen not to use this licensed software and posts openly about it in their forum. In the unregulated market of Forex without a regulated quote feed it is just too easy to be dishonest. I believe that the majority of Forex dealers make money on MORE than just the spread, but I could never prove it. ES
I completely agree that many brokers make money on more than just the spread, trading is a zero sum game. You make the point of selecting a broker that does not even have this software available to them and there are some brokers that don't have this plug-in. My point was that whether the software exists or not a live dealer could do the same things as the software and unfairly influence your trading. The key point is in the selection of the broker. FX is an OTC market which makes the counterparty you select the first and most important decision when you begin trading a live account. I agree with your assessment, select a broker that is truly straight through processing your flow and one that doesn't have the plug-in to manipulate the price feed against you.