As I read thru some threads in this forum and also other forums, I have noticed some traders were put in manaul due to scalping or picking. And the rep from some retail MM explained in detail what the reasons were. One of the reason was ultra-short term trading (in and out within minutes) which makes their dealing desk hard to offset. Therefore, dealer has to check the entry price and blah blah... My question is... What does "holding the position longer than couple minutes" help Market Maker if they can't offset within minutes? The reason I am asking is the following. When somebody tries to close the postion fast, that means they have profit which means the market price already moved in trader's favor. If market maker cannot offset that profitable position before the price moves, they ends up loosing wether the postion is closed or not unless the trader waits until the market price bounced back to the entry price. Is this could be the reason for some traders who actually didn't scalp to be put in manaul? Simply becasue Market Maker loose money when those traders (who knows exactly when to enter) doesn't give a chance to manage the risk? Does that mean I should pray the price I entered don't move at least couple minutes and then moves in my favor so that i don't have to worry about putting in manual?
It could just as easily mean that the trader has a loss, rather than profit, and needs to get out fast. When you talk about "offsetting" by the dealer and praying for a couple of minutes of price stability, etc... You seem to neglect the reality that the dealer 1) cannot and 2) need not (as in doesn't want to) offset most individual trades. 1) Cannot offset (externally, that is) -- because of the 1-2 orders of magnitude difference between the size of most trades and minimum interbank trade sizing. 2) Need not offset -- because a) the MM is concerned with laying off their total risk exposure per currency (not currency pair), across all accounts, and b) most traders have a negative edge and lose over time.
Thanks for you reply, You said MM doesn't need to or cannot offset due to several reasons. Does that mean I will be put in manual if I make profit in consistent base? What do you think about the FXCM's rep saying about "ultra short-term" or "picking"? just BS?
Only 1 way to find out... Seriously, every MM is different when it comes to their dealing practices, fair or unfair. In general, I would think the smaller your account and your average trade size, the more stuff you can get away with, in terms of sub-5-minute scalping, etc. You may want to link to that post or quote from it. Most people probably don't remember exactly what was said / what you are referring to... that was a while ago, wasn't it?