If the bank is widening their own spreads via adjusting their own bid/offer price then how is that devious?
Very true. When the liquidity providers do it, they are merely offering prices as they see fit. However, they can also see both depth of market as well as all stop orders submitted electronically. I don't doubt for one minute that they have a view of the broker's back-end that gives them this advantage. So, when the banks cranks the spreads they do it to their own advantage. Price Spiking cannot be done absent a crank on either the Bid or the Ask, or both simultaneously.
So, simply offering prices that vary is not the problem - that's the way the business should work. But, spiking the Bid/Ask or artificially widening the Bid/Ask when they know full well that a significant move is on the way (before/during news for example), is somewhat devious to say the least.
Now, couple that with the Brokers algo and you can see how the retail guy gets the shorter end of the price stability stick all the time. Brokers are adding yet another layer of price manipulation on top of what the Banks are already doing to cushion and/or prevent their losses.
The only way for the retail trader to reach long-term success, is to find the repeating patterns in the data and develop the algo to exploit them whenever and wherever possible.
They have the right to bid or offer at any price they want...after all it's THEIR pricing.
Sure they do - that's the way the business works. But, a "Panic Button" and tweaking the speed of the price stream - speeding it up and slowing it down at will? That's market manipulation and it probably results in even wider spreads being seen on the retail platforms, as the broker's algo has to work out its own profit model when wildly diverging bid/ask streams result from more than one bank jerking the speed of their stream (no pun).
Again, if brokers would give traders at least access to the true DOM, then traders could decide for themselves where prices are lagging, who is lagging them and where best to place their order. But, since the vast majority of FX retail brokers don't offer anything even remotely close to true DOM, the retail trader is left with jerky pricing and artificially rigged spreads.
However, if they show different spreads to different customers then that's a much darker arena.
Actually, with true DOM on your platform (something that brokers CAN do) you could decide to do business with those providers offering fairness in pricing. If you see a bank jerking off in the corner with wildly differing pricing that is outside of true mean, then you can ignore that jerk and do business with someone offering a fairer price. Likewise, if you see no fair prices out there, then you can simply sit back and wait until you are happy with the pricing levels before entering your position.
Right now, you have no idea whatsoever what fair looks like - because it is all being masked by the broker's back-end pricing engine and their need to generate revenues through keeping spreads artificially wide.
Remember, in a true DOM world, you would get opportunities for Zero Spread entries because you can do your own price matching of sorts and pick the best opportunity the market has at the time of your entry. Right now, you don't have the opportunity on most retail platforms.
Remember too that their customers are NOT retail traders but the brokers that we all have accounts with. If they widen spreads to those brokers and the brokers pass those wider spreads on to the retail customers then it appears that many brokers are CORRECT in stating they just pass the wider spreads on and don't widen them on their own.
Not quite. Banks are not paying the same ridiculous spreads that retail traders pay. Remember, there is Interbank and then there is Forex. Retail traders trade on Forex. The banks ARE the Interbank system and they are often times seeing Zero to Negative Spread conditions. They take advantage of those all the time. Arbitrage opportunities are very real at that level - but I'm not even talking about that.
So, what brokers are getting from the banks [individually] are more than likely not the high spread conditions you see - as brokers have to widen those spreads to pad their revenues. As proof, just take a look at DCFX pricing right now. They charge a commission and the spreads are fairly tight for a retail account - even tighter for an institutional account. Therefore, if the banks were delivering wider spreads to DCFX, there would be no reason for that broker to reduce the spread before streaming it to their trading platform - that makes no sense. So, the banks must be delivering very tight spreads to that broker to begin with.
Without a doubt there are downright scum bag brokers out there and the forex arena is murky at best. But the video clearly shows that widening of spreads originates from the large fx banks (that us retail traders are NOT customers of ). Several of us have said this many times over the years here.
That applies to Interbank. Retail traders do not trade on Interbank rates. If you did, then you would see Zero Spread conditions and even Negative Spread conditions a lot more often - as matter of routine business. These are the conditions that are seen on Interbank all the time. Therefore, if Zero to Negative Spread conditions exist, that must mean that banks are dealing at near Par on a very frequent basis on Interbank.
However, inside these Dark Side Bank retail Forex proprietary liquidity pools is where retail traders execute their orders and those are not Interbank rates. The broker is also widening the rate to establish their revenues from retail transactions consistently.
Between the broker and the bank, the retail trader is getting hosed. So, it becomes important to beat these guys in the Algo Arena, where if you design your own they can't touch you. All the broker can do at that point is start freezing the platform after you execute your order, start offering you more re-quotes than you have ever seen before and increasing the amount of negative slippage than you normally see in your trading.
This is precisely what happens on many retail trading platforms when you actually start growing your account balance to significant levels and it is precisely why you can only go so far, as a non-commercial retail trader on such rigged platforms. At some point, you have to switch to an institutional account on a
real institutional platform and use a prime broker.
That being said the fact that they can and do alter the speed of the price stream is new to me too.
I'm still scratching my head on that one too. :-0 But, again - with true DOM on your platform, you could at least see where the lagging occurs on an individual basis and then choose the banks that best represent fair pricing at that moment. There are all kinds of tactical decisions that you can make at entry time when you have access to true DOM. Right now, most retail brokers are just price aggregating wholesalers.
They may even be doing some of their own off-setting when the banks just can't agree on a "fair level" for price at any one time, by taking your order and then off-setting it at a later time against other "entities" within their pool [best guess]. If the banks are all over the map on pricing, that blows a hole straight through the middle of the retail broker's business model. The brokers can't just close up shop and go home - they have to deal.
So, in a sense, you could argue that the brokers offer a kind of "price stability" in such situations where the liquidity providers just can't agree on where price should be in any instant. However, price stability should not be confused with price fairness. The brokers are still, for the most part, screwing the trader left, right, up, down and sideways.
Create unique and bespoke algos based on repeating patterns with empirical and historical support and screw them before they screw you.
No matter what - somebody is going to get screwed - might as well be them not you.
