Forex broker integrity question

[davidmaria1]

Bear with me please, as the answer may be right in front of me.
What advantage does a forex broker gain by running a stop? If the broker charges a commission (i.e MB), how would this help them? They've made their cut.

 

[bugscoe]

Do you have a specific example you could show?

I watch MB's data all day and would be more inclined to say that it's not a broker specific event. But you never know.

 

[cabletrader]

Apart from the obvious (which is rare for mainstream brokers), some marketmakers may run stops to provide in-house liquidity.

 

[davidmaria1]

No specific example. By in-house liquidity, are you referring to a broker closing the positions he took against you or others?

 

[cstfx]

On an ECN model broker, the prices an the screen "usually" reflect the best bid/ask prices of their respective liquidity partners. I say usually because there are some brokers using Currenex ECN platform that pad the spread by a pip and don't charge a commission, i.e. FXCM's platform. So for the most part, an ECN doesn't run stops because effectlvely they don't control the prices you trade with.

Now bucket shops, sorry, marketmakers/dealing desks, they create the price that is displayed. Through some type of algorithm and prices from their liquidity provider, this is the price that shows up on your screen. They can manipulate the price you see, and as such, can change the price to run stops, causing your trade to execute and they get their pip.

MBT is supposed to be an ECN, like Hotspot or IB, their prices are supposed to be controlled by their partners, not by some internal controls. As someone asked, what happened with MBT that makes you think your stop was run?

 

[crgarcia]

Quote from davidmaria1:

Bear with me please, as the answer may be right in front of me.
What advantage does a forex broker gain by running a stop? If the broker charges a commission (i.e MB), how would this help them? They've made their cut.

When you place an order, most forex brokers don't actually buy/sell the currencies in the interbank market.
They just pretend to have done so, and keep your money (bucketing).

Since most traders lose money (95-98%), every dollar lost by traders is a dollar of pure profit for them.

So, by running stops, it's guaranteed you lose (and they profit).

Commissions (spread) is an insignificant source of income for brokers, they gain what you lose.

 

[cabletrader]

The conspiracy thoeries never end, this subject has been beaten to death on pretty much every trading forum.

Guys, you're not trading in the forex market, you're trading a derivative product, and the 'broker' hedges his exposure in the market as he sees fit. I don't care what your marketmaker calls himself and his platform, STP, ECN style, no dealing desk, marketmaker, bucketshop, etc etc, the counterparty to all your trades is the broker or a subsidiary, not a bank!

Every retail forex broker has the facility available to adjust and manipulate the price he is prepared to deal at. Most of the time that closely reflects the underlying market for obvious reasons.

 

[davidmaria1]

I'm sure they do, and after seeing that post yesterday, with the screenshot from MT4 showing the features of their software, I guess it could leave a bad taste. Is the general feeling on MB Trading such that they will meet any new fed. capital requirements?