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Broker - Too High Profit Question

  • #1
  • First Post: May 19, 2016 7:53pm May 19, 2016 7:53pm
Hello, i'm in the forex scene now for some time ... i have a question i read somewhere that brokers simply won't let you earn alot of money.

for me it just makes no sense i mean they profiting mutch from "spread" why would they give a fuck about how mutch money you earn. they dont lose anything if you are a sucessfull trader and earn alot of money in a short time or i'm wrong on the other side they are happy becuase they still can suck your spread ...

so please tell me somone is that just a myth ? or does a broker has really problem with you when you make in a month a milion dollar (just and example with the milion).
  • #2
  • May 19, 2016 8:56pm May 19, 2016 8:56pm
In this market, at some point, someone has to be making a market for you to actually get your trade filled. Normally these market makers are banks, though there are some institutional non-bank market makers, but the majority, around 56%, of all risk in the retail market is taken up by the top 3 FX banks.

Most banks are buy or sell side firms, meaning they don't offer you both sides of the market on every trade, so they don't really earn from the spread, they simply use the spread as a way to guarantee enough time or space for them to of load or hedge your trade with other market participants and in doing so they retain a commission.

Most banks consider a flow to be toxic when they are unable to do just that, and this normally is due to the speed you are in an out of the market. It can also have to do with the inability to offset trades due to nonexistent liquidity, but most cases of toxicity have to do with speed.

To answer your question it depends on your trade flow, if it is considered toxic, and this does not mean if you win or loose exactly. In the end someone is taking risk when you enter the market, and if your trading style stops them from being able to remain profitable... well your trading conditions will become quite aggressive quite quickly.

Small MMs will simply close your account... STP outfits that have LP complaints may do the same... Larger STP brokers will simply have their LPs adjust the filters on their pricing feeds which will eventually have you closing the account on your own.
Kevin Murcko | CEO at FXPIG
  • #3
  • May 20, 2016 12:21am May 20, 2016 12:21am
If you are that BIG. The easy way around is to have more than one account with more than one broker.
Without having an understanding of down, you can never appreciate up.
  • #4
  • May 30, 2016 4:42pm May 30, 2016 4:42pm
Quoting repxl
Hello, i'm in the forex scene now for some time ... i have a question i read somewhere that brokers simply won't let you earn alot of money. for me it just makes no sense i mean they profiting mutch from "spread" why would they give a fuck about how mutch money you earn. they dont lose anything if you are a sucessfull trader and earn alot of money in a short time or i'm wrong on the other side they are happy becuase they still can suck your spread ... so please tell me somone is that just a myth ? or does a broker has really problem with you when...
@repxl My suggestion is to go Swiss.
militarymonk
  • #5
  • May 30, 2016 4:53pm May 30, 2016 4:53pm
Regulation does not help the 'too much profit' question.

This relates to a brokers business model, their true business model, not the one they advertise, and their willingness to work with their clients to route their flow in a way that is advantageous to both parties.
Kevin Murcko | CEO at FXPIG
  • #6
  • May 30, 2016 8:38pm May 30, 2016 8:38pm
Quoting repxl
Hello, i'm in the forex scene now for some time ... i have a question i read somewhere that brokers simply won't let you earn alot of money. for me it just makes no sense i mean they profiting mutch from "spread" why would they give a fuck about how mutch money you earn. they dont lose anything if you are a sucessfull trader and earn alot of money in a short time or i'm wrong on the other side they are happy becuase they still can suck your spread ... so please tell me somone is that just a myth ? or does a broker has really problem with you when...
Depend on the broker. If the broker is a market maker who makes money from trading against you, then no, they do not like it when you make too much money because if you are making too much money that means they are making too much losses as they are the opposite side of your transaction. But if you have a broker that's making money mainly from commissions from your trading volumes, then they will be more indifferent to the amount of the profit you make but they will prefer traders with high trading volume to generate commission revenue for them.
Make your losses in demo. Earn your profits live.
  • #7
  • May 30, 2016 9:54pm May 30, 2016 9:54pm
Quoting Forexia
{quote} Depend on the broker. If the broker is a market maker who makes money from trading against you, then no, they do not like it when you make too much money because if you are making too much money that means they are making too much losses as they are the opposite side of your transaction. But if you have a broker that's making money mainly from commissions from your trading volumes, then they will be more indifferent to the amount of the profit you make but they will prefer traders with high trading volume to generate commission revenue for...
The reality is regardless if your front facing broker takes the risk or they STP the risk to another provider... someone is going to be taking the risk. The job of a good broker is to work with its liquidity providers AND its clients and find the best balance between toxicity and profitability.
Kevin Murcko | CEO at FXPIG
  • #8
  • May 30, 2016 10:08pm May 30, 2016 10:08pm
Quoting FXPIG.Kevin
{quote} The reality is regardless if your front facing broker takes the risk or they STP the risk to another provider... someone is going to be taking the risk. The job of a good broker is to work with its liquidity providers AND its clients and find the best balance between toxicity and profitability.
Somewhere in between, the broker that takes on more of the risk themselves will have more incentive to limit a successful trader's profit potential.
Make your losses in demo. Earn your profits live.
  • #9
  • May 30, 2016 10:11pm May 30, 2016 10:11pm
Your right... but the point is that even IF the broker is STP the same applies to the brokers liquidity partners, thus just finding a STP broker is not enough, you need one that can effectively manage its clients trade flow.
Kevin Murcko | CEO at FXPIG
  • #10
  • Last Post: May 30, 2016 10:37pm May 30, 2016 10:37pm
@Forexia @FXPIG.Kevin both of you are right, it is a matter of integrity and having enough capital for the payout on brokers end.
militarymonk
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