If the broker keeps the trades and the trader wins, the broker has to put from his pocket but that almost never happens because he always cancels each trader out ....
- Thank you for taking the time to enlighten us,
- Assume with me that I'm trading an exotic pair and there is no other trader is trading this pair with me, so broker fill the other side of my trades. Also assume that I'm a consistent winner.
- What happen to this broker after a long losing time trading with me? (Is he going out of business?)
No.. Broker don't go out of business.. if the broker just have you trading the Symbol, he just send your trades to the bank/liquidity provider, you pay spread, from this spread the broker pays smaller spread to the bank exactly like a Middle man, doesn't matter if you always win or lose the broker always makes money.
Because the broker puts the risk to the banks side from your trades.. and trust me the banks almost always have someone to cancel the trades out.. the banks work on similar basis, and even if the banks don't have someone to cancel trades out, guess what, they change price on the opposite side and makes money no matter what.
And you know what's the best? They don't need to explain no one why price changed opposite direction!
If the Brokers see you always losing he keeps the trades and gets all your money, if the broker see you always winning he sends all your trades to the bank and makes smaller money but always makes money.
The only time Broker takes risks is when he keeps the trades thinking your a loser and then suddenly you are winning, then he needs to pay from his pocket, that's why there are risk management systems to check everything on real time and change you quick from B-book to A-book.
That is if the broker makes everything the correct way..if he is a bad guy the dirty things the broker is able to do that I know of is that he can open and close trades in your name, your account, and you can not do nothing about it, if you deposit your money to a broker you should trust him.
Price is King, Volume is Queen, all the rest are just story tellers!