Trading for a living with a Market Maker

With all the talk about ECN vs Dealing Desk, I thought I would ask the question to all the full time traders on FF.

Can you trade full time with a market maker and make a living? Full time traders, are you using a a ECN broker or a Dealing Desk?

One last point do you have to move from broker to broker if you are using a market maker?

Cheers,

Yes you can trade full time. I traded for a long time solely off of Oanda. Now I have accounts with several different providers.

You only need to move if one broker does not provide services you need over another. Or if you are trading in a way they do not like. You can find reliable services from each realm, its just a matter of how you trade and what you need.

Yes, you can make a living trading at a market maker. Just make sure you're not at a scam broker that's going to run off with your money, but presuming you're not, then yes. IBFX and FXDD are 2 market makers that many people report having large accounts with. Not saying I recommend either, just that what you're asking can be done and is done by others.

Being a good trader is what will allow you to do this fulltime though, not the broker you're with. So focus mainly on developing your trading skills...

thanks for the feed back guys.

I have wondered about this as lately all I read is negative posts relating to dealing desks.

I know they are a business that can in a lot of cases profit from your losses. This why I thought overall do they want you to be consistently profitable?

I am personally going to go with a ECN as my last experience with Apari was not a nice one. I made consistent profits with em but the consistent requotes of late drove me a way.

I think now Oanda has set the standard as a few brokers are moving to the verible spread with no dealing desk set up.

Good to hear some of you are making it with a MM.

I really can't fault FXCM to be fair, can trade in different Currencys GBP £'s for me, there online news feed and info centre isn't bad not that I use it.

Orders are Quick and no requotes dunno if there guaranteed SL or not these days.


Only had 1 issue where the Quote server went down and a +30pip profit sold at -1.1pips or something but they fixed it and gave me back my +30


Big enough not to mess you around I'd hope.

Although Eggs and Baskets, keep a large wedge of cash under your mattress these days with the banks failing, incase FXCM does go down, and don't run the account too high without bolstering your under the mattress funds.

I traded with Oanda for about a year and never had issues making money. However, their execution and liquidity is not great for big orders. Anyone, who has traded over 5-7M orders with them can tell you this. With that said, I took home a nice bit of change with them before I moved on. I traded with FXCM back in the day and they were brutal. I have heard much better things about them these days but will never go back. I also trade directly with DB on their Autobahn platform and I have made a very nice living trading with them. That is not to say that I have had my issues with them. DB has a dealing desk and they make a market.

Here's the interesting part of my trading as of late. I have been a manual trader for years; like 25+ years and last year I built an algo which I use along with my manual trading. Basic summary, my algo is based on some very simple forms of parity models and simple forms of triangular arbitrage for price discovery. My model is much more active than I could ever be but trade sizes are kept below 3M per order. I have been asked to leave from several ECNs because the banks dont like my algo.

The point of my post is this - banks have dealing desks and if they dont like your trades they will turn you off or screw with your trading in the same ways retail desks do. My only advice is to try and build solid relationships with your broker, regardless of how they do business. If you help your brokerage make money they should in turn do everything they can to help you make money. If they cant or wont... LEAVE. Hope this helps.

That's interesting. ADM said they'd cut me off if I news-trade on their Currenex, and CMS told me the same if I hit inverted quotes. I found both "threats" somewhat amusing. I guess I've been spoiled by IB & MBT where there are no rules or ultimatums.

Nice work on the algo. I wouldn't imagine the banks would have a big issue with triangular arbitrage in 2009, a few years ago sure, but their black boxes should be up to spec by now (one would think).

25+ years! Congrats, you're quite the veteran!

MBT and IB do not go inverted anywhere near as much as a Currenex broker that allows you to see it. Not sure why... However, if MBT and IB allow you to hit inverted spreads on the bid and offer; why dont you build a simple algo that does this and see if there are still no rules or ultimatums? I doubt they would allow such a program but if they do its free money for you. As long as the inverted spread is inverted more than 1 pip with MBT and more than .4 pips at IB you will win everytime.

As to the bank technology, there are certain pairs where their technology is late to the party and they know this.

hi all,

this is a question that i've been meaning to ask and the feedback provided here are insightful. one conclusion that i've come to from the feedbacks is that " damn if we trade with a bucketshop and sh*t with a ecn". we're just fodder for the fish!!

can anyone provide a guideline about how we should trade with these brokers? so that we would not step on their toes and get screwed. thanks

I've only seen inverted at MBT once or twice, they're stale quotes way off the market usually and I'm doubtful if they would execute. In any case, haven't seen it happen in at least 9 months. IB I've never seen inverted, zero very rarely.

I can understand the no-hit inversion rule at CMS. But the no-news trading at ADM throws me for a loop, can't see why that's off limits this day and age.

I dont understand that rule by ADM either. If there is a market and you want to deal in that market you should be able too. Does ADM stop pricing or do they just tell traders not to trade?

My rep just told me multiple times during the setup process, "don't do news trading or we'll be forced to close your account." Talk about a friendly way to start a business relationship.

Seriously... that makes no sense to me though.

Wow. I could see telling someone "Realistically, you might not be happy with the pricing around some news announcements.", but telling someone "Don't do it or we'll shut you down"? That's crazy.

I ran across this at another forum,
This is Bill Williams take on FX brokers ,
_____________________________
10.07.2006
....reasons
why I do not trade Forex
Bill Williams.

WHEN TO NOT TRADE FOREX
Because so many people bombard us with requests
about forex, we teach people how to trade it.
Better to teach them the right way than to let
them commit financial suicide. Nevertheless, we
do not advocate forex trading unless you have a
particular reason as to why you need to trade
during the middle of the night, or you have a
specific need to trade in currency pairs that
do not involve the U.S. dollar. If the U.S.dollar
is involved and you are able to trade during U.S.
market hours (7:20am-2:00pm U.S.Central Time) you
are much better off trading currencies in the
Chicago currency futures markets. Here is the
reason why:

* Brokers deceive you about there being no com-
missions. $30 minimum/round turn(called spread)
is in reality a commission that eats up your
capital at an astonishing rate. Even winning
traders lose money and end up with negative
results because of this outlandish overhead.
Trading futures, you never have to pay a broker
more than $10/round turn, and usually quite a
bit less than that.

* Guaranteed fills. True but... The only way a
broker can guarantee fills is for the broker to
become the buyer or seller of last resort. That
means the broker is running a bucket shop. All
forex brokers are the buyer and seller of last
resort.

* Brokers do not tell the truth about volume.
They show the volume for all forex trading,
which doesn't even come close to the volume
they truly have at their own brokerage, which
is where you are trading. Volume in currency
futures is considerably higher than the volume
traded at any single forex broker, often great-
er by a factor of ten.

* Leaning. Brokers say they are charging you a
3 pip spread to trade the popular currency
pairs. But in reality a broker may be making
as much or more than 10 pips on your trades.
He does this by skewing prices. Since you are
not trading at an exchange, the broker can
feed you any price he wants to feed you. He
can buy at the bank for perhaps 7 pips less
than he sells to you. He then charges you 3
pips for the privilege of being ripped off for
a total of 10 pips.

* Unregulated. Forex may sound like an exchange
but it isn't. It exists entirely in cyberspace
with every broker and every bank having diff-
erent prices for any particular currency.There
is no regulation,even for brokers who register
with the CFTC and the NFA. Forex brokers do
not have to mark to market each day as do
futures brokers. If your forex broker files
for bankruptcy or absconds with your money you
have zero recourse.

* No guarantee. If a forex broker does go out
of business, you could lose all your money.
There are no guarantees and no one standing
behind it. Futures brokers are required to
mark to market every day. They have to put up
cash to cover every open trade on their books.
Future brokers have gone broke, but no future
customer has ever lost one cent of the money
in his trading account because of a failed
broker. Nor have they had to wait for their
money. It is immediately available.

* You can get exactly the same action in the
euro fx futures as you get in the"Euro" forex.
Commissions are as low as one tenth per round
turn depending on volume, through a regulated
broker, trading electronically at an exchange
where you know the true price of the currency.

* What is the true price? A forex broker can only
give you the price of a currency as quoted to
him by the bank through which he trades. Banks
have diffeing prices for a currency. You never
know what the real price is because there is no
central exchange through which all prices flow.
Besides not knowing the true price from the
bank, you can also be deceived by "leaning" or
"skewing" of the real price at the bank. Forex
brokers comonly lean the prices.

* Forex brokers are not truthful. They lure
people in with hype and false advertising: "No
commissions!" "Guaranteed fills." "24 hour
trading:" Who in their right mind is going to
trade in the middle of the night unless they
have a special need. While it is true that
total forex volume is greater than in the
futures, futures volume at the exchange is
greater than the volume at your broker for the
most popularly traded currencies. The only
place where the liquidity differential matters
is in currencies like the Mexican peso, the
Brazilian real, and somebody's drachma. Those
thinly traded currencies may be more liquid in
forex. But if you trade anything but the few
most liquid and popular currencies, you are
going to be paying at least 5 pips, and often
more. Unless you have a particular comercial
need to deal in Polish ziotys, Indian rupees,
or some other thinly traded currency, you don't
need forex.

* You are told by forex brokers that there is
little or no stop running. This is one of their
biggest and boldest fabrications. The truth is
there is far more stop running in forex than in
futures, and possibly as much stop running as
in the stock market. I have friends who work in
forex as well as many traders who of necessity
have to trade forex. One of my students is a
market maker in forex. These are people who
should know, but in case you don't want to
believe me or them, simple observation of forex
trading will reveal the vast amount of stop
running that takes place there. Who is it that
runs the stop? It's your friendly forex broker,
that's who. The broker has a vested interest in
seeing to it that your orders are filled. Stop
running is nothing more than order filling.
The broker sees to it that everybody's orders
get filled.

* Probably you have heard that if your are win-
ning regularly in forex, you may be barred from
trading. Is this true? Yes it is. The fact that
is true is just another proof that when you
trade forex you are trading at a bucket shop.
In the book, "Reminiscnces of a Stock Operator,
" we are told that Jesse Livermore was banned
from trading a certain stock brokers because
they couldn't stand him beating the housel. The
same thing is true with many forex brokers.
Since they are the ones guaranteeing you a fill
they in effect the buyer and seller of last re-
sort. The truth is that most forex brokers have
precious little liquidity at their firms. In
order to give you the impression that there is
liquidity, it is the broker who gives you your
fill. It is the broker who does the stop run-
ning that supposedly doesn't exist in forex.
But if you are regularly beating the socks off
the broker, he will ban you from trading at his
firm.
Now you know the truth about forex. I challenge
any and all forex brokers to prove that I am
wrong.

Thanks for that reasoning for brokers' actions. Sticky? (In a pro vs. con to trade forex approach, I guess.)

Yes, it's possible to trade full-time with a Market Maker Broker. You just need an honest broker (and I use the word "honest" very loosely). I know a few traders that trade with FXCM, GFT, and Forex.com (Gain Capital) full-time, professionally, and have been doing it for a few years now.

The key to trading with a market maker broker is to know the limits. To know your limits and their limits on just how much money you can take from the "house" (in poker terms).

1. Never let your account "build up". *A lot of traders win monies and instead of withdrawing those winning accordingly, they let they account equity build up, allowing them to increase their LOTS size and risk. Most brokers don't mind a trader winning with 1-2 Lots. But a trader trading 5-10 Lots, successfully, then brokers will have to put a stop to that. Broker's take note of successful traders, especially traders that trader big and win big.*
2. Keep your LOTS modest. *To stay out of a brokers radar, try and trade with 1-3 LOTS and under. Anything higher, will wake the monster and you will be placed on manual execution.*
3. Don't scalp! *An easy, and fast way for your account to be closed is to scalp. If you trade the 5 Min chart, hold trades for as long as 5 minutes, minimum, before closing them out. This allows the broker the place an trade opposite of yours. If you don't give them enough time time to mimic your trade or trade against you, you will be the one to loose out. Not the broker.Manual execution is a bitch to scalpers.*

These are just a few, basic rules to follow if you intend on trading professionally with a market maker. I'm sure many traders will insist on telling to to trade with a broker such as Interactive brokers or a ENC ... but those brokers have their fair share of problems as well. There is NO PERFECT broker.

Once you reach a level to where you are dealing with $100,000+, then it would be best to open an account with a global bank, such as Goldman, and look forward to dealing with a Prime Broker.

Do you realize how ridiculously absurd you sound?

How can you possibly advocate trading with a market maker, and then go on to warn about things such as "brokers putting a stop to you", "being on the broker's radar", "don't scalp", etc?

Why on earth would you advocate using them then?

Notice you didn't mention a single pro. Not that there are any worth mentioning, but if you're going to advocate something, well it certainly helps your argument.

I see inverted quotes in FXCM from time to time. The last time was a couple of weeks ago. I was surprised it went on for 3 or 4 minutes.

That's a really lame way to say "we do not allow scalpers", but it still is better to know this from the start, isn't it?

For anyone who hasn't read this: http://www.forexfactory.com/showthread.php?t=7484 I suggest they do. It is quite informative on why brokers do not like news trading

Hello
I don't mean to butt in here but far from sounding absurd I thought it made sound sense


I think he meant just in case you have no other alternative and are compelled to trade with a market maker. Actually what he says seems quite reasonable, its a good idea to withdraw profits regularly.




Well once again if you have no better alternative. For example its difficult to find an ECN especially if you have a small account and want to trade mini or micro lots.

Yet if you still absolutely want to trade you'd be forced to use a market maker and following his recommendations above might just help you survive in the bucket shop environment which most market makers are said to be.

Anyway I don't want to get into any argument KGB trader, I just thought it was a good advice by Jhig.