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So Whats the Catch?

  • Post #1
  • Quote
  • First Post: Jul 1, 2012 9:36pm Jul 1, 2012 9:36pm
There's got to be a catch. At what point does a broker push you out and lose your account. What amount of money gained by an individual will cause a broker to lose your account or start stealing your money?

I'm looking for some answers form forex veterans that earn alot doing this.

Thanks in advance.

http://www.forexfactory.com/images/m...ading_dark.gif

Quoting JTattheRanch
There's got to be a catch. At what point does a broker push you out and lose your account. What amount of money gained by an individual will cause a broker to lose your account or start stealing your money?

I'm looking for some answers form forex veterans that earn alot doing this.

Thanks in advance.

http://www.forexfactory.com/images/m...ading_dark.gif

It's against your brokers interest to push you out. Once your account size gets very large, say you are trading 20 lots or more, the amount of money they make off the spread is ridiculous.
Quoting V00d00trader
It's against your brokers interest to push you out. Once your account size gets very large, say you are trading 20 lots or more, the amount of money they make off the spread is ridiculous.
I thought they only make money when a client loses and thats how they can afford to leverage clients collateral so much.
Quoting JTattheRanch
I thought they only make money when a client loses and thats how they can afford to leverage clients collateral so much.
Once you start trading large sizes, brokers hedges your position in the open market. Therefore whichever way your trade goes, they do not make a loss. When you reach thoses sizes(maybe from 10 lots and above?), you will notice that there is a time lag between, when your trade is placed and the actual trade being executed. This is due to the broker actually hedging your position.
That really depends on who you work with.

OANDA claims to hedge every trade in order to remove the conflict of interest.

FXCM claims to operate differently then most brokers and says that they act as the middle man in electronically delivering your order to 3rd-party liquidity providers, so as to allow you to remain anonymous to the market, which also removes the conflict of interest.

I say that these brokers 'claim' to operate in these ways, because you really can't be 100% certain. It comes down to trust in the end. If they actually do, then I would think that they would never steal your money or ask you to leave, no matter how profitable you were... it would be absolutely against their interest to do so.

-fighter
  • Post #6
  • Quote
  • Edited 1:09pm Jul 2, 2012 12:41pm | Edited 1:09pm
You are trading with Bucketshop brokers with dealing desks, they never lose money because they manipulate the price feed to guarentee profit for themselves. Review the contract you sign with the Bucketshop, nearly all of them state that the price they offer doesn't have to reflect the real market price.

You need to trade with a proper ECN broker which sends your trades directly to the market. That way your winning money from the market and losing your money to the market. With the conflict of interest gone, the broker has a incentive to see you win rather than lose because they make all there money from spreads and commissions instead of losers.
I will second the comment about noticing lag when you start to do well and start to trade with bigger lot sizes as your account grows. It's not uncommon for traders who finally figure it out and start doing well, all of a sudden find they get more slippage, errors, lag, requotes any anything else that hinders performance. At this point most close their bucketshop accounts and take their money to a genuine ECN to trade on the real market.

I would say if you have to trade with a non-ECN broker or bucketshop, FXCM, despte their questionable past, are about the best. If you have a decent account size and can trade a decent monthly volume, they will put you on an active trader account and send your trades through the real market. Ideally though you want a true ECN broker like IB, using Currenex. But the platorm will seem like a bag of turd if you are used to a good bucket shop platform.
  • Post #8
  • Quote
  • Last Post: Jul 2, 2012 1:26pm Jul 2, 2012 1:26pm
Quoting JTattheRanch
There's got to be a catch. At what point does a broker push you out and lose your account. What amount of money gained by an individual will cause a broker to lose your account or start stealing your money?

I'm looking for some answers form forex veterans that earn alot doing this.

Thanks in advance.

http://www.forexfactory.com/images/m...ading_dark.gif

There are legitimate brokers with proper licensing and banking credentials and trained staff, and then there are pretend brokers with none of that, whose only goal is to set up a false store front to lure in unsuspecting marks.

There are about equal numbers of each kind. Your job is to sort out them before sending in your check. Just use common sense. If you wouldn't fall for the old Nigerian bank scam, then I assume you wouldn't be sending your money to a scam artist posing as a broker, either. But it takes a little digging to be sure. You can't rely on just a slick web site, or a handful of 5-star votes on a supposedly independent web site. If you are prepared to invest 2 weeks to make a few international phone calls, and hear back from your emails, etc., then the likelyhood of being scammed drops significantly. Bottom line, trust no one and do all your own research, every time.
To improve is to change. To perfect, is to change often.
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