Counterparty Conflict of Interest

wheaters · Oct 16, 2006

Does anyone have a solution? As far as I'm aware, all forex brokers are counter-parties to all forex trades. Not the case with equities, but I don't want to trade equities. If the broker is counter-party to all my trades, it's in his best interest to stitch me up, slowly, over the fullness of time.

Does anyone know of any forex broker who matches my short/long with another actual trader's identical long/short? The way equity brokers do?

Jack o'Clubs · Oct 16, 2006

See comments on ECN etc for more info, on this thread (or just trade CME currency futures).

http://www.trade2win.com/boards/showthread.php?t=21432

damianoakley · Oct 17, 2006

wheaters said:
Does anyone have a solution? As far as I'm aware, all forex brokers are counter-parties to all forex trades. Not the case with equities, but I don't want to trade equities. If the broker is counter-party to all my trades, it's in his best interest to stitch me up, slowly, over the fullness of time.

Does anyone know of any forex broker who matches my short/long with another actual trader's identical long/short? The way equity brokers do?

Hi wheaters,

Out of curiosity, why don't you want to trade equities?

Thanks

Damian

wheaters · Oct 17, 2006

damianoakley said:
Hi wheaters,

Out of curiosity, why don't you want to trade equities?

Thanks

Damian

A number of reasons, some if not all of which may be erroneous.
Don't trust the big players not to bend the market to their benefit at my cost. Equities aren't strictly demand/supply situations - you get emotions moving the market to where it shouldn't go, and I feel forex won't do that as much. There are simply too many shares/markets to look at, and I'd prefer to look at only one or two currencies, and hopefully!? become an expert in their movements and personalities.

damianoakley · Oct 17, 2006

I'm afraid that your reasons ARE, as you suggest, erroneous !

Forex is an unregulated market that can be bent to the market-maker's benefit at your cost just like any other market out there. If your main reason for abandoning equities in favour of forex is because you think forex is a "straight" market, then I'm afraid you are very much mistaken. Forex is moved about by human emotions as well - just watch the EUR/USD around an important economic event (like employment figures or similar) and you'll normally see a crazy market with crazy spreads that's virtually untradeable at that time.

I'm not saying that forex is a bad market to trade. I'm just saying that be careful your reasons for choosing forex as your preferred market are the right reasons. So many beginner traders decide they are going to get into forex because it just because seems so accessible and easier to trade than other markets. This is not the case - forex is not an easy market to trade - it just looks easy.

Thanks

Damian

wheaters · Oct 17, 2006

damianoakley said:
I'm afraid that your reasons ARE, as you suggest, erroneous !

Forex is an unregulated market that can be bent to the market-maker's benefit at your cost just like any other market out there. If your main reason for abandoning equities in favour of forex is because you think forex is a "straight" market, then I'm afraid you are very much mistaken. Forex is moved about by human emotions as well - just watch the EUR/USD around an important economic event (like employment figures or similar) and you'll normally see a crazy market with crazy spreads that's virtually untradeable at that time.

I'm not saying that forex is a bad market to trade. I'm just saying that be careful your reasons for choosing forex as your preferred market are the right reasons. So many beginner traders decide they are going to get into forex because it just because seems so accessible and easier to trade than other markets. This is not the case - forex is not an easy market to trade - it just looks easy.

Thanks

Damian

Damian,

All your points are valid. I'm a newbie who blew out two small accounts while learning and have spent the last 18 months demo-trading and trying to get back into trading proper using another small account. I'm simply trying to get better and be consistent. I originally moved over to forex because of the marketing - '$1.9trn a day - liquidity', and also liked the idea of simply trading one, maybe two currency pairs, so I can hopefully really get a feel for them. I don't trade the news, for the very reason you mention, but I traded BP and was gapped up and 'slipped' more than twice the spread, whilst I've never yet had slippage with the forex brokers I use.

One of the other replies I got which suggested using the futures markets at CME might be the way forward, although I feel I'm a long way off being competent to trade those sorts of instruments.

Dave

damianoakley · Oct 17, 2006

Hi wheaters,

It sounds like you've moved over to forex because you see it is a safer market to trade after a "gap scare" you had in stocks. I have traded stocks for years and have never suffered any significant damage from price gapping or slippage. I don't say that to be arrogant - I say it to make the point that if you trade correctly, then gapping and slippage should never stop you profiting in the stock market over the long term.

Whilst gapping and slippage will be less of a problem in forex, this market comes with it's own problems of equivelent irritation that you will have to find ways to overcome it you decide you are sticking with forex as your chosen market. I understand your want to keep things simple by following just one or two currencies......it's easy to become overwhelmed by the thousands of stocks out there, but trust me - there are relatively easy ways to filter out only the best stocks - I do it every day from 10,000 stocks !

I would suggest that if you've blown two accounts, then you are taking far too much risk per trade relative to your total capital available. The more you risk, then the more often you have to be right on every single trade you take...........and that's putting massive pressure on yourself.

Many beginning traders that I coach have busted more than one trading account, and it's normally because they are risking far too much money on each trade.

Good Luck

Damian

wheaters · Oct 18, 2006

damianoakley said:
Hi wheaters,

It sounds like you've moved over to forex because you see it is a safer market to trade after a "gap scare" you had in stocks. I have traded stocks for years and have never suffered any significant damage from price gapping or slippage. I don't say that to be arrogant - I say it to make the point that if you trade correctly, then gapping and slippage should never stop you profiting in the stock market over the long term.

Whilst gapping and slippage will be less of a problem in forex, this market comes with it's own problems of equivelent irritation that you will have to find ways to overcome it you decide you are sticking with forex as your chosen market. I understand your want to keep things simple by following just one or two currencies......it's easy to become overwhelmed by the thousands of stocks out there, but trust me - there are relatively easy ways to filter out only the best stocks - I do it every day from 10,000 stocks !

I would suggest that if you've blown two accounts, then you are taking far too much risk per trade relative to your total capital available. The more you risk, then the more often you have to be right on every single trade you take...........and that's putting massive pressure on yourself.

Many beginning traders that I coach have busted more than one trading account, and it's normally because they are risking far too much money on each trade.

Good Luck

Damian

Damian,

Thanks for your reply. At present, and for the foreseeable, I'll be simply learning the craft, perfecting the skills, slowly building up the equity and becoming a better trader. I'm not massively worried about blowing out two accounts simply because from what I read, it's quite normal to do just that. 'Paying my dues' and my 'tuition costs' as the Americans say. When I'm much better, much more consistent, and have built up my account to a reasonable size I'm sure I'll want to diversify and trade more instruments. In the meantime I'm trying to keep it simple.

wheaters

damianoakley · Oct 18, 2006

Hi wheaters,

You're quite right in that some of the best traders blew several accounts when they first started !

Good luck with your trading.

Thanks

Damian

stevespray · Oct 18, 2006

Hi Damian - Good input. Any chance you might want to briefly outline your trading strat? I noticed in a previous post that you say that you monitor around 10,000 stocks to find the ones to trade. How do you detect the ones you're interested in and then how do you set about trading them?

Wishes,
Steve.

damianoakley · Oct 18, 2006

Hi Steve,

I use a computer to filter out each day only the very best quality companies on the market, based on recent earnings performance, recent price performance, and recent volume. After this filtering process, I normally end up with around 20 stocks to manually screen to find the best trading opportunities based on risk/reward.

Thanks

Damian

Counterparty Conflict of Interest

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