I am interested to try and figure out more about your suggestions that the broker has in some way 'fiddled' with my buy/sell environment to make it less profitable for me. It would certainly explain last week's poor results. However I am equally curious about why they would do that on this ECN account if, as they claim: A.) They have no Dealing Desk and take no positions against their clients; B.) Liquidity providers are not required to take both ends of any given deal - it can be split into a buy and a sell and each LP gets what they offer; C.) If I am profitable, I will trade more contracts for longer periods and they will make more commission and D.) All the profits they make from me are in the form of commissions. All the spread goes to the LPs.
It would seem to be against their better interests to curtail any profits I could achieve. Unless, of course, one or more of my assumptions are false. Or, if I am overlooking another aspect of their profitability. I deliberately chose a broker that makes 100% of their profits from commissions for that reason.
Could either or both of you suggest the motivation the broker has to consider this action? I realize if they do it, I am likely to never know except that profits just continue to erode. - Thanks
Ergo: They are the CASINO and they want to make money.
Why do brokers choose this path?
90% of retail traders lose all their funds. So why should not 90% of traders lose their monies (in addition to spreads and commissions) TO the B-booking brokers? Why would the brokers give this chunk of 'meat' to Liquidity Providers...?
They just facilitate the process by the virtual dealer plug-ins.
What about the 10%...? Well, 5% probably just breaks even, and they don't care about them.
The 5% profitable traders (who cannot be destroyed by the plug-ins) are eventually passed on to the LPs...
This is WHY you need to read your brokers RULES and trading conditions and disclaimer VERYY carefully.
Lets get our facts straight and use the proper language please. The market microstructure is made up of basically two types of exchanges. There are two 'model' types of exchanges in forex market : broker , dealer .
Broker model also known as ECN Broker: provides access to broker firms who then markup their commission to sell to others. This means all transactions are matched against best bid and offer available. The downside to this model is the the liquidity is finite and if very few traders want to trade at certain point then slippage will likely occur due to lack of liquidity.
Dealer Model: One exchange does all. This is the majority of forex firms. Traders orders do not cross over and there is no order matching of other traders. This is where the fixed spread comes in and that is how dealer earns profit. You will notice if you cannot place an order between the bid and ask, your broker is likely this type. These are the ones you have to be careful about and do your own due diligence because of some of the dirty tricks this model can do to reduce its own risk. One disadvantage that is a big one that we all witness often is news events or surprise economic events. So this exchange will get a large quantity of orders on one side, so in order to hedge there own risk they must place orders on other exchange which is why you will get widening spread. This is the most common one. Your best bet is to go to a true ECN like IB, or Saxo or something like that. Doesn't mean an ECN still cant slip you though, YOU must read the rules. Then only then will you profit smarter.
Thanks! This explains the environment more clearly than I understood before. Looks like I need to get busy and do some more very careful analysis of the language within the broker's rules and trading conditions to determine whether or not they leave themselves the option to take a position against me or whether they claim that 100% of the trades go out to LPs. Mine is a 'True ECN' style account so we shall see.
From there I will decide whether there is a need to look more carefully into my trades and attempt to verify this is actually how it is being done. At that point I would appreciate any help you may wish to provide on how to best establish in writing that my broker is, in fact, placing all trades with LPs and not trading against me. I see several traders who are unhappy at the fill prices at times but the broker is clear that they post only the most favorable rate available on the MT4 terminal. When the trade hits the books, that exact rate or LP may no longer be available. I just want to ensure that whatever is happening is happening without my broker benefitting from any revenue other than commissions.
Is it really that hard to believe the strategy is not profitable in recent markets? Why is there so much blame against the broker? If it really works, it would work at all brokers and not at a few selected brokers or demo accounts only.
Fighting through latency and liquidity is the real world, you can't blame the broker for giving you real world conditions.
The facts are simple, it does well on demo and only a limited amount of real accounts. It is obvious it is not a successful strategy but more of a finely tuned strategy that doesn't work with real world scenarios hence demo's and a few market makers
Very true. As I check into things more carefully, I see the large majority of the time, the trades are closed out at or very close to the EA's TP or SL value. It is looking less and less like the broker is influencing the execution in some way and more and more like it is the EA negotiating the real liquidity conditions of the markets. The fact that trades stay open so short a time seems to make it a bit 'gun shy' closing trades before they can get out of the spread or commission zone if they are not instantly profitable.
I have turned all the risk levels to Conservative in my account and will watch it a while longer before I make a final call to keep going or shut it down. Sometimes the losses of a week can be eclipsed in one trade. Other times - not so much.
I have looked at all 196 trades since I started this EA. Average slip is -0.3Pips. It has been the same during winning periods and loosing periods so I can not attribute the change in results to a sudden jump in slippage. When slip is much higher than average (2% of the trades) I can trace them back to very volatile times in the market when you would expect higher slip.
I can see no reason to think the broker is doing anything but executing with transparency as I had hoped. Appreciate everyone's input and would welcome more if it becomes available.
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