Quote from mcgene4xpro:
Objectively thinking, you might be dead right. I have a strong feeling that brokers/big guys have much more sophisticated algo than i have. No doubt about it. But i still do not like the idea to give them a piece of logic even they already have. It is something i dont like to give those guys any.
Subsequently, if i could do some minor changes in my code to make it difficult to be deciphered. This actually will not harm me.
Most Retail FX Trader positions never see the light of day in the real Interbank system. Yet, Retail FX Traders are out there each day, clicking Long and Short positions into the market. The question is,
which market?
Essentially, there are two:
1) Interbank
2) Retail FX
That $4 Trillion in liquidity that FCMs and Brokers like to advertise to new customers, is nowhere near the level of liquidity that the Retail FX guy gets access to. That's why when you look at all these so-called platforms that are allegedly showing you the "DOM," your eyes pop-out at the lack of tick-by-tick real liquidity, even on the larger pairs.
The Notional Value being quoted across most Retail platforms, is not the same as what you will find on true Institutional Platforms. The Retail Trader is destine to trading on
proprietary platforms with proprietary liquidity pools.
When you read most Retail FX Client Agreements (which I encourage all new traders to do), they make it pretty clear that they
"reserve the right to act as counter to any, or all..." trades executed by the "Client" on the "XYZ Trading Platform." Heck, even the largest FX liquidity provider in the world, Deutsche Bank, had that very statement (or, words to the same affect) printed on their New Client Agreement. In fact, Deutsche Bank, took it a step further by outright telling you in bold print, that they might on occasion have the need to act as the Counter-Party to the Client's trade, in order to secure their obligation to their "premium customers," that might also be
disadvantageous the Clients position in the market. LOL! So, dbFX, used to come right out and let you know up front, that they were definitely going to be
trading against you.
But, outside of Retail intermediaries such as dbFX (now gone) and CitiFX, most of the others almost have to act as the Counter-Party to your trade, even when they lie and tell you that they don't. There are less than a small handful that offer true STP in the Retail FX space - maybe even less than two (2). All the others, for the most part, are claiming STP/ECN, but in reality are engaging in Concurrent Off-Setting.
This brings up the differential between Counter-Party and Off-Setting. Most people here already know the difference, so I won't labor on that point, except to say that Retail FX Brokers and FCMs, etc., love to lie about this point, or they love to hide the truth about how it works from their customers. Suffice it to say that just because they Off-Set you quickly, does not mean that they are not at the same time, acting as the Counter-Party to your trade. And, that is because they have TWO (2) contracts:
a) One with you their customer, where they agree to execute your trades and carry you to market.
b) One with their
proprietary liquidity pool, where they agree to roll-up notional value to a specific level, before Off-Setting the position to the pool.
We can write for days on end about this subject. Bottom line:
a) FCMs/Brokers in Retail FX, do take positions against you. It is part of their business model to do so!
b) If you can, you have to find an FX Intermediary who will engage the Retail Markets, offering
true STP through something like a Currenex Hub, and where they ONLY charge a commission (round trip) for their services to the Trader. This is the closest that any Retail FX Trader can get to the "real" Interbank Market.
Any Retail FX Intermediary who gets paid on the spread, and then turns right back around and
out right promises you "guaranteed low spreads and no commissions," is by logical definition, a
Retail Bucket Shop and they most definitely will be trading against you on their books.
Commission only Retail FX, is definitely not the norm out here. But, it is what the trader needs to get as close to Interbank as possible. Just don't expect to walk in there with a $500 paypal account, expecting to trade with them.
Now, are there ways to deal with Bucket Shops and trade profitably at the same time? Absolutely, yes. Retail FX dealing rates are not an exact mirror of what you will find on most Institutional platforms. However, since many of the entities making up the Retail pools, come from Interbank, you will find relative consistency between Retail rates and Interbank rates, with most of the divergence coming on the side of the Spreads.
So, there are two (2) truths here:
I) Retail Bucket Intermediaries do take the other side of your trade.
II) It won't matter if you learn how to trade correctly and improve your ability to predict the direction of the market prior to executing your position, and if you use proper Money Management Modeling, along with a good Money Management Strategy - and there is a difference between a Model and a Strategy.
Do that, and you can successfully get out of Retail Hell. It might take a while, but you can get out of jail and on to a real institutional platform.
