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Beware who your broker is?


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Beware who your broker is?

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  #1 (permalink)
salt lake utah
 
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It's rather sensitive subject and not sure if it's been asked before. I watched a youtube video couple days ago where Anton Kreil gave seminar in one of the university I believe in London. He said that many of the broker actually put a position againts the losing trader or going with winning trader. I thought it's very clever. Also if I understand correctly, in one of the futures trader 71 webinar he said he can't believe why some of his client put trade order at that specific point of time. I thought is it just coincidence or is it really that scary if it's the truth. Any comments?

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  #3 (permalink)
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rintin2x View Post
It's rather sensitive subject and not sure if it's been asked before. I watched a youtube video couple days ago where Anton Kreil gave seminar in one of the university I believe in London. He said that many of the broker actually put a position againts the losing trader or going with winning trader. I thought it's very clever. Also if I understand correctly, in one of the futures trader 71 webinar he said he can't believe why some of his client put trade order at that specific point of time. I thought is it just coincidence or is it really that scary if it's the truth. Any comments?

That may apply to certan securities, e.g. Forex, but it does not apply to futures. With futures you have the so-called DMA (Direct Market Access) which means that as soon as you enter an order, the order is immediately placed on the relevant exchange. So the brokers do not take any position on your behalf.

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@xplorer Thanks for the participation. What you said is correct but i believe your broker knows if you're in a position also if i guess it correctly and know either you're long or short. I probably looking some sort of answer/explaination from gray area/taboo topic and won't be going anywhere. Thanks again for your reply.

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  #5 (permalink)
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rintin2x View Post
@xplorer Thanks for the participation. What you said is correct but i believe your broker knows if you're in a position also if i guess it correctly and know either you're long or short. I probably looking some sort of answer/explaination from gray area/taboo topic and won't be going anywhere. Thanks again for your reply.

Yes, your futures broker knows if you have a position on and what position it is.

But knowing your position is different from taking a position against you.

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  #6 (permalink)
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this technique was used in forex industry all broker forex Trade against you

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This is a 2 hour video, and I watched as much as I could stand. Iím sure he and others will say he is a fine human being, and perhaps he is, I make no judgment, but this is the biggest bunch of gibberish I have listened to in decades. I watched this video and took notes for 40 minutes of my life that I will never get back, because that is how loooooooooooooong it took to reach the reason for your question, which reminded me of an actual scam that occurred in the early 2000ís and I thought perhaps he was alluding to that.
First, the scam.
Given that a large percentage of futures traders lose ALL their money, a group of brokers set up a futures brokerage, and rather than sending the trades through to the floor or cme electronic system, they simply took the other side of the trade. They were very profitable, and I donít remember how they got caught, but they were prosecuted, and I thought you might be referring to a scam like that. Now, to your issue as brought up in the video.
Kreil states four conflicts of interest between you and your broker: Spread, Commission, Financing Turn, and OTC Gain.
Spread Ė DUH, there is a bid and an ask, and the difference is the spread. This does not preclude you from offering out your stock or futures contract wherever you you choose.
Commission Ė yes, you pay a commission and an exchange fees.
Financing Turn Ė When you buy stock on margin you pay to borrow the money to buy the stock, I donít get how this is something dirty.
OTC Gain Ė I am not familiar with this, I have only traded US stocks and this doesnít apply, sounds more like bid ask to me.
From your profile, I see you are in Indonesia, and have been trading since 2013. I know NOTHING about Indonesian access to markets, and maybe you have a particular situation regarding access to brokers that makes this video pertinent. For US traders this is ridiculous, I have know many Euro traders who also do now face these kinds of obstacles, I suspect other members here will weigh in if you provide more detailed info.
In the meantime, I wish you well, preserve your capital, and stay safe.

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This is a 2 hour video, and I watched as much as I could stand. Iím sure he and others will say he is a fine human being, and perhaps he is, I make no judgment, but this is the biggest bunch of gibberish I have listened to in decades. I watched this video and took notes for 40 minutes of my life that I will never get back, because that is how loooooooooooooong it took to reach the reason for your question, which reminded me of an actual scam that occurred in the early 2000ís and I thought perhaps he was alluding to that.
First, the scam.
Given that a large percentage of futures traders lose ALL their money, a group of brokers set up a futures brokerage, and rather than sending the trades through to the floor or cme electronic system, they simply took the other side of the trade. They were very profitable, and I donít remember how they got caught, but they were prosecuted, and I thought you might be referring to a scam like that. Now, to your issue as brought up in the video.
Kreil states four conflicts of interest between you and your broker: Spread, Commission, Financing Turn, and OTC Gain.
Spread Ė DUH, there is a bid and an ask, and the difference is the spread. This does not preclude you from offering out your stock or futures contract wherever you you choose.
Commission Ė yes, you pay a commission and an exchange fees.
Financing Turn Ė When you buy stock on margin you pay to borrow the money to buy the stock, I donít get how this is something dirty.
OTC Gain Ė I am not familiar with this, I have only traded US stocks and this doesnít apply, sounds more like bid ask to me.
From your profile, I see you are in Indonesia, and have been trading since 2013. I know NOTHING about Indonesian access to markets, and maybe you have a particular situation regarding access to brokers that makes this video pertinent. For US traders this is ridiculous, I have know many Euro traders who also do nor face these kinds of obstacles, I suspect other members here will weigh in if you provide more detailed info.
In the meantime, I wish you well, preserve your capital, and stay safe.

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  #9 (permalink)
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@Sunstone yes the video is long and i watched half of it too. I personally don't care about what he does (teaching traders in paradise island show lol), but he is very well known and very interesting to hear what he has to say about it. That's why when I heard another broker said something similar, I just connect the dots and starting discussions. No finger pointing. Just an intersting topic to hear what other traders here think. About Indonesia, yes thats where I was born. Thanks for your participation.

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Sunstone View Post
a group of brokers set up a futures brokerage, and rather than sending the trades through to the floor or cme electronic system, they simply took the other side of the trade.

I have been wondering that exact same thing. As retail traders how do we know our orders ever even reach the exchange?

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  #11 (permalink)
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Grantx View Post
I have been wondering that exact same thing. As retail traders how do we know our orders ever even reach the exchange?

Tsk Tsk Tsk Grantx.... if you've been watching the DOM long enough you should know better....

As an afterthough - you have placed live trades, haven't you?

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xplorer View Post
Tsk Tsk Tsk Grantx.... if you've been watching the DOM long enough you should know better....

As an afterthough - you have placed live trades, haven't you?

Yeah Ive been live trading and demo trading and thats the thing, its impossible to tell if my orders ever reach the exchange or get diverted somewhere else. It moves so quickly that during periods of high liquidity, unscrupulous brokers could easily divert some of the consistently losing retail traders to a lovely little money making exchange on the side.

I love a good conspiracy.

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Grantx View Post
Yeah Ive been live trading and demo trading and thats the thing, its impossible to tell if my orders ever reach the exchange or get diverted somewhere else. It moves so quickly that during periods of high liquidity, unscrupulous brokers could easily divert some of the consistently losing retail traders to a lovely little money making exchange on the side.

I love a good conspiracy.

Yes, it would seem you do!

This is my live account (bear in mind this works only with a live account).



I trust this assuages your conspiracy theory fears

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xplorer View Post
Yes, it would seem you do!

This is my live account (bear in mind this works only with a live account).



I trust this assuages your conspiracy theory fears

Haha cant argue with that xplorer.

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Did you guys ever bother for a brief second to go to the home page of his "institute"?
Right on the home page, there are four brokers he is referring to while three are FX and CFD brokers.

In the U.K there is a concept of I.A which is Introcing Agent, namely, you introduce customers to a brokerage, get paid on in but you can not guide or be an intermediary with the clearing house. You do not need to be licensed to be an I.A and as the name suggests, you only introduce. In my personal opinion, he gets paid for the referral of customers. So brokers are bad UNLESS you get paid on the flow?

I find extremely unprofessional (putting it mildly) that he uses such tactics to draw in beginners.

After you throw away all the useless indicators you bought, courses, lifetime licenses for software, etc. The only person you would stay with is your broker. He/she will be your longest term partner.

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The brokerage most likely to do these types of things are your non-ECN forex brokers.

The typical non-ECN forex brokerage always trades against its customers - it is just the only way to do this when there is no exchange. However, doing this carries a risk in that the customers can suddenly be right and the brokerage will suffer losses and go out of business. Therefore, once their exposure reaches certain thresholds, the brokerage will just go to another participant and hedge the exposure that is out of line. Even though they are technically trading against you, their business model relies on lots of traders executing lots of trades that net each other off and allows the broker to earn commissions (spreads).

The honest non-ECN fx brokers do not make money betting against you. If a fx broker wanted to screw you over, they could either provide you with false prices that stop you out or widen spreads that stop you out. I only traded with OANDA, but I had a Bloomberg on my desk and could compare fx prices. OANDA's prices were legit. Regarding the widening of spreads, OANDA did widen them to discourage trading around news events, but it was mostly done to reduce their risk. It was extremely annoying to be stopped out of positions merely cause the spread widened, and not trading around those times was the only option. Their model was not aimed at fleecing me, but rather at earning commissions while keep their risk low.

So, how does this relate to futures? Quite simply in that a brokerage that trades against you carries risk. Apart from the obvious market risk, it carries regulatory risk (can I be fined / disbarred) and reputational risk (will I lose all of my clients if this becomes public). Even if the broker decides to take these risks, there are still easier and much less riskier ways to make money. If you have have a large client base, the interest you earned (before 2009) would have been pretty significant. Not sure how brokerage adapted to this low-interest rate environment, but I am pretty sure there are other ways to make decent money (managing funds for instance).

Of course a broker who is struggling financially, may resort to these type of shenanigans, but he would most likely be put out of business sooner or later. A bigger risk would be that your broker goes bust (MF Global - https://en.wikipedia.org/wiki/MF_Global) and you can't get your funds back due to some legal loophole no one noticed at the time. Or just plain fraud that the auditors never picked up (https://en.wikipedia.org/wiki/Peregrine_Financial_Group)

@mattz is most likely correct - this guy is just trying to earn referral fees.

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mattz View Post
In my personal opinion, he gets paid for the referral of customers. So brokers are bad UNLESS you get paid on the flow?

I find extremely unprofessional (putting it mildly) that he uses such tactics to draw in beginners.

I dont understand what you mean. You refer customers and get paid on the flow dont you? How is what you do any different?

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