Poll: Is retail Forex just a setup by the big boys to take our money?

Your votes and / or comments are welcome.

P.S. - My vote will be "I do not think so". But I'm trying to keep an open mind on the subject.

Hi PC - is it that you're not happy with your trading at the moment?

No that's not it. I read this idea on another thread, and thought a poll might be interesting.

Hi PC - ok, sorry about that. Not a bad idea for a poll though! Cheers

I admit, it did cross my mind a few times.

But I think I was losing regularly when I started trading forex and I thought it was just me being a bad trader.

HOWEVER, from personal experience, when it comes to money, it's quite possible

Yes, In my country,

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Elliott wave analysis

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They can't take your money if you don't give it to them!

Most retail traders are impatient and because of that they give their money away.

That's right pipmutt,and if I trade RIGHT they NEVER take my money!

here's a note that was originally on Wikipedia under FXCM but has since been deleted. it briefly points to how retail brokers make money:

1. The Spread - The difference between the spread FXCM quotes to clients and the spread FXCM receives from the banks they offset from. If FXCM is unable to match a buyer and seller internally, FXCM will, after the positions become sufficiently large, offset with larger banks that quote them cheaper spreads.
2. Internal matching of client trades - If the spread is 3 pips, and FXCM is able to match a buyer and a seller internally, they collect 3 pips.
3. Interest on client deposits (like most online brokers, such as E*TRADE, these are a dependable and large source of income)
4. The firm's own speculative positions in the market.
5. Losses on clients' trades that were never offset.
http://en.wikipedia.org/wiki/FXCM

the poll question always come up whenever someone lost his account ...... as is expected for >95% of retail accounts who are known to re-fund their accounts six times on average. but nowadays the US regulatory authorities requires all US forex brokers to be registered as a Futures Commission Merchant (FCM), registered with the Commodity Futures Trading Commission (CFTC), and join as NFA member, and so comes under the rulings of the NFA. even though there is no forex regulatory body. and new rules require the broker to maintain regulatory capital of US$20million so as to discourage scams and small time businessmen setting up shop to benefit from retail speculators.

despite all these, you will still lose money as speculators/gamblers if you don't know how to trade. the brokers are setup to do a business to make money for themselves of course. we traders just make use of the services to make money. but i won't call them a scam or bucket shop. due diligence to find a suitable broker.

Oh yeah! Absolutely it is but that doesn't mean it's unwinnable.

Massive leverage. Hedging. Competitions with unreasonable expectations. Encouraging of over-trading. Also, a couple of years back you had to contend with price shading and enormous slippage; stuff which happily seems to be on the way out (there's a reason why FXCM changed it's business model for example - those days of easy retail profit I think are long gone).

All that said, it's not a scam - it's just an industry capitalising on lack of education and the lure of easy money.

I think that there are two ways:

1) Market Makers brokers sometimes have interest in make you lose money, with direct or undirect methods. This is not a proof of theirs bad service, but I think that if there's only one single reason to steal your money the system isn't enought save, even if my broker would be regulated by NFA. MM earn money from spreads & market manipulations, and this can really hurt you.

MM make money by:
- Spreads difference from central banks
- Internal spreads difference
- Interest on client deposit
- Losses on client's trades that were never offset

So MM can manipulate the market you "see" to match theirs spreads difference, or in the best case they can "simply" reject orders, wide spreads or create lags in according to theirs interest.

2) True ECN brokers doesn't have any interest in make you lose money, because they offer you the same spreads that normal MM take from central banks. There are some ECN brokers that doesn't make you pay a spread, but only a commission for evey trade.
They make money from:

- Commissions on every orders
- Interest on client deposits

Those brokers doesn't have any interest in offering a bad service or make you lose money because the more you earn, the more interest they have on your account, and they don't manipulate the market because the do not have any spread commission.
ECN are open only for high equity traders (but now you can get it with just some thousand of dollars...), don't you ever asked why?

True ECN requires higher minimum deposit, but they can offer a save broker system for those that want to sleep good at night. MM sometimes can be happy if you get a "bad service" or if you lose money. ECN are happy only if you keep to pay commission and yes, they are much more happy if you grow your account up... because more equity = more trades or more lots = more commissions every trade.

Hope this helps...

every retail bucketshop that calims to have a no dealing desk and other crap, should not be taken serious and threaten with care.

of course the brokers are interested that you lose money to catch your margin. that's the function of margin based trading. they mirror the real market and you trade on their playfield. at the end, their calculation is net +ve for nice profits, since most of the retail traders fail. if the broker is big enough liek fxcm, they can take profitable traders but the time comes when such brokers call guys which are too profitable and start to rip too big profits at the retail branch and then you receive recommendation to switch the broker or move to the institutional branch.

but most of the traders do not lose because of the broker-games, more because they have no clue of how markets work and trade accordingly. the herd mentalim which can be seen i naction on a daily basis. like moths following the light when they see rapid market movements and jump on the train, just to get surprise buttseks

at prime brokerages you do not trade margin based. you pick the counterparty you wanna trade with and you provide liquidity to the market yourself. unless you grab at least 500k for institutional level access you can dump it. with prime brokerage access you do not even send money to the brokerages- it can be kept on your bank and guarantees fo your bank are enough for those prime brokerages.

so in fact, yes, every retail bucketshop is interested in ripping you off. at the time you deposit money at their french fries stand they assume that it is already theirs. you will see it the next weeks till about 15th of january. markets are thinly traded so low liquidity is enough to shake markets around. you will see way more spiking action than in regular times. just an interesting period for brokers/mm to make some extra money.

but this does not mean you cannot make money. this behavior offers good opportunities e.g. news spikes if you are used to market mechanics.

edit: if you are really so naive to think, that the game is setup to be fair, you should take your money and do something else. if you think the instruments which are offered to you for free everywhere like news, free stock newsletters etc. are for your advantage, you should take your money and do something else. if you believe that the markets are too big and regulated that a specific group can move them into one direction, you should take your money and do something else.

you are playing the money game in an ocean full of sharks. there are no friends and the second best thing besides making money is preventing others from making money.

I see several informative posts about brokers. Thanks bstay2, triphop, Retal1ator, and Dr. G. Obviously all brokers are businesses and as such they need profits to survive. They’re taking advantage of a niche, and the successful ones have a business plan that gives them a profitable edge. It’s fair to assume they’d rather take our money than to be our friends. Accusations of dishonesty are common, and at least some of them have had substance.

Does this mean that retail Forex is a just a setup by the big boys to take our money? Or are the brokers just taking advantage of a situation that already exists, in an effort to have a profitable business?

And what about the other players in the arena, like large banks and hedge funds? Are they part of a “setup” to take our money? Do they conspire? Or are we too insignificant for them to care about it?

I think that is an exaggeration, this is not a conspiracy or a "setup to take our money" :-) They just discovered that there was a large "deficit" when it comes to retail trading in the FX; this was quite some years ago, because now I think that it is a "surplus" of brokers. a lot of them are not so honest but... we are in the retail league so... expect everything. But overall, if you study a little bit and you will pay attention to what other traders say, then you will be able to see the good/not so good brokers.

The market (and brokers) exists because there is a demand to trade financial instruments regardless of whether these people are qualified or informed enough to intelligently participate. The fact that uneducated people lose because they over-estimate their ability to profit/survive is unfortunate but inevitable. Equally, unscrupulous brokers profit because uneducated traders fail to perform appropriate due diligence and give them money. Ignorance is no defence. It is these uneducated traders who then shirk the responsibility of accepting the consequences of their own poor decisions and conclude that the game is fixed against them. So no, I don't think it's set-up that way in some act of collusion by the financial elite, but it is a pretty good description of what generally occurs.

$ 50 billion per day is the total trade volume accounted by retail traders in a $ 3 trillion per day turnover forex market.

50 billion it's a huge amount. That can move the market by itself in certain times if all the retail traders will trade in the same direction.

All businesses are a "setup to take our money". That's why they're in business.

Some illegal businesses like the pyramid scheme, chain letters, etc. are designed only to take our money.

Forex is legitimate business. But it's not a give-away program. It is designed to take the lions share of the retail money. Provide liquidity, blah, blah, blah.

So, is it just a setup to take our money ??.....

I'm going to second this opinion.

I'll add that the poll question may be a bit vague. For, as we know, nothing seems to be quite that simple when it comes to Forex !!

Lots of good posts today. I see my views aligning most with this one at the moment. Like birdt, I don’t think there was collusion by the financial elite (big boys) to build a trap for traders. We’re in a tough business and we don't have the upper hand. But we're free to leave at any time, and we should accept responsibility for the way things turn out if we stay in.