After reading posts throughout the various FOREX forums, as well as a question of my own, I was hoping someone could explain how dealers "trade against"their clients. Also, how is this possible with these large firms having so many clients and just about every type of order. They can not trade agains EVERYONE.....can they? What is the theory on how to profit if the dealers are working agains us - i.e., never place stops, limits, other, etc? Thanks, Golflyer
If they can't f**k up your trades they will try to defraud your account, maybe adding transactions you never made or making your losses look even bigger in your statements. This is a no brainer mate, stay away from spot forex dealers, spreadbetting and cfds.
It's really very simply, Golflyer. If you buy something, the bucketshop's computer will be programmed to make you buy, on average, for prices excessively higher than you should reasonably pay. If you sell something, the bucketshop's computer will be programmed to make you sell, on average, for prices excessively lower than you should reasonably pay. The bucketshop has total control and monopoloy power over the price you pay, because their arrangement involves no competition between market-makers or other market participants. It is just you and the bucketshop; which is not really a market at all, because a market, by definition, consists of many competing buyers and sellers. Competition between buyers, and between sellers, in a true marketplace, makes impossible the endlessliy varies abuses perpetrated by bucketshops. The bid-ask spreads, advertised by bucketshops, are meaningless, because of all the dirty tricks they play to make you pay MORE than the spread, without even realizing you are doing it. You want to know the theory on how to profit from this situation? The answer is you that walk away and you find a better situation. You find a situation in which you are trading as part of a competitive market, with many buyers and sellers competing for each side of each trade. If you want to trade spot FX, you close your account, and you move to Interactive Brokers, because they will allow you to trade in a truly competitive marketplace, instead of a bucketshop.
I once again appreciate the feedback and honesty. 1. I am still trying to get my arms around why firms like FXCM, GFT and others can stay in business if so many people are losing money because of their trade practices. 2. Why is GFT and FXCM able to draw new clients...at all? 3. Are you suggesting there really is NO free market for traders with the likes of FXCM, GFT, etc? 4. Are GFT, FXCM clients ONLY trading against other clients of theirs? 5. Who are clients of IB trading against? Other IB clients? Directly against interbank participants? Other? 6. If clients of these firms are not trading a true free market, wouldn't the prices quoted get out of line with other dealers? 7. With so many dealers, dont prices have to have some relationship to the true interbank market? Thanks Golflyer
You sound like a sincere guy, so I'll be honest with you. Is it impossible to make money trading forex? Of course not, that would be a ridiculous thing to say. However.... You have done some searches and have started to put the pieces together. The picture is looking so bad that you were compelled to post on a public forum saying that you've heard all these bad things, and are they true? The first response you got is from a reasonable sounding poster, confirming everything you've heard and warning you to stay away. In addition, you have likely been doing this process at other forums as well. Your response to this post indicates that you really don't want to believe what you yourself have suggested. I'll show you what I mean. Here are the real answers to some of your questions. Why? If you hear this about an industry, from so many different sources (all those different forex forums you are going to), then why are you still wondering? If I tell you that you'll burn your hand by putting it on a stove, and if everyone else tells you the same, do you wonder why we are saying it? Are you asking why people get defrauded? It happens every day, all over the world. It's because people are credulous and naive and greedy and lazy. By now you've heard several people tell you straight out that this is the case. Why are you asking if it is being 'suggested'? Sorry, but is this a serious question? You don't think a forex bucketshop has the ability to get a quote from the interbank market and keep their 'quotes' in line with that, or from other bucketshops? Again, you have been told how the system works. What is the relevance of this question? Here, you are essentially saying "I can hardly believe all of this is true!! Please, someone, tell me it isn't.' Most people like you are in the following situation 1) They heard about something called 'forex trading' where you can make a lot of money 2) They have a small amount of capital, usually less than $10,000 3) They then open an account and lose their money and wonder what went wrong. This is the bread and butter of the forex shops. You seem to have one thing over those people in the sense that you have tried to get some information, and what do you know - the information you are getting is all warning you away. The majority of the people who are encouraging you to try are the ones who can make money off your attempts. The question remains - if you want to try trading, and you are interested in trading currencies, why not trade currency futures? At the very least, pick your broker with extreme care. You are still asking questions about places that are known to you to be bucketshops, and that is not a good sign. Every time someone posts like this (and it happens a lot these days) the end result is - IB is the only broker for spot forex.
Gee, what do you know. http://www.elitetrader.com/vb/showthread.php?s=&threadid=61360&perpage=6&pagenumber=1
An interesting perspective on the psychology of greed and denial, traderNik. I think many of Golflyer's questions were answered by P.T. Barnum, who observed, "Nobody ever went broke underestimating the intelligence of the American people."
Nik How about telling us your personal experiences with the brokers you joined. I trade forex with GCI, FXCM and oanda and Interactive brokers at the moment (and futures with Interactivebrokers). If I take oanda as an example . I opened a short on yen that went against me about 120pips. I wasn't worried though as my outlook on the market was that it was due for a turn, so I added some more to the position, in fact I added 3 times till my total was about $100,000. It finally went my way and I made a few hundred dollars. If I had done that in my futures account, with just one contract I would have been down over $1000 - and too much fear to add another position. Actually I would have probably closed it out around a $600 loss and be too unsettled from the loss to go short again. I probably trade futures as much as forex - but I use futures more for scalping and forex for trades of a few days where I can take smaller positions, and easily add to them. I also trade the NZD and other exotics a lot and certainly the spreads on the futures market get wider than on forex- What is you experience there? On futures I got stopped about 20 ticks below my level once, and swore I'd never trade a NZD future contract gain, whereas with say Oanda I've never had a problem trading the cross.
so what you are saying is that you position/swing trade fx for a few hundred $ over a period of days, and you scalp futures (probably for a few hundred $) implying a much shorter holding period. you imply yourself that you are under funded for swing/position trading futures due to emotional reasons (nothing wrong with that - just an observation) so basically, you have 2 methods to get a few hundred $. thew difference is, is that 1 method has a longer holding period than the other. a longer holding period means MORE RISK. so trading fx is again more risky, takes more time, etc. why bother? could it be the emotional gratification of getting a big move in when you look at the chart rather than the money? just a thought.
Hi roberk I have never traded spot forex; I have traded currency futures. Ummm... I am not 100% sure what you're saying here. What was your stop on the trade? How much of your capital do you risk in each trade before you definitively pull the plug? If you are saying that you added to the position because you were sure the market would turn and that you had it planned that way all along... well, that's great. Congratulations on that trade. Again, I'm unsure about what you are saying here. Is it that you can let positions 'breathe' more trading small spot forex positions? Maybe you're saying it's easier to leg into positions in spot forex if you don't have a huge trading account? If so, that may be great for a certain of style of trading. I personally leg into positions too, but my stops are worked out before I enter the first leg, so my opinions after the first leg goes on don't really matter. It wouldn't matter to me what my 'outlook' was - my outlook would have been reflected in the position I put on in the first place. I very rarely if ever add to losing positions. Instead I get out and wait for the market to provide me with fresh evidence that my initial judgement was correct. I've read about lots of guys who average down, though, including some heavyweights. I don't scalp anything, ever. I treat futures as you do spot forex. In currency futures I have never traded the NZD, only the CDN and EUR and GBP. And yes, I've been filled away from my stop in a fast moving market. It is a new idea to me that bad fills in fast moving spot forex markets are, for structural reasons, less likely to consume xx% of your equity-at-risk than a commensurate position in a fast moving futures market. I would be very interested in knowing if this is the case, because it could affect my trading decisions. As I stated in the first sentence of my reply, it would be ridiculous to claim that you can't make money in spot forex. I firmly believe that a good trader can make money in almost any market, as you probably do. My reply was meant to point out to this individual that the pattern of questions he asked and his reactions when those questions were answered indicates to me that he needs to be very careful in his decision making process. My guess is that he already has an account opened at one of the brokers he mentioned. There are bad horror stories out there and if I sound a little paranoid, fine. If one guy gives a second thought to opening an account with a company that would have bucketed his orders, fine with me.