Brokers monitoring your pattern of trade.

Maybe it's true but I cant stand that this article sound more threatening than informing.You should put it in a good awareness information than describing the situation that can add a complete confusing/doubt to the trader. I know who ever read this article maybe have a various of point of view depend on the mentality or experience but in general term, it will produce a big doubt on newbies and will effect their soul in trader.IHMO

Very well written article, and maybe it's why I can't relate to people who constantly cry about their broker ripping them off. I am particularly in agreement about what you wrote about account size. I have always looked at my FX account as a cash register tray, and not a savings account. Money is to be quickly deposited and extracted from my FX account, and it is not to be saved there! The 1-2% risk rule, that everyone runs around touting to newbies, is a prime example of how people get set up with the mindset that they should have a huge growing FX account. (And why would you look to store large amounts of cash in something that isn't FDIC insured in the first place? Technically you're risking 100% of your capital by letting it merely sit in a non-FDIC insured bank account.)

It was not written to be alarmist, just to introduce traders as to how Dealing Desk brokers run their books. It is not in any way an article written to slam or to threaten, it is an article that hopefully will enlighten some in how an Order gets processed. When bad fills, spikes and slippage happens it is down to liquidity, and if your Broker uses a Dealing Desk it may be that is an internal liquidity issue at that time.

Brokers that run Orders straight to the Interbank and charge a commission on the trip, rather than make profit off the spread, are at the mercy of the overall Market. A Dealing Desk Broker may be able to bridge that gap by using in-house leverage, and knowing the pattern of trade of account holders will help in doing that. There are as many positives to come from this as anything else.

Thank you for the feed-back, points taken, and hopefully the article now reads a little less alarmingly.

thx LFB.Im always a fan of yours.

One should not really worry much about this.
otherwise, you will become paranoid instead of concentrating on your
plan and goals.
If you work according toyour methods, then as long as you make profits,
it doesnt really matter how your broker routes the orders, etc.

this is nothing new. as long as they don't go against you (and right now i can think of spikes to get you SL, or manipulating the price not allowing your trade to exit at TP), it's nothing to worry about. IF you are using a profitable strategy, i don't see why you should care if your profit comes from inside the house or from outside.
the problem is, the more money you have, the more problems your broker will cause you (i can't use the same strategy with a 2k account as opposed to a, let's say, 10k). so... you either split your money with different brokers to keep a low profile... or change your trading style (which is NOT changing the strategy). for me, this means a tighter money management and more time spent in front of the screens... and some other things that i don't want to get into now.

I noticed 2 major slippaged with gft forex, once on NFP which is understandable, but the second one was very strange and cost me 50 pips basically my stop loss for -10 pips was never filled instead it just said order pending meantime price and equity was sliding it wasnt fast movement either was trading gbpusd on sunday when the yen went to ike 96 very odd i was pissed i had to manually close the position but the broker who has a dealing desk, told me next time to call the dealing desk and not cancel the order myself, was really upset at this is this somekind of manipulation?

I doubt that human behavior is so easily reverse-engineer-able that it's profitable; otherwise this would be just as possible for an abstracted entity such as the market itself, which does nothing but create behavioral patterns in turn. (Not that it ISN'T possible; I'm just saying I'd be amazed if every Jack and Jill had the tools.) And isn't an autopilot-profitable-EA the thing everyone's searched for since forever? And they all have that kind of thing?
Saying a low end broker house can do this when this has been the "grail" of anyone from a hometrader to multibillion automated hedge funds for decades, is a bit of a reach imho. No? Maybe I'm just lacking imagination.

Unless there's a guy, waking up at 8, placing a EURUSD long at 9(stop always equal) and closing it at 10(or always the same TP), I don't see this kind of reverse-engineering happening efficiently enough to generate easy profit. But maybe it's enough to pre-filter some things here and there and selectively apply, dunno.

But: I also don't see where this information comes from. Whether there is a common software in use to actually enable this; whether the level of sophistication required is really tons lower, etc.

In short, it feels very "I'll just write it, who needs a foundation in scientifc, empirical studies and papers" as most things on this kind of subject go.

I've read about this ever since I started trading, however not once has there been anyone citing a study, any kind of relevant, reality based research nor hard, solid data to backup claims, provide mechanisms, software, technique etc used and so forth to make it all more believable than the usual "don't use real stops lest your broker utterly destroys you" lore that has not one inch of truth to it(my stops get hit because price goes there, not because my broker feels like a profit boost).

As for the bid and offer and liquidity mechanics of either a dealing desk/internal matchmaking software or the actual pass-through aggregation mechanisms - that's different than what the title of this article reads and most probably a much more complex topic as well.

From what I've read in passing(I think it was a Darkstar post or similiar on a thread where real size was discussed) even a broker like Oanda was/is capable of handling a "yard" (1000 lots if I'm not mistaken) with just a smallish ripple.

Anyone large enough can just utilize an ECN or trade futures in the first place.

Another thing is - where is the problem whether the "real" market or the broker / another trader takes the other end, as long as the passthrough works efficiently?
What I mean is that as long as fills are constant, slippage nonexistant and spread widening contained, what downside is there(read: What are you trying to say? Monitoring and internal mechanics seem to exist, but are no threat? Then be careful? But how so? In what regard? Doing what? Why? And if you are actually capable of placing large orders, why are you at a dealing desk? Wouldn't one rule out the other in the first place for most? Etc.)?
Sure there's inefficiencies in spread size on many many brokers compared to the "real" market, but that's just the compromise of actually being allowed "in" as a small fry.

I'm fine with a market maker when beginning or when wanting micro sizing IF there isn't malpractice such as constant slippage / unfilled stops/orders. As long as that isn't a problem they can try to make profit off of me or anyone; it's fair game, it's the market. Anyone for themselves. They just need to reflect reality and a trader just need to be able to trade it(i.e. actually get what they see).
Being monitored is something we all need to learn to live with(since not enough seem to feel it a worthy enough obstruction to their lives to actually invest energy into countering it); in America and England especially there are increasing measures for tracking and surveillance - and the EU is working hard on bringing Orwell's nightmares true just as well.

Yoda Glenn, great post. To me that is a different way of looking at MM. I have been uncomfortable with the concept of having large amounts in an uninsured account. Just never dawned on me that 2% is 2% whether the balance is all in the brokers hands or someplace else. A wow moment for me. Thanks.

maybe my account is still in development lol, but wouldnt the broker
(non-dealing ones) would want you to continue to be successful, the higher
your capital become the more transactions you would make, the more
commissions the broker will make, since it will pass your transactions to
the interbank network, anyway!

so why would the broker want cause a customer "trouble" when his
capital keeps increases (gaining profits)?

I am really confused now. :?

The whole context of the thread was that it does not make a difference in where the order gets routed to most traders, so long as they are filled at the price that they actually see is all that most need to worry about. However, for those running a sizable account this is something that they need to be aware of. You will get different fills the larger your account grows, that is a fact, but the point that all Brokers want successful traders and account holders is key here. Your Broker works harder than most realize in trying to keep you successful, and hopefully that came through in the original post. No conspiracy, the better trader you are the more money your Broker makes by keeping you 'in-house'.

SL, please do not underestimate how easy this is to analyze, your Broker will be running Risk:Assets ratios on all account holders, and the larger sized active traders will be key in their role as liquidity providers.

LFB,
everything you say here about brokers is true and i guess that is the reason you don't bother to make money trading and choose to sell so called "forex services".
Why to do the hard way to shovel the gold when you can sell tools...silver,gold membership...good work.

cheers

We are doing the work anyway in preparing for what will be traded, so there is no reason not to publish Trade Plans, Market data and updates, Commodity Overviews, Session Previews, Technical Updates and Broadcasts. It seems to make sense to us that if we are already producing the data, that others may not have the time or inclination to do, then we can make it available. Most of it is free and available to all, some of it is subscription and is an option.

This is what I meant, I am very much lacking details of the how
There hasn't really ever been an in depth explanation of how this all works and how it is used to the brokers benefit either in efficiency of operation or any other way.
As for the fill problem - I thought ECNs and Futures provided a direct high liquidity access? Haven't really dealt with huge sizes yet(I do however know for a fact that for example 'normal' broker Oanda has no problem whatsoever with filling six figure accounts), but then again the % of people on FF that have is probably also diminishingly small.

Btw, the thing about the "split account"(partial broker/external account) and insured accounts is a far more interesting topic once at size imho.
I've just begun moving things around because of considerations about this.

It's a bit of a shame that there isn't a routine account inlay insurance everywhere(I know that some market makers like the new ABNAMRO offering has insurance for the connected account of up to 20k EUR for their local deal here, german banks in general MUST guarantee 90% of funds and any normal "day to day" yielding accounts usually have a written 100%) and that one has to worry about this oneself.

I wouldn't pay too much attention to this. Trading is hard enough and this will only mess with the all important psychology of trading! Remember the LFB and others make posts here to draw readers to there site in hopes of you signing up for a paid subscription.The business has changed a lot even in the past year or so. LFB is applying old school thinking in there approach to trading. this ain't your grandfathers FX market and we should all apply a fresh approach and thinking to our trading! It reminds me of the Hillary Clinton 3am the phone is ringing advertisement

lol i wouldn't mind if they keep checking my trading pattern

since i dun even know what is my trading pattern

one thing my broker wouldn't be able to check : my level of confidence on each trade opportunity

"The business has changed a lot even in the past year or so. LFB is applying old school thinking in there approach to trading. this ain't your grandfathers FX market and we should all apply a fresh approach and thinking to our trading! It reminds me of the Hillary Clinton 3am the phone is ringing advertisement"


Agreed, this is not your Grandfathers FX market, however the Technical studies that most monitor, and the Commodity Market links that generate technical signals are the same now as they were then. All that is happening is the answers are getting to a lot quicker than they ever were, thanks to people like Ol' Pop. His work back then, and now, has increased the volatility, and with technology allowing instant access it is that volatility that creates the price moves that Forex traders crave.

Thank goodness for the Granfathers, and thank goodness for the small group of Professional Traders that took the time to bring this into the public domain, and to help develop a closed Institutional Market, into something that new traders could learn from in quick time. It 'aint Granfather's Forex, but without people like him you may not be a Forex Trader.

Have you noticed how relatively few Professional traders are here to share in-depth data, after all, why should they? The time and cost of knowledge in a specialized field is high. Few criticize a Doctor that charges for more in-depth knowledge than can be taken from reading the side of a box of Flu medicine, especially when the Doctor prescribes the correct way of improving the condition.

This 'aint your Granfather's Hospital either, but he can still make you better because he has evolved his skills, and all of the time maintained the knowledge gap between him and a newbie. That is why we respect him, his knowledge is not his power, the proper use of his knowledge is power.

Thank you to the Commodity Traders, the Arbitrage Traders, and all those who have actually walked the floors of the World's Exchanges for bringing to the masses what was designed for the few. The respect and dignity that these Traders have earned over decades of experience is something to be proud of, it cannot be replicated, and is hard to put a price on; Yet some of them share most of that free of charge, and have adapted to ever changing Market access. The Fundamentals and the Technicals still have the same links, and in a Global trading environment it may be more important than some think to use a little experience every now and again.


Outside of volatility, most things are as they were, Pop taught us well, and we now have our own young bucks around the globe that are in their mid-twenties looking to take things to another level, and carry on that work of sharing. Three generations of Trader get us to where we are right now, and so it starts again with a Plan in place to take Forex into 2010 and beyond. The more things change, the more they stay the same; a successful Professional Trader always has a Mentor, and Mentors do not get put out to graze, they get taken for the new ride by those that they took the time to teach. Well, that is how it works in our world.

Things change and the new generation takes over. Pop moves out to the back porch. End of story!

I love when I nail the dealer on lifting an offer or hittin' a bid just right and they don't have a chance to make $ on me...but even when I'm lucky enuf to have that happen 1 out of 3 times they still clip me on the other 2. It's best I don't think about it cuz it aggravates me...but forex dealers do make me appreciate the futures maket where any edge goes to another trader...

IT is getting worse. I trade cable mostly with a little euro. My regular spreads are 2-4 pips. At night now my spreads on Cable are 10 at least and 4 for euro. All others are the same.