Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
How to know if a Forex dealer is taking the other side of your trade?
Other than taking their word for it, or what others might say on the forum etc --- how can one be sure a forex broker is not taking the other side of your trade? Is there a list somewhere that can be trusted?
Can you help answer these questions from other members on NexusFi?
ehmm would it be an issue if they do that? The prices they quote have to move in sync with the real spots which they have no control. So if they take a trade against you and the real spot price move against them, would it not be perilous for them?
I would think the only problem is they increasing the spread so wide that it could hit your stops.
I don't trade Forex, so I'm ignorant about the issue. So, what would be the difference between the broker taking the other side as opposed to another trader?
I don't know how you could figure that out...FXCM for example has no dealing desk but does in fact trade against thier clients. I suspect most all do the same
When you sign the agreements with your broker/dealer it states that they are your "partner" and when you buy they sell and vice versa .
From the MB risk agreement that must be signed before opening an account .....
(1) TRADING IS NOT ON A REGULATED MARKET OR EXCHANGE—YOUR DEALER IS YOUR TRADING PARTNER WHICH IS A DIRECT CONFLICT OF INTEREST. BEFORE YOU ENGAGE IN ANY RETAIL FOREIGN EXCHANGE TRADING, YOU SHOULD CONFIRM THE REGISTRATION STATUS OF YOUR COUNTERPARTY.
The off-exchange foreign currency trading you are entering into is not conducted on an interbank market, nor is it conducted on a futures exchange subject to regulation as a designated contract market by the Commodity Futures Trading Commission. The foreign currency trades you transact are trades with the futures commission merchant or retail foreign exchange dealer as your counterparty. WHEN YOU SELL, THE DEALER IS THE BUYER. WHEN YOU BUY, THE DEALER IS THE SELLER. As a result, when you lose money trading, your dealer is making money on such trades, in addition to any fees, commissions, or spreads the dealer may charge.
Therefore theres no reason to NOT think the broker/dealer trades against you in every trade .
One difference is if the broker has taken the other side of your trade and stands to profit if you lose, then they might play dirty tricks with the data feed or platform that they control. Metatrader software which many forex bucket shops use has features on the broker's side (google metatrader virtual dealer plugin for details) that let them play tricks such as freezing the platform or delaying orders.
I raised the question simply because there has been a lot of talk about "I don't want to use a broker who trades against me". People cite that as probably the primary reason for not trading Forex.
Where personally, when I started trading Forex through MB Trading, I noticed zero effects or issues with them "trading against me". I opened the MBT Forex account so I could 1) learn more, and 2) use it for larger term swing trades on the Euro, while I maintained my primary Velocity account for my intraday trading.
I've used limit orders every time, usually placing a limit order @ the current offer and getting filled immediately. There has been no slippage, and there has been no bad spreads. In fact, the spread is almost always less than 1 pip.
Compare this to the futures market, I would have to trade the Micro EUR/USD (M6E) to offer a similar $1/pip risk. I still have no capability of buying into or scaling out of at less than $1.25/tick on M6E, whereas on Forex I could go as low as $0.10/pip. But that is fine, $1/pip is cheap enough.
So then compare the commissions, fills and spread. Futures commissions are much higher. Forex has clear advantage here, as the CME Euro is a secondary market with far less liquidity. On M6E in particular, the spread is enormously huge, often times 5 or 6 ticks.
The only thing left I can think of are: 1) Bad press by some Forex Dealers, like FXCM's recent bad press and $2MM fine from the NFA. This was a result of asymmetrical slippage. 2) Desire to trade a market other than currencies. Obviously if you want to trade an Index or Commodity, Futures are the way to do it.
But as the admin of the site, when new traders ask my advice, I'd like to see them position themselves for the most likely change of success. And I think that for some traders, especially less experienced ones, that means they should open a Forex account first, before a Futures account, so they can minimize risk during the learning process. If the CME Micro's were more liquid this wouldn't be necessary, but unfortunately that is not the case. The CME should really consider lowering margins and fees further on the Micro's to try to create more liquidity.
I agree on lowering fee's for the smaller micro's. Otherwise they just won't compete.
Have you traded during a volitile time? Well, sometimes the other side becomes 'unplugged' a lot of times when things speed up. So, you will get a lot of 'error' messages, but that is using MT4.
If you do limit orders you are much better off! Slippage with buying market is HUGE but completely changes dependent upon the broker. Some brokers there will be 22 pips between bid/ask when things heat up! Others, they just disconnect.
I traded forex for probably 1.5 years and spent a lot of time evaluating. I had little success scalping and believe Futures to have many advantages over market maker types.
For instance, I have had orders closed out on me when the market reached my price (forex.com) but when I evaluated through other brokers, that price wasn't reached within 20 pips!!!!
If you trade long enough with the market makers, and you trade small timeframes, then I think most would agree not to do it. But, if you swing trade and you do limit orders then you are setting yourself up for much better success.
