MarketMakers

Well first, easier said than done ... it is one hell of a time even getting a juniour position in these firms, as some here will testify, and two, why spend 5-10 years serving coffee for a bigwig at a bank, I'd rather spend 5-10 years learning the ropes to trade solo and serve coffee to myself

Nope - independence is one thing that drove me away from working for someone else

Working for yourself...the skies the limit.

Also, its a personal choice. Some people prefer to work at companies, cause they make personal relationships, while working for yourself, this isnt so easy.

But a lot of traders i know who worked at the banks, pack up and leave after 2-5 years.

They packed up because they wanted to(why would they do that?) or because they were fired?

Go work for a bank on the trading desk and find out why they packed up.

I have to agree with Rusty, why spend your time with people you have to be with, when you can be with people you want to be with. Trading privately full time doesn't mean you live the life of a hermit, for me it would mean spending more time with my new family, playing golf when it's sunny, and doing something meaningful with any spare time I have such as charity work. Still that's just me, I guess some like doing the 9-5 (or worse) thing and throwing on a tie each morning.

I understand your point,but there`s something one can get trading for a bank,that he could never get trading from his home.Like you`ll better understand the game trading from inside.95% of new traders fail,I don`t think it`s same percentage for people that learned trading at banks and institutions.One has greater edge in the bank.Than you can scalp your clients positions,so you have like free trades.Than you can earn more because you trade large amounts of dough.Like,even if you are great trader,and make,let`s say 50% per year.First you need who knows how many years to become real pro.But let`s say you are really,really good,and you start trading like a pro after 1 year.Than when you open live account,I`m not sure how many people are there that can open account larger than 10 G`s .Now how many years one needs to trade with 50% ROI per year to get to million $ ? and with bank,I think you`ll trade that size in notime.So,I think that biggest problem is that one can`t easily get that kind of job.I don`t know for others,but I`ll rather trade my last 2 years trying to learn to trade(`cause I didn`t learned much,at least I`m not earning) with 5 years of trying to get that kind of job and getting it.
I think forex is like producing wine,or maybe chocolate or something.Probably you can learn it yourself,but if you have mentor that is already king in that field,you`ll do much better.
At least that`s MHO.

I would,believe me,but there are no such things in my country now.Maybe in future,I`ll know what are you talking about,but now it would be nice if you explain it.

Retail Forex Brokers

Retail forex brokers or market makers handle a minute fraction of the total volume of the foreign exchange market. According to CNN, one retail broker estimates retail volume at $25-50 billion daily, [2]which is about 2% of the whole market. CNN also quotes an official of the National Futures Association "Retail forex trading has increased dramatically over the past few years. Unfortunately, the amount of forex fraud has also increased dramatically."

All firms offering foreign exchange trading online are either market makers or facilitate the placing of trades with market makers.

In the retail forex industry market makers often have two separate trading desks- one that actually trades foreign exchange (which determines the firm's own net position in the market, serving as both a proprietary trading desk and a means of offsetting client trades on the interbank market) and one used for off-exchange trading with retail customers (called the "dealing desk" or "trading desk").

Many retail FX market makers claim to "offset" clients' trades on the interbank market (that is, with other larger market makers), e.g. after buying from the client, they sell to a bank. Nevertheless, the large majority of retail currency speculators are novices and who lose money [3], so that the market makers would be giving up large profits by offsetting. Offsetting does occur, but only when the market maker judges its clients' net position as being very risky.

The dealing desk operates much like the currency exchange counter at a bank. Interbank exchange rates, which are displayed at the dealing desk, are adjusted to incorporate spreads (so that the market maker will make a profit) before they are displayed to retail customers. Prices shown by the market maker do not neccesarily reflect interbank market rates. Arbitrage opportunities may exist, but retail market makers are efficient at removing arbitrageurs from their systems or limiting their trades.

A limited number of retail forex brokers offer consumers direct access to the interbank forex market. But most do not because of the limited number of clearing banks willing to process small orders. More importantly, the dealing desk model can be far more profitable, as a large portion of retail traders' losses are directly turned into market maker profits. While the income of a marketmaker that offsets trades or a broker that facilitates transactions is limited to transaction fees (commissions), dealing desk brokers can generate income in a variety of ways because they not only control the trading process, they also control pricing which they can skew at any time to maximize profits.

The rules of the game in trading FX are highly disadvantageous for retail speculators. Most retail speculators in FX lack trading experience and and capital (account minimums at some firms are as low as 250-500 USD). Large minimum position sizes, which on most retail platforms ranges from $10,000 to $100,000, force small traders to take imprudently large positions using extremely high leverage. Professional forex traders rarely use more than 10:1 leverage, yet many retail Forex firms default client accounts to 100:1 or even 200:1, without disclosing that this is highly unusual for currency traders. This drastically increases the risk of a margin call (which, if the speculator's trade is not offset, is pure profit for the market maker).

According to the Wall Street Journal (Currency Markets Draw Speculation, Fraud July 26, 2005) "Even people running the trading shops warn clients against trying to time the market. 'If 15% of day traders are profitable,' says Drew Niv, chief executive of FXCM, 'I'd be surprised.' " [4]

In the US, "it is unlawful to offer foreign currency futures and option contracts to retail customers unless the offeror is a regulated financial entity" according to the Commodity Futures Trading Commission [5]. Legitimate retail brokers serving traders in the U.S. are most often registered with the CFTC as "futures commission merchants" (FCMs) and are members of the National Futures Association (NFA). Potential clients can check the broker's FCM status at the NFA. Retail forex brokers are much less regulated than stock brokers and there is no protection similar to that from the Securities Investor Protection Corporation. The CFTC has noted an increase in forex scams [6].

Nice insight Rusty - wish I'd read this sooner. Could this also be a sticky candidate in the brokers section?

Anyway the link you suggested is:

http://www.cftc.gov/tm/tmfcm.htm

I've pulled off the spreadsheet and highlighted a number of retail brokers and sorted on net capital requirement. Oanda is highlighted as a benchmark.

Looks like FXCM is #1 so their blurb about being the biggest retailer might be true. Interestingly Oanda's adjusted net cap is quite high in proportion to their requirements. I would presume a lot of small traders are parking their spare cash there as a savings account!

Thank you Rusty for this very enlightening thread!

You said that traders meditate before session - could you describe the method? What are the main expected benefits of meditation?

THANKS!!!

What about other requlatory bodies around the world, like UK, Switzerland or EU in general, Japan or Hong Kong or Asia? Do you know where to get similar information like this?

go to fxstreet.com look on the left hand side.

Sorry to be a bother, but do you have the exact link for that info?

I've tried looking and couldn't find it ... must be missing something obvious.

http://www.fxstreet.com/brokers/regu...organizations/

Great thread mate


turbo

Hi everybody!
Great thread, Rusty! Thank you!
So I even decided to register on forum

I have some questions. Where did your bank place orders? EBS or Reuters 3000 Spot Matching (D2)? Did it provide liquidity to some ECN's? How did it place orders in ECN if it happened?
May be I just don't understand smth. but curious to know how it goes on the 1st layer...

Thanxx in advance

Thanks Moe

I am looking for new broker.
I usually trade the news.
I prefer fixed spread.
any suggestions?
Thank you

fxsol

Thank you Moe