I have never placed a real FX trade, so bear with me here. I have seen quite a few people on the net claim that the dealing desk will trade against you, or look at your stops and stop you out just to take your pips. What I'm a little unclear on is why, out of ALL the trades being placed through their desk, with different stops, trades placed in opposite directions (buy or sell), etc. would they pick on ONE guy to trade against or stop out. And even if they did, would that not benefit a lot of other people who were trading in the opposite direction?
They don't need too. Metatrader has backend software that slips, stalls or rejects orders within broker-defined parameters. Given the simplicity of such a program, you can bet most FX buckets have similar type software. Happens all the time. Once you get profitable with most buckets, execution goes down the toilet. Instead of executing off the bid.ask, theres a 2-3 second delay, prices will be off at least a few pips on entry or exit. This is an unregulated market and scams like this are completely LEGAL. And common place. All the liquidity relationship transparency nonsense buckets repeat as mantra, nope. Sorry. 95% don't pass the sniff test. Even Oanda has cracked down on scalpers. Not just spread arbitrage. But people in for a quick 5 to 10 pips. hmm.
They don't gun for ONE guy, they try to take out as many as they can at once. It's like a farmer and a sickle: when he swings the blade, he is not looking to get one stalk but as many as he can in that one swing.
From what i have heard mostly they spike price near a major level like a Pivot Point level or a Fib Level that is we a good amount of traders place there stops so they try to get as many as they can and 1 spike.
So which brokers DON'T do this? Do they all? Is it just part of the game? Non ECN brokers that is. I do like some of features the DD brokers like GFT have.
Every Broker at the moment does this no matter what they say they ALL do it like you said its part of the game, that might change hopefully for the better with the new bill that got passed give CFTC more regulation power over Spot Forex. For the moment the best broker imo would be Oanda i hear they do spike prices but not as much as other. ones to stay aways from are FXCM GFT are the ones off the top of my head they looks very professional but they will screw you over thats mostly for interday trading tho or scalping for a long term type of trading where few pip spikes dont effect your trade your fine with any broker that is well capitalized at least above $25 million but there are a few that are over $50 million and Oanda is some where in the $160+ million area. you can look at there capital here. http://www.cftc.gov/marketreports/financialdataforfcms/index.htm Also brokers that use Meta Trader all have dealing desk thats because that the way meta trader was designed, for dealing desk brokers. like a previous poster mentioned it designed to lagg give you slippage etc.
Surprisingly few bucketshops blatantly run stops because it's just too obvious, all a trader needs to do is compare a few charts to see whether a spike was unique or not, it's not rocket science. If you're trading with a marketmaker who consistently runs your stops then the solution would be simple, just find another marketmaker, there are quite a few honest ones around. Don't confuse market players hunting stops with your marketmaker hunting your stops though, you'll see plenty of legitimate spikes occuring around significant levels. There is a thread about Oanda and it's dubious tactics but they're a company who just doesn't care what their punters think, 90% of their customers don't even notice anything is wrong which is why they can get away with it You'll find lots of conspiracy theories about marketmakers, most of them come from people who don't understand the average marketmaker's business model and how they hedge exposure.
It's not necessarily a 'scam', think about it. Why would a consistent loser get automatic instant fills but a consistently profitable trader experience delays at times? Clue: hedging
Yes and no. Hedging exists for aggregate outstanding long.short positions broker-held. But not the winning trader who ALWAYS gets slipped 2-3 pips trading mini's or 1 or 2 standard lots. This is all legal. Its a great way to jack revenue 100-200%. Advertise EUR spread at 1 pip, then slip an extra pip both side. Thats 200% right there. I take it you're pretty happy at Oanda? May I ask if you scalp non-news?