There are 3 kinds of Forex brokers, of which only the first can truly use the description with honesty and accuracy:
- 1. Real brokers:
- Firms like Global Prime, who send your trade directly to the liquidity providers via the ECN network and 'straight through processing'. ECN is the network which connects it all up and STP provides a faster method of transferring the information.
- What this means is that your trade is sent direct to the liquidity providers rather than Global Prime being the counter party to your trade. As brokers between the individual trader and the liquidity providers, these true brokers make their money out of the commission they charge for brokering the deal.
- They have a vested interest in their clients succeeding as traders; as the trader's account grows, so does trade size and consequently, commission. Characteristically, their spreads are much narrower than are available from the market makers and bucket shops. No conflict of interest here.
- do not send your trade to the liquidity providers unless you are a losing trader - see below for an explanation. Instead, they take the opposite position and so have a vested interest in you failing. When you lose money with a market maker, they win your money. Huge conflict of interest here. I am given to understand that there are honest market makers out there, but I have never found one.
- both take the opposite side of your trade and invent the quote your platform receives. Said quote can be anything they want it to be. You may as well ask a Mafia boss for a sub as to try to get a live cash deposit back from them.
'Market making' sounds distinctly dodgy to me and possibly should be illegal. 'Bucket shopery' should be illegal. The dodgy market makers and bucket shops have a variety of nasty tricks up their sleeves:
- 'stop hunting': the market is within hailing distance of your stop loss and when hit, the trade will be a loser. They will send a spike to your platform that will hit your stop. They can even manually adjust the spike candle to make it look even more convincing. View the Youtube video linked in Zennor's post at http://www.stevehopwoodforex.com/phpBB3 ... 12#p155212 - it will blow your socks off.
- Widening the spread briefly when you take a trade. You do not notice.
- Widening the spread during volatile periods.
- Sending back 'off-quotes' errors when the market is moving quickly in one direction and you are trying to enter/close a trade.
- Slippage – this is a real rip-snorter. This involves holding up accepting your trade until a few ticks have moved the market in a direction unfavourable to you. This is absolutely brilliant for them when you are trying to close a trade manually – they hold up execution and then send a few ticks that shave pips off your profit or add them to your loss.
- Treating your tiny initial cash deposit well, then hitting you with every trick in the book once you are confident enough to make a much larger deposit.
- 'A' book and 'B' book. The criminals profile their 'valued clients' <hollow laugh> and divide them into 'A' bookers and 'B' bookers. Both get different price feeds. Transfer from 'A' book to 'B' book and back again happens without the knowledg of the 'valued client':
- 'A' book traders. These are the profitable traders whose trades are sent straight to the liquidity providers. The crims hate these. The only money they can make is the spread as they magnanimously do not charge commission on the trades. Mind, the spreads can be vast but noobs do not tend to know that.
- 'B' book traders. The crims love these. They are the losing traders transferred from the 'A' book. The crims regard the traders' deposits as their own.
- They do not want the traders losses going to the liquidity providers; they want these losses for themselves, so the crims take the opposite side of the trade and throw every nasty trick in the book at the trader to ensure the losses continue.
- Once the account is blown, the crim has snaffled all of the original live cash deposit.
- If, by any remote chance, a 'B' book trader still manages to be profitable then they are transferred back to the 'A' book to stop causing the crim problems. Here the different feed frequently destroys the system or EA the trader was using and turns him into a loser again. He is then transferred back to the 'B' book but without the confidence to continue using the system/EA that was originally profitable. End result? Blows the account trading unprofitably and the crim pockets the cash.
That is why you guys should sign up with Global Prime. The firm is a true brokerage and so will pull none of the nasty stunts some of the others will pull.
The added bonus is having GP run by Jemook and his two buddies. You will come to understand what a treasure Jem is, once you have been around here for a while.. Read the threads in this particular forum and you will see how responsive GP is to members requests for changes. We are soooooo lucky to have a broker we can actually trust.
Subsequent update about the regulatory body GP operates under: read this post by Nufty http://www.stevehopwoodforex.com/phpBB3/viewtopic.php?p=64999#p64999
Midnight just rolled around and I'll be answering all Qs in the morning. Gnite all.
