How can a broker work against you?? | Forex Factory

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How can a broker work against you??

  • #1
  • First Post: Jul 30, 2011 6:48pm Jul 30, 2011 6:48pm
I read briefly last week somewhere (can't remember where) how an individual reckons a broker can work against a trader if they appear to be earning too much money...............is this possible?
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  • #2
  • Jul 30, 2011 7:19pm Jul 30, 2011 7:19pm
Quoting paulw
I read briefly last week somewhere (can't remember where) how an individual reckons a broker can work against a trader if they appear to be earning too much money...............is this possible?
Well they say Forex brokers make money with the spread and the rollover.

In reality, they can make much, much more money if they simply bet against you and hunt your stop, that way they take and pocket your ENTIRE position. They know and see where all the stops are, so it is easy for them to do that, it is like stealing a candy from a baby.
  • #3
  • Jul 30, 2011 7:36pm Jul 30, 2011 7:36pm
I've always had a lot of trouble with that proposition. I can understand where a fly-by-night operation working as a market maker could do that for some quick profits from their clients but as a sustained business practice? It doesn't make any sense.

Say you have a trader with $10,000 in funds who trades three times a day. Each time the trader trades, the broker can make let's say...oh I dunno...5 dollars. That's 15 dollars per trading day. At three trades a month and about 20 trading days in the month, that's $300 a month that a broker can make from the one client. Jam 100 clients into the same can and that's $30,000 a month from that basket of clients. Over a year, that's $360,000 in fees raked in from just 100 clients.

Instead however, let's assume that the broker rips traders off and hunts their stops. At 10,000 for each trader, let's assume that the broker is actually as bad as it could possibly get and wants to actually just blow your account. That's $10,000 from each client in one pop right? jam 100 clients into that, and the broker rakes in $1,000,000. sounds like a lot. It's three times as much as what they would have gotten in simple operating fees from their 100 clients in the one year but over three years, it's less.

Over three years, their clients will pay more to the broker, generate referral business and add more to their liquidity pool if they are successful. Brokers lick their chops at compounding rates of return too you know. If they can encourage the success of those 100 clients, the fees they collect over time increase exponentially and yearly profits will blow that $360,000 out of the water. If those 100 clients are able to double the size of their average account holdings, each year will see $720,000 collected in fees. Double it again and the broker then collects $1,440,000 in fees. Suddenly, destroying a client's account in a $10,000 pop doesn't seem so sensible when instead, the broker could be trying to help traders be successful.

I'm not saying there aren't greasy brokers out there. Traders should do their research but to say a broker is stop hunting I think needs some rather serious evidence to back the claim up because when I look at forex brokers as businesses, the notion doesn't make a lot of sense to me, especially for the bigger players.
  • #4
  • Jul 30, 2011 7:52pm Jul 30, 2011 7:52pm
Quoting Wacky Canuck
I've always had a lot of trouble with that proposition. I can understand where a fly-by-night operation working as a market maker could do that for some quick profits from their clients but as a sustained business practice? It doesn't make any sense.

Say you have a trader with $10,000 in funds who trades three times a day. Each time the trader trades, the broker can make let's say...oh I dunno...5 dollars. That's 15 dollars per trading day. At three trades a month and about 20 trading days in the month, that's $300 a month that a broker...
Let's say you run a Poker room from your house.

Let's also suppose you can see all the player's cards via some secret mirrors. What is more profitable for you in the long run : Collect a fixed entrance fee from each player ($20 for example) or collect the whole pot two or three times a night via a few accomplices?

Think about that...
  • #5
  • Jul 30, 2011 7:59pm Jul 30, 2011 7:59pm
I have thought about that. It still doesn't make sense because over the longer term, (and most reputable brokers seem to stick around for more than just a year or two) a broker can collect rediculous amounts in fees so long as the average success rate of their clientele is as high as possible. The more equity a broker's client base can build, the more in fees the broker can collect.

Hampering the growth of clients' accounts has an exponentially negative effect on future revenues. It should be obvious to even a business school drop out that you are reducing your profits exponentially by taking profits off the table for your clients.

The entire point of a brokerage is to make money by offering a channel for trading currency. while a broker could conceivably manipulate a price feed on purpose with the intent of screwing their clients, it simply doesn't make sense for a broker that wants to stick around for more than a year.

EDIT:

Oh, and if you run a crooked poker house that doesn't shut down and move locations each day, you're officially retarded.
  • #6
  • Jul 30, 2011 8:12pm Jul 30, 2011 8:12pm
Quoting Wacky Canuck
The more equity a broker's client base can build, the more in fees the broker can collect.
This is EXACTLY what they want you to believe!

In reality, Forex brokers rely on a constant supply of "fresh meat" (err....I mean new customers) to stay in business.

Don't forget, 90% of traders lose money in less than 3 to 6 months and simply disappear from the trading arena, so they need new "victims" to stay in business.

PS: No I do not run a poker room and I hate any sucker game of that nature, I make enough money just day-trading the Forex market thank you.
  • #7
  • Jul 30, 2011 8:26pm Jul 30, 2011 8:26pm
You know...THIS:

Quoting Mr Breakout
This is EXACTLY what they want you to believe!

In reality, Forex brokers rely on a constant supply of "fresh meat" (err....I mean new customers) to stay in business.

Don't forget, 90% of traders lose money in less than 3 to 6 months and simply disappear from the trading arena, so they need new "victims" to stay in business.
Is so very very often followed by this:

Quoting Mr Breakout
I make enough money just day-trading the Forex market thank you.
A sign that perhaps you're prone to making negative assumptions is that you've pulled that popularized 90% figure. Do you have any idea where it came from because I can not for the life of me actually find any confirmation of it and how on earth could we? It is after all pulled directly from your ars! And hey, if it's true, how do you figure you and so many people here on FF tout themselves as being one of those one in ten? American brokers have to now release statistics about profitability and Oanda's idiocy on that count aside, we saw that about 35% of traders make money. I'm sorry but that's a tad bit more than 10%. Is it a good situation? No, it could be much better for fx brokers and traders alike but look further and start reading studies on who loses money most often and it's more active traders. The more active the trader, the more likely it is that they will lose money. A study in Taiwan found that about 80% of active traders lost money. The less disciplined you are, the more often you are likely to trade and the more likely you are to lose money.

Look, bottom line, the FX markets generate profit for retail traders about as often as the stock markets. Lots of people lose money...and lots of people are people who would probably be better off not trading.
  • #8
  • Jul 30, 2011 8:37pm Jul 30, 2011 8:37pm
Quoting Wacky Canuck
It is after all pulled directly from your ars!
I do not like or even tolerate vulgarity, so let us stop this discussion right there, shall we?
  • #9
  • Jul 30, 2011 8:40pm Jul 30, 2011 8:40pm
Ars is vulgarity? And I thought we Canadians were so polite. *chuckle*

You can stop if you so please but it's either because you're as delicate as a tulip in the sun or because you aren't big enough to admit that you, in the heat of defending a questionable position, pulled a horse puke quality statistic out of wherever you pulled it to support your position.

Sure, we can stop but it's not out of any respect for your argument or your sensibilities. Ars? Really?

  • #10
  • Jul 30, 2011 10:03pm Jul 30, 2011 10:03pm
didnt go through your post but ive had this chat before and i dont believe a broker works against its client i believe in the market which is demand and supply credit and debit
if a broker worked against his client you wouldnt have a broker
  • #11
  • Jul 30, 2011 10:36pm Jul 30, 2011 10:36pm
Quoting paulw
I read briefly last week somewhere (can't remember where) how an individual reckons a broker can work against a trader if they appear to be earning too much money...............is this possible?
If they let you open an account, they are not your friends.
The Thief of Wall Street
  • #12
  • Jul 30, 2011 10:46pm Jul 30, 2011 10:46pm
Quoting cohiba pips
if a broker worked against his client you wouldnt have a broker
Is that so?

Take a look at this video and you will see how Forex brokers can steal from their customers on a daily basis. I am not saying that they are ALL dishonest but just watch what they can do to your Forex account...

http://forexsocialmedia.com/home/soc...r+Manager.html
  • #13
  • Jul 30, 2011 10:56pm Jul 30, 2011 10:56pm
Hey looky there, a guy hawking a product and using fear to do it. That's like the most timid politician ever making that video. lol.

The virtual dealer plugin is troubling yes and if there is a broker out there using it to trade against their clients, shame on 'em and I'm sure they're out there. If you think that's the norm and just how things are done in the FX market, I think you're ridiculously wrong. As I've already explained, the notion of trading against your clients doesn't make sense if you plan to be in business for more than a year or two.
  • #14
  • Jul 30, 2011 11:07pm Jul 30, 2011 11:07pm
Quoting Chicky
If they let you open an account, they are not your friends.
i know a broker who doesnt like me very much either
  • #15
  • Jul 30, 2011 11:19pm Jul 30, 2011 11:19pm
Well well, it seems that this thread is attracting of lot of Forex brokers who are more than eager to defend their interest...

Especially from the Canadian side, a great country by the way, I should know I lived there for 2 years as an exchange student, a long time ago.

Anyway, and once again, I am not selling anything in this forum, the website (see previous post) is for informational purpose only, no direct order link of any kind is ever mentioned in the video or anywhere else.
  • #16
  • Jul 30, 2011 11:23pm Jul 30, 2011 11:23pm
See, your paranoia is showing. And hey, didn't you finish with me because of my horrid vulgarity? It's funny when you take a position, you're accused of having some sort of self interest. With this logic, I am apparently on the payroll of FX brokers or some such thing?

Hey, here's an idea. Instead of casting aspersions on why I maintain an interest in this argument, explain where you got that 90% losers in the retail market stat. Explain your evidence for your positions. Give us some real evidence that reputable brokers are trading against their clients.

Honestly, what are you five years old?

Quoting Mr Breakout
Anyway, and once again, I am not selling anything in this forum, the website (see previous post) is for informational purpose only, no direct order link of any kind is ever mentioned in the video or anywhere else.
Why do you have to reiterate something you haven't actually asserted. Once again? You nor anyone else ever said you were selling anything the first time around. I just said it was some twit nipple using fear to hawk something in that video you posted.

Really, I get the impression that when you walk down the street, you fight the urge to look over your shoulder every few seconds to see who's following you.
  • #17
  • Jul 31, 2011 2:08am Jul 31, 2011 2:08am
Here is another clever forex trick. As you know, Forex brokers now publish the success rate of their customers. For example FX broker ABC would say :
On the first quarter of 2010 35% of our customers made money.
On the second quarter 33% made money, etc...

These numbers seem rather impressive, but of course what they do NOT tell you is that on the second quarter of 2010, those traders who made 35% during the last quarter are now flat broke and have disappeared from the radar and that a new batch of "fresh meat" took over.

This is why they need a constant supply of new traders to stay in business.

Don't fall for that marketing gimmick, according to reliable sources less than 10% of Forex (and futures) traders are still profitable after a year.
  • #18
  • Jul 31, 2011 2:18am Jul 31, 2011 2:18am
"reliable sources" hey? Well shucks...I'm sold! Hell, never before have I been so convinced and given such solid information with which to make decisions! Seriously, you're a moron.

Again, the foreign exchange is about as profitable for retail traders as the stock markets; which is to say that for most retailer traders, it isn't. It's not a conspiracy, it's people who don't know how to manage their money. It's people who think it's perfectly sensible to risk half of their account balance on a trade because they don't know how leverage works. You know how many people piss and moan because their equities trading accounts get wiped out when they try and short?
  • #19
  • Jul 31, 2011 2:23am Jul 31, 2011 2:23am
Quoting Mr Breakout
Here is another clever forex trick. As you know, Forex brokers now publish the success rate of their customers. For example FX broker ABC would say :
On the first quarter of 2010 35% of our customers made money.
On the second quarter 33% made money, etc...

These numbers seem rather impressive, but of course what they do NOT tell you is that on the second quarter of 2010, those traders who made 35% during the last quarter are now flat broke and have disappeared from the radar and that a new batch of "fresh meat" took over.

This is why they need...
no shit sherlock!

it's not the job of the brokers to DISSUADE people to join them and trade. they are a business.

b - u - s - i - n - e - s - s !!!

they have to make money too and require clients to do that. your argument is the same as macdonalds not posting pictures of cows being slaughtered. everyone knows their burgers are made of cows, but it's not in their interest to show you poor old buttercup having a knife to it's throat while it looks at the camera with big sad eyes as if to say "why me?".

it's not up to the brokers to hold the hands of their clients. it's to provide a service. if they get caught tampering with their service then clients are quick to complain about any little injustice, so it would be obvious if a broker was being unjust simply due to the hordes of whiners.

everyone knows there are a million and one ways to get screwed-over. but most complainers on any forum regarding any broker "stop hunting" and the likes etc would do well to get on a sim and see if the sim also stop hunts them... which reveals the person simply has a CRAP METHOD and it has NOTHING to do with the broker cheating them. they are cheating themselves.

due diligence!
Congratulations ScalaFX for coming out of the closet!
  • #20
  • Jul 31, 2011 10:00am Jul 31, 2011 10:00am
Quoting Mr Breakout
Is that so?

Take a look at this video and you will see how Forex brokers can steal from their customers on a daily basis. I am not saying that they are ALL dishonest but just watch what they can do to your Forex account...

http://forexsocialmedia.com/home/soc...r+Manager.html
Interesting stuff there and as a newcomer (less than 2 years) to forex it's useful information.However,I can't be sure I myself have experienced such "dodgy" moves with my account........yet.

I use a VERY wel known broker *****.com but wonder which ones are suspect?????
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