Hello,
New to this site. Just a thread caught my eye earlier about a somewhat frustrated trader after he was stopped out by his broker.
One of the replies was that brokers hit your stops on "purpose" and that this action was legal or ok.
Sure it was legal, but this is a major problem for our trading as the odds are stacked against us from the time we enter the trade. Not only will they charge us a spread but they are after our risk capital also.
So is trading a game of a 1 trader wins and 1 trader loses ?
No it is not, neither is it a zero sum game, as the broker is taking 3 pips off me and 3 pips off you.
Trader "A" takes a long position @ 1.2000 with a 20 pip stop and a target of 1.2040. Seems fair enough, 2:1 risk versus reward with a tight stop.
Trader "B" takes a short position @ 1.2000 with a 20 pip stop and a target of 1.1960. Also seems like a good trade.
Both traders are -3 from the start. The market slowley goes to 1.2020 and Trader "B" gets stopped out. Trader "A" is now in a comfortable position as his P@L now shows 17 pips. His target is still 23 pips away and rather than bringing his stop to breakeven he leaves it where it is to give the trade some breathing space. We all know what happens next, 17 becomes 16 then 15 and so on. The market comes back down to 1.2000, then 1.1980 and trader "A" stop is hit.
The above is an example but this is what happens for real in the market on a daily basis. So is it true that losers pay winners ? No. Both traders lost money even when they where going in opposite directions.
Who made money ? The broker, firstly on the spread x2, then on the risk capital x2.
Is this a reason why we should all abondand the FX market ? No, but be aware of what your broker can do to extract your cash.
Take a harsh look at the FX market and your broker and get rid of the " losers pay winners " logo that probably got you interested in the first place, lets face it a lot of people think they can do something better than others " i can beat you" " I bet Iam better than you at this "
Maybe you can/cant, but beware of the middle man. Because he never loses.
Thank you.
PS: As i said in a earlier thread Iam working with an ex employee of a brokerage firm. We are putting together a list of what brokers do.
Looking forward to your replies.
New to this site. Just a thread caught my eye earlier about a somewhat frustrated trader after he was stopped out by his broker.
One of the replies was that brokers hit your stops on "purpose" and that this action was legal or ok.
Sure it was legal, but this is a major problem for our trading as the odds are stacked against us from the time we enter the trade. Not only will they charge us a spread but they are after our risk capital also.
So is trading a game of a 1 trader wins and 1 trader loses ?
No it is not, neither is it a zero sum game, as the broker is taking 3 pips off me and 3 pips off you.
Trader "A" takes a long position @ 1.2000 with a 20 pip stop and a target of 1.2040. Seems fair enough, 2:1 risk versus reward with a tight stop.
Trader "B" takes a short position @ 1.2000 with a 20 pip stop and a target of 1.1960. Also seems like a good trade.
Both traders are -3 from the start. The market slowley goes to 1.2020 and Trader "B" gets stopped out. Trader "A" is now in a comfortable position as his P@L now shows 17 pips. His target is still 23 pips away and rather than bringing his stop to breakeven he leaves it where it is to give the trade some breathing space. We all know what happens next, 17 becomes 16 then 15 and so on. The market comes back down to 1.2000, then 1.1980 and trader "A" stop is hit.
The above is an example but this is what happens for real in the market on a daily basis. So is it true that losers pay winners ? No. Both traders lost money even when they where going in opposite directions.
Who made money ? The broker, firstly on the spread x2, then on the risk capital x2.
Is this a reason why we should all abondand the FX market ? No, but be aware of what your broker can do to extract your cash.
Take a harsh look at the FX market and your broker and get rid of the " losers pay winners " logo that probably got you interested in the first place, lets face it a lot of people think they can do something better than others " i can beat you" " I bet Iam better than you at this "
Maybe you can/cant, but beware of the middle man. Because he never loses.
Thank you.
PS: As i said in a earlier thread Iam working with an ex employee of a brokerage firm. We are putting together a list of what brokers do.
Looking forward to your replies.