'...typically trade against their clients...'

[Sunshine777]

Hi, I'm keen on the whole get rich live comfortable be independant idea but can anyone explain to me why wikipedia would indicate that retail forex brokers and market makers make profit out of losing trades from their clients and how the heck do they do that?

"Retail forex brokers
There are two types of retail brokers offering the opportunity for speculative trading. Retail forex brokers or Market makers. Retail traders (individuals) are a small fraction of this market and may only participate indirectly through brokers or banks. Retail forex brokers, while largely controlled and regulated by the CFTC and NFA might be subject to forex scams[6] [7]. At present, the NFA and CFTC are imposing stricter requirements, particularly in relation to the amount of Net Capitalization required of its members. As a result many of the smaller, and perhaps questionable brokers are now gone. It is not widely understood that retail brokers and market makers typically trade against their clients and frequently take the other side of their trades. This can often create a potential conflict of interest and give rise to some of the unpleasant experiences some traders have had. A move toward NDD (No Dealing Desk) and STP (Straight Through Processing) has helped to resolve some of these concerns and restore trader confidence, but caution is still advised in ensuring that all is as it is presented."

or am i reading this wrong, meaning they take the other side of the trade regardless of whether the overall position is winning or losing?

 

[fakhar]

Hi, I'm keen on the whole get rich live comfortable be independant idea but can anyone explain to me why wikipedia would indicate that retail forex brokers and market makers make profit out of losing trades from their clients and how the heck do they do that?

"Retail forex brokers
There are two types of retail brokers offering the opportunity for speculative trading. Retail forex brokers or Market makers. Retail traders (individuals) are a small fraction of this market and may only participate indirectly through brokers or banks. Retail forex brokers, while largely controlled and regulated by the CFTC and NFA might be subject to forex scams[6] [7]. At present, the NFA and CFTC are imposing stricter requirements, particularly in relation to the amount of Net Capitalization required of its members. As a result many of the smaller, and perhaps questionable brokers are now gone. It is not widely understood that retail brokers and market makers typically trade against their clients and frequently take the other side of their trades. This can often create a potential conflict of interest and give rise to some of the unpleasant experiences some traders have had. A move toward NDD (No Dealing Desk) and STP (Straight Through Processing) has helped to resolve some of these concerns and restore trader confidence, but caution is still advised in ensuring that all is as it is presented."

or am i reading this wrong, meaning they take the other side of the trade regardless of whether the overall position is winning or losing?

You understood it correctly. Forex trading is not a good idea. if anyone wants to trade forex than he should trade currencies being traded on CME globex.
hope it will help
thanks
fakhar

 

[jonnyace]

You understood it correctly. Forex trading is not a good idea. if anyone wants to trade forex than he should trade currencies being traded on CME globex.
hope it will help
thanks
fakhar

There's a myth floating around that the forex market is worth $1.3 trillon a day. It might well be but not for retail accounts.

A large percentage of the time the retail brokers are traders of last resort, ie thay have to take the opposite side. Therefore slippage,spikes, increased spreads etc are to their advantage. Why do you think they all offer free platforms/research etc.

Fakhar is right, if you must trade curriencies do it on the futures, the spot market is a nightmare and unregulated.

 

[Rhody Trader]

To make things absolutely clear, there are two main types of forex "brokers". One is the ECN type which is a proper broker in that it passes the customers order through to be matched like a stock broker does with an exchange. The other type is a market making broker in which the customer trades with the broker, with the broker doing an internal offsetting of positions among its customers and using the broader market to hedge any remaining exposure as it sees fit.

Bottom line is, if you don't want your broker on the other side of your trades for fear that they may be abusing that situation then go with an ECN.

That said, I'm going to disagree with fakhar and jonnyace. If you trade with a trustworthy broker (and despite what you might have heard, they are out there) then you'll be fine. It all comes down to good trading.

 

[Sunshine777]

Thanks guys! Will definately have a look at CME but out of interest do you know any trustworthy brokers John?

 

[gc1]

When people say trade the CME currency futures :- the disclaimer should be added that this is only realistic for the 6 commonest currencies against the US dollar. For the crosses the spot market is still the way to go (unless you want the complexity of opening two positions to establish the cross).

Also the liquidity on Globex currency futures has decreased markedly of late. At the moment the inside quotes are well below 10 contracts each side for much of the day - much poorer than it was 3 months ago.

 

[Rhody Trader]

Thanks guys! Will definately have a look at CME but out of interest do you know any trustworthy brokers John?

Oanda is one you will probably hear close to nothing bad about, except perhaps some folks wishing their charting was better.

 

[fakhar]

When people say trade the CME currency futures :- the disclaimer should be added that this is only realistic for the 6 commonest currencies against the US dollar. For the crosses the spot market is still the way to go (unless you want the complexity of opening two positions to establish the cross).

you are right. you should trade spot if you need to trade your currency.

 

[FXSCALPER2]

That Wikipidia article is such a disgraceful piece of rubbish. People lose in trading because they don't know what they are doing. That is all there is to it.

 

[TomTom]

Well Said FXScalper.
When trading anything its best to become an expert in the given area.
Forex is extreamly profitable but also can be a tool to loose lots of cash if the nececery methods are not adapted,
If i need to say it trade through CME ........ not anything else for best service ect