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The pumpers and dumpers of forex

  • #1
  • First Post: Nov 22, 2006 4:39pm Nov 22, 2006 4:39pm
Hello all,

I'll start by saying that I came to forex after getting manhandled in the penny stock market. It was fun and it taught me a lot though. I can read charts like a champ now, but pennies are still full of scams and shady ceo's. There are also the pumpers and dumpers. In fact penny stock traders have said there are paid pumpers are dumpers. They run up or down the price of stock for their profit.

Obviously that can't happen in forex. BUT, in forex we are trading against the interests of our brokers. When we make money they lose money. So I'm wondering if anyone has ever speculated that brokers have certain departments in their company looking at forums such as this. They see who is trading what method and can then manipulate their prices here and there to make the system eventually lose.

The incentive for a broker to do it is there. If a system works and has many followers then they are all following the same system and will be stopped out at the same point. Thus, making the broker money.

We've all seen the posts about stop hunting, I'm just questioning if the stop hunting is a blind stab in the dark or if we can go so far as to say the brokers know where our stops our considering what systems are popular right now.

Anyone want to speculate with me? Matt
  • #2
  • Nov 22, 2006 4:51pm Nov 22, 2006 4:51pm
Quoting permanentjaun
Hello all,
BUT, in forex we are trading against the interests of our brokers. When we make money they lose money. So I'm wondering if anyone has ever speculated that brokers have certain departments in their company looking at forums such as this. They see who is trading what method and can then manipulate their prices here and there to make the system eventually lose.
Ok. So maybe I am confused. How are we trading against the broker?

Surely when we win then another party has lost? Not the broker.

I really can't see any broker having the time to visit a forum and fathom out what system people maybe using. Especially when most forum members are probably going to be using a different broker anyway.

All sound like a big conspiracy theory.

Did you get burned lately or make a bad trade and looking for excuses ?
  • #3
  • Nov 22, 2006 5:05pm Nov 22, 2006 5:05pm
Quoting willf
Ok. So maybe I am confused. How are we trading against the broker?

Surely when we win then another party has lost? Not the broker.

I really can't see any broker having the time to visit a forum and fathom out what system people maybe using. Especially when most forum members are probably going to be using a different broker anyway.

All sound like a big conspiracy theory.

Did you get burned lately or make a bad trade and looking for excuses ?
You're trading against the broker if they offer fixed spreads. Say the spread is 4. You buy at 1.8000. Immediately you're negative on the trade because of the spread. Price moves up enough that you're able to sell for 1.8005. You're buying and selling with the broker and not other traders. So you just bought low and sold high with your broker while your broker sold low and bought high to you. They lost money.

I haven't lost any big trades lately to make me bitter. I just need a few things cleared up. It would be in the interests of the broker to do what I just described. I don't think it would take too long though. Just go to the forums, see which systems have the most replies and views and see what its all about.

If it would be too time consuming then you'd think it would also be too time consuming for these brokers to offer free live online 1 on 1 tech support and customer service. My broker has it nearly 24/7 though. It wouldn't be hard to have a handful of people at a company reading forums constantly. Matt
  • #4
  • Nov 22, 2006 5:09pm Nov 22, 2006 5:09pm
Well to some degree there is some truth in this theory, not perhaps to the extreme of having dedicated departments (although perhaps the trading desk is exactly that), brokers run stops for sure, it is to their benefit because if they close your trade for a loss, chances are you open a new one, which of course means you pay the spread again ... chaching.

It is not only brokers that run stops though, large positions holder need to liquidate their positions at times, and the areas of most liquidity are stop groupings so that is not so uncommon.

In terms of them looking at forums like this, the experience trader doesn't need to, there are blatantly obvious places for inexperienced traders to put their positions and their stops, besides the positions they want to stop out are probably somewhat larger than what is traded by the traders hanging around forums (with some exceptions I know).
You can quit and they won't care, but you will always know.
  • #5
  • Nov 22, 2006 5:48pm Nov 22, 2006 5:48pm
I'm not so sure that the brokers view things on an individual trade basis, through trades from all their clients they will have an average position size on a particular pair at an average rate. They will look to liquidate their position over time keeping their average position in profit. Furthermore, given the various marketmakers and other brokers they have access to the price for them is not a thin line but a band of prices. If they do wish to liquidate a trade immediately they need to seek another price that is their side of the price within the band bearing in mind they have the spread on their side.

A question I have - hypothetically speaking supposing a client opened an account with a broker with say $10m and wanted to trade with a 10:1 gearing which would amount to a tradesize of $100M per trade. Would this be a welcomed proposition for the broker or not ?
  • #6
  • Nov 22, 2006 9:25pm Nov 22, 2006 9:25pm
OMFG do these threads ever end? Look, if you THAT concerned about your broker go out and mortgage your house. Then you can open an account on Currenex or FXall and trade with the banks as your counterparty. No broker, no arbitrary spreads, no excuses for why you suck as a trader.

Instead of bitching about how the system is stacked against you why don't you ask which brokers you can trust and work from there? I promise you they are not all out to get you. Truth is most of them could give a rats ass about your $1,000 mini account anyway...
  • #7
  • Nov 22, 2006 9:46pm Nov 22, 2006 9:46pm
Quote
Truth is most of them couldn't give a rats ass about your $1,000 mini account anyway...

LOL - precisely
  • #8
  • Nov 22, 2006 11:15pm Nov 22, 2006 11:15pm
Quoting Darkstar
OMFG do these threads ever end? Look, if you THAT concerned about your broker go out and mortgage your house. Then you can open an account on Currenex or FXall and trade with the banks as your counterparty. No broker, no arbitrary spreads, no excuses for why you suck as a trader.

Instead of bitching about how the system is stacked against you why don't you ask which brokers you can trust and work from there? I promise you they are not all out to get you. Truth is most of them could give a rats ass about your $1,000 mini account anyway...
Way to over react. I'll give a very possible scenerio though. There are strategies on forums that have nearly 1 million views. If you don't believe me then you can PM and I'll send you a link. Would it not be improbable for only 1000 people to be following the strategy on that thread? If their average play was 1 lot for those 1000 people then I would think a broker would have a severe interest in getting that money. Forex may be the largest market in the world, but the market on any one broker is not nearly as large. They very well could be affected easily by a popular system.

I think I should further the topic by asking if anyone has heard of any future possibilities for regulating forex? Essentially the relationship we have with our brokers right now would be like buying virus protection from a company that also creates cimputer virus'.

What would forex be like if it were regulated like NYSE and other major stock markets? Matt
  • #9
  • Nov 22, 2006 11:37pm Nov 22, 2006 11:37pm
Quoting permanentjaun
Would it not be improbable for only 1000 people to be following the strategy on that thread?
don't know about improbable but I'd say the probability of 1000 people playing the same strategy with the exact same settings at the same broker is somewhere near 0.
  • #10
  • Nov 23, 2006 12:34am Nov 23, 2006 12:34am
Quoting ycomp
don't know about improbable but I'd say the probability of 1000 people playing the same strategy with the exact same settings at the same broker is somewhere near 0.
Unless an EA has been created and each trader has the exact same trading criteria. I'm only sayin for sake of argument.
  • #11
  • Nov 23, 2006 1:04am Nov 23, 2006 1:04am
Quoting permanentjaun
Unless an EA has been created and each trader has the exact same trading criteria. I'm only sayin for sake of argument.
But they don't and it will never happen. I can give everyone on this forum my strategies, tell them exactly how to enter and exit, and most will still lose...
Mr. Trend
  • #12
  • Nov 23, 2006 3:41am Nov 23, 2006 3:41am
Quoting permanentjaun
...What would forex be like if it were regulated like NYSE and other major stock markets? Matt
More expensive.

Seriously. You'd have more middle-men. Higher commisions.

I like it how it is for now.
Bundy's status today: "Waiting..."
  • #13
  • Nov 23, 2006 4:22am Nov 23, 2006 4:22am
Not sure that i have been trading against my broker, and stop loss chasing is part of a trading strategy and knowing how the markets work it gives trades more momentum cant see how a broker can influence that, it takes a heck of a lot of money to move the markets.

Not sure if i am allowed to mention my brokers name so i wont, but he has provided me with all the tools all the information to make money, and thats what i am doing, can ask them any question about trading, different strategies, anything i want and he always provides excellant advice.
  • #14
  • Nov 23, 2006 4:40am Nov 23, 2006 4:40am
Quoting Darkstar
OMFG do these threads ever end?
No, they´ll never end because everyday there´s new people entering the business.
  • #15
  • Nov 23, 2006 6:37am Nov 23, 2006 6:37am
Goodness, Matt, I thought your original question was reasonable; but we seemingly have some folks with sensitive hides!

A market-maker, whether they are a relatively small broker or a giant interbank, can see every nested client order on the trading screens. They don't know whether those orders are yours or mine, but they see the price level and the quanitity at that price. Even if they don't "run" the nearby stops when they open for business (which they most certainly do!), the informatioin they can see gives them tremendous insight into the current supply and demand for a particular pair. Advantage who? It certainly isn't any of us retail traders, no matter how big or small our trading account equity.

By definition, a market-maker does just that for his clients. So whether we want to think of it that way or not, your market-maker has taken the other side of your trade. True, they may offset some of their retail business to another market-maker, but the market-makers of the spot Forex world take the other side of retail trades.

ECN (Electronic Currency Network) brokers may be the alternative we retail traders need to take the next stop up from our cannon fodder status with our broker market-makers. However, it too has a weak link; that being that our ECN broker could choose (for a fee of course!) to direct all or part of his retail orders to the bid/ask posted by a particular giant interbank rather than to the best bid/ask out there at the time.

Some of us have been making money despite all these ways for our broker to pick our pocket and line his, so do we care about all these broker games? Good question, but I for one prefer the playing field to be as level as possible.

Have a great turkey day! ...\larry.bye
  • #16
  • Nov 23, 2006 10:46am Nov 23, 2006 10:46am
Surely if 95% of traders lose money on FOREX and 5% win money then the broker is getting paid by 95 traders and only paying out to 5 traders.

Now if you won 95% of your trades wouldnt you be happy.

Thats how i reckon it works anyway, same at news time, all they need to do is body swerve half the punters and voila, losers pay the winners and the broker takes the spread.

I might be wrong but who cares as long our accounts bigger on Friday than it was on Monday

Stay Lucky

Lyndon
  • #17
  • Nov 23, 2006 12:31pm Nov 23, 2006 12:31pm
Ok I'm still new but it sounds to me like everones a little confused. The broker with a fixed spread makes money no matter if you win or lose. When you enter, you enter negetive when you close your trade reguardless of direction that spread is still there and is the brokers profit on each and every trade, they never lose. If I'm wrong please explain this to me.
"Opportunities multiply as they are seized."- Sun Tzu
  • #18
  • Nov 23, 2006 9:55pm Nov 23, 2006 9:55pm
Quoting pairtrader
Ok I'm still new but it sounds to me like everones a little confused. The broker with a fixed spread makes money no matter if you win or lose. When you enter, you enter negetive when you close your trade reguardless of direction that spread is still there and is the brokers profit on each and every trade, they never lose. If I'm wrong please explain this to me.
That would only be if there was someone there to pay the price at the new level. Say you buy at 1.8000 and want to sell at 1.8005 for 5 pips. You're immediately negative 4 pips because of spread. You need it to move 9 pips to make the 5. It moves 9 pips and you're able to sell for profit. The broker sold to you at 1.8000 and bought back at 1.8005. They lost money. They'd only make money if there was someone who bought at 1.8005 to counteract your trade. Otherwise they're still just selling low and buying high from you. Maybe I'm wrong, I don't know. Matt
  • #19
  • Nov 23, 2006 11:54pm Nov 23, 2006 11:54pm
Quoting permanentjaun
That would only be if there was someone there to pay the price at the new level. Say you buy at 1.8000 and want to sell at 1.8005 for 5 pips. You're immediately negative 4 pips because of spread. You need it to move 9 pips to make the 5. It moves 9 pips and you're able to sell for profit. The broker sold to you at 1.8000 and bought back at 1.8005. They lost money. They'd only make money if there was someone who bought at 1.8005 to counteract your trade. Otherwise they're still just selling low and buying high from you. Maybe I'm wrong, I don't know. Matt
OK I am saying it is my impression that no matter how the trade goes the broker wins because he is not involved in the trade except as a third person, he is making his money strictly off the lot size and spread. So I would think that a broker would only want to encourage us to do more lots and more trades and really not care which way the market goes(at least for our individual trade). The intersted parties in the currency price would be large banks governments and global industry. Right?
"Opportunities multiply as they are seized."- Sun Tzu
  • #20
  • Apr 4, 2007 1:48pm Apr 4, 2007 1:48pm
Quoting pairtrader
OK I am saying it is my impression that no matter how the trade goes the broker wins because he is not involved in the trade except as a third person, he is making his money strictly off the lot size and spread. So I would think that a broker would only want to encourage us to do more lots and more trades and really not care which way the market goes(at least for our individual trade). The intersted parties in the currency price would be large banks governments and global industry. Right?
This would be true if the broker offset every trade with a bank.

90 - 95% of all traders blow out their account within 90 days, or whatever that oft-repeated statistic is.

So, on accounts under, say, $5000 or so, why wouldn't a broker just take the other side of every trade?

In 90% of cases, they get the spread plus the $5000 within a month or two. Do that a thousand times and that starts to add up to some real scratch. Why settle for a few hundred dolllars in spreads when you can sit back and bank on a true 90% probability trade?
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