I want to know how Brokers work | Forex Factory

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I want to know how Brokers work

  • #1
  • First Post: Jul 28, 2013 5:33am Jul 28, 2013 5:33am
Hello all,
I have some questions in mind for some days.
We deposit money to brokers for trading. So far I know that brokers earn from the 'Spreads' from our trades we open.
But I wonder how much money they make from this spread to run a broker? Is it sufficient for them or there are other sources?

My another question is if we lose money then where it goes? I mean who gets it? And if we make Profit then whose money we are getting? As I know that Forex is a market place, it's not a product. So it's doesn't have own income source, it's all traders money.
Once I read somewhere that at first Brokers handle their traders by their own money and if it exceeds limit then they switches trades in open market. Is it true or possible?

Often I hear if a trader lose money then the respective broker gets benefited. How?
  • #2
  • Edited 1:38pm Jul 28, 2013 6:11am | Edited 1:38pm
There might be some useful info about how forex brokers operate as explained in this thread,
The Structure of Forex Brokers

You should also Google search (filtering for forex brokers) on terms such as "A book" or "B book" or "B-booking" or "aggregator", which described how brokers handle client order flows. The second part of your question is related to market structure (where did the money come from, where did it go to) and explained in following links and reports, courtesy of Seneca Pilot at his thread
Ramblings of a Forex Junkie.

Quoting Seneca pilot
The bible is Trading and Exchanges by Larry Harris. Not a cheap book but worth the read.

Also Foreign Exchange Market Microstructure - Georgetown University

And A Guided Tour of the Market Micro Structure Approach to Exchange ...

And Market Microstructure Theory: Maureen O'Hara: 9780631207610 ...
Quoting Seneca pilot
My gift to the very few who are willing to spend the time to learn (see attached). {image}
Attached Image
Attached File(s)
File Type: pdf Trading and Exchanges Draft.pdf   650 KB | 985 downloads
File Type: pdf Forex Market Microstructure.pdf   118 KB | 664 downloads
File Type: pdf Vitale survey micro FX.pdf   268 KB | 873 downloads
No longer trading forex. Looking for full time job.
  • #3
  • Jul 28, 2013 7:26am Jul 28, 2013 7:26am
Quoting Arav007
Hello all, I have some questions in mind for some days. We deposit money to brokers for trading. So far I know that brokers earn from the 'Spreads' from our trades we open. But I wonder how much money they make from this spread to run a broker? Is it sufficient for them or there are other sources? My another question is if we lose money then where it goes? I mean who gets it? And if we make Profit then whose money we are getting? As I know that Forex is a market place, it's not a product. So it's doesn't have own income source, it's all traders...
mmaker has set you up with some very good information.

Happy reading!
  • #4
  • Jul 28, 2013 8:54am Jul 28, 2013 8:54am
Quoting mmaker
There might be some useful info here, The Structure of Forex Brokers You can also use Google to search some fine articles about how retail forex brokers operate, could be faster to get your answer. {quote} {quote} {image}
Thanks a lot. I'll read them and try to get proper idea.
  • #5
  • Jul 28, 2013 11:41am Jul 28, 2013 11:41am
Hello mmaker, I am going through that thread and almost completed. Then I will go through that PDF. I hope I'll be able to complete it.
  • #6
  • Jul 28, 2013 12:11pm Jul 28, 2013 12:11pm
Excellent PDF mmaker! Thanks
Forex is a losers game.
  • #7
  • Jul 28, 2013 9:51pm Jul 28, 2013 9:51pm
Can't be bothered, or don't have the time to read all of that to agree or disagree, but ultimately every broker will have different setups and agreements with liquidity providers and/or dealing desks on how they make their cash.

All you can do is choose a regulated broker in a decent country like UK or Australia and don't do anything dodgy. I've spoken to people before who freely admitted trying to arb broker prices etc, then get annoyed when the broker fights back, but when they trade normally, everything is ok.

Don't be a bastard, and you'll probably find they are nice to you as well.
  • #8
  • Jul 28, 2013 10:46pm Jul 28, 2013 10:46pm
Quoting gregosv
Don't be a bastard, and you'll probably find they are nice to you as well.
One of the smartest things I've read on forex factory.
  • #9
  • Jul 28, 2013 10:52pm Jul 28, 2013 10:52pm
Quoting eurscalpr
{quote} One of the smartest things I've read on forex factory.
Thanks! I try...
  • #10
  • Jul 29, 2013 3:26am Jul 29, 2013 3:26am
Quoting gregosv
Don't be a bastard, and you'll probably find they are nice to you as well.
Very true. There aren't just difficult Brokers; there also many difficult customers.
Forex is a losers game.
  • #11
  • Jul 29, 2013 10:42am Jul 29, 2013 10:42am
Who does support the financial system?
  • #12
  • Last Post: Jul 29, 2013 8:49pm Jul 29, 2013 8:49pm
Quoting Maso
Who does support the financial system?
I just googled your question and came up with...

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