Forex Brokers and Implication to you (Trader)
It is so important to choose the right forex broker. As a rule of thumb, you want a broker that is fair to you in trade related matters (read more below to know what I mean), a regulated forex broker from a good regulator, and the most important point, a forex broker which you can withdraw your money any time, any amount. If in doubt, use the broker which I'm using: Axitrader. It is probably not the best, but it met all those criteria which I mentioned above. Do use our link to get extra benefits. Try demo trading if you want.
FOREX BROKER IN DETAIL
- Market Marker makes the market. When you buy or sell a pair the broker is the counter party, if you lose money, it means that the broker earns it:
- Free charting software and news feeds
- Very user-friendly trading platforms
- Currency price movements can be less volatile
- Fixed spread or variable spread
- Manipulate currency prices to run their customers’ stop loss or not let customers’ trade reach profit objective
- Their currency quotes may be 5 to 10 pips away from other market rates
- A huge amount of slippage can occur when news is released
- Stop hunting, will try to stop you out when the market have not reach your stop loss
- Electronic Communications Network (ECN) offers you direct trading on the real market. Participants could be banks, retail traders, hedge funds, and even other broker.
- Tighter Spreads
- Great Liquidity
- No re-quotes
- No market manipulation
- Charge commissions on top of spreads
- Can result in extremely bad fill when there is no liquidity in the market (e.g. sudden announcement of EURCHF unpeg by SNB)
- Straight Through Processing (STP) is everything of an ECN but does not charge a commission, Instead, it simplifies by charging a markup on spread
- Recommend to have ECN or STP
Important fact to consider when choosing brokers:
- Low Spread – Cost of trading is most important to sustainability
- Quality Institution- is your broker backed by quality institution e.g FSA, NFA, ASIC and strong financial background (this is most important)
- Extensive tools and research
- Fair game and accurate fills – is your trade filled at the price that you asked for?
- Account Types – option for standard and mini or micro account
- Level of Leverage – 1: 100 or 1: 200
A Book or B Book? Is it true that broker will trade against you?
- If you hear things such as "Brokers trade against you", "Brokers know my stops and stop-hunted my trades" or simply at critical moments (such as high impact data), your platform froze and when you would like to execute trades, those trades simply don't get filled....these are signs that your account is in your broker's B-book.
- A-book simply means your broker paid extra costs to have your trade cleared with a liquidity provider. If you make or lose money, your broker has no extra benefits. This is the most straight forward framework where brokers have no involvement in your trades. Your broker is merely earning a commission for clearing your trades - broker is passing orders only.
- B-book means your broker takes your trade. Your win is your broker's loss while your loss is your broker's win. If your account is being B-booked, there could be an assumption that your broker will try to prevent you from winning such as carry out stop hunting, or simply to slow you down if you scalping.
- There is no way of knowing whether your account would be B-booked. As a matter of fact, if the say is true that 95% of traders lose money, a broker would be motivated to put your account under B-book as there isa 95% chance that a trader belongs to the losing group.
- As a rule of thumb, if you are a retail customers unknown to the broker, or you couldn't be identified with any schools or your trade size is small like micro lots or your funding is little, brokers are likely to categorise that you could possibly belong to the 95% of traders who will eventually lose money. There is a lot of motivation to B-book your account.
- Therefore, once brokers know where you come from, the type of training you have and your consistent winning record, they want to take a second look whether to b-book your account.
- Does market maker b-book all their accounts? The answer is no. But there is a higher chance that a market marker will b-book their trading accounts. This is one of their main cash cow.
- Thus, if you have attended OFM courses, and are being introduced by OFM to our preferred brokers, there's not much motivation to b-book you. Look, brokers don't want to b-book winning accounts. So use this link to apply for your forex MT4 trading account http://bit.ly/liveaxi
TRADES & LOSING TRADES
"Live" actions and reviews from our students directly from our social media accounts. We don't tweet winning trades only. We tweet losing trades as well. It's just that we have more winners. Follow @terraseeds in twitter for live trades and forex ideas.