Brokers - Why do we still pay spreads?

Jan 16, 2014 at 12:56
2,665 Zobrazení
61 Replies
Členom od Feb 22, 2011   4862 príspevkov
Jan 23, 2014 at 18:25
CrazyTrader posted:
I don't debate really for myself... I'm fine with my strategies.

It's just a topic to help 90% looser traders.

Let's be honest here: Only 10% retail traders are winning... so if nobody is interested to save money.

Well let's broker making easy money.

'if you earn $1 each trade why do not let broker has its share like $0.1' for 0.1 Lot
'if you earn $10 each trade why do not let broker has its share like $1' for 1 Lot
'if you earn $100 each trade why do not let broker has its share like $10' for 10 Lots

The question is why guys would you accept to pay more for the same service.





What kind of the same service are you talking about?
Like community broker? I saw a couple and the service was indeed worse then regular broker
Členom od Nov 21, 2011   1718 príspevkov
Jan 23, 2014 at 18:58
'What kind of the same service are you talking about?'
Any services that a random broker provide. I'm just saying we could create a broker that provides the same service but it won't be that greedy on commissions.

'Like community broker? I saw a couple and the service was indeed worse then regular broker'
I'm not aware of this. can you provide a link?
SwissManagement
forex_trader_150670
Členom od Sep 12, 2013   110 príspevkov
Jan 23, 2014 at 18:59
@CrazyTrader , community broker sounds good really. But i think it's so difficult to create this kind of community because of law.
Členom od Feb 22, 2011   4862 príspevkov
Jan 23, 2014 at 22:37
CrazyTrader posted:
'What kind of the same service are you talking about?'
Any services that a random broker provide. I'm just saying we could create a broker that provides the same service but it won't be that greedy on commissions.

'Like community broker? I saw a couple and the service was indeed worse then regular broker'
I'm not aware of this. can you provide a link?

Well I do not recall the name exactly as it was not worth it
it could be this https://www.thecollectivefxglobal.com/
Členom od Nov 21, 2011   1718 príspevkov
Jan 23, 2014 at 23:17
Brilliant... this does already exist : )
Členom od May 04, 2012   1608 príspevkov
Jan 24, 2014 at 01:32
Establishing a brokerage is a pretty costly enterprise, not to mention the maintenance costs. I guess brokers need to charge some fees to cover their expenses and to make some profits for their investment in the business. What is wrong with it...?
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Členom od Nov 21, 2011   1718 príspevkov
Jan 24, 2014 at 01:53
FxMasterGuru posted:
Establishing a brokerage is a pretty costly enterprise, not to mention the maintenance costs. I guess brokers need to charge some fees to cover their expenses and to make some profits for their investment in the business. What is wrong with it...?

Guys please undertand my point. I'm just saying that brokers could propose an alterntive way. A broker is like any another firm. It has investments, cost, maintenance... and it has to be profitable while it meets its clients needs.

Being attractive with cheaper commissions (different model from the classic one we know) would attract a large numbers of traders. This volume would compensate enough to make sure the broker is profitable.

My point is to say that we could all be happier if we could pay less commissions to the broker. I simply defend retail traders performance as we all should do.

I have no idea about how a broker is profitable but I have never heard a broker were bankcrupt.

I'm sure if one famous broker do so... they will all have to follow otherwise they would loose clients.


I just got an idea... i'm going to upload a picture soon : )
Členom od May 04, 2012   1608 príspevkov
Jan 24, 2014 at 02:18 (upravené Jan 24, 2014 at 02:18)
Yes, you are right. Brokers could go lower with commission and actually they go lower, but only for the big guys. From a reliable source I know about a reputable broker offering 0.2 pips ECN commission for its instituational client. In other words, whatever we pay above 0.2 pips/lot is an extraprofit for the broker.

I also wonder why none of the hundreds of brokers would embrace the above outlined business model...
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Členom od Nov 21, 2011   1718 príspevkov
Jan 24, 2014 at 03:38
My word would be:
United we stand, divided we fall

We must exige the same. They do get such conditions only because they have an huge account.

Let's image 1000 traders that trades in average $1000 account. It's like we have one account of $1 000 000.

1000 traders is not a lot... as Myfxbook is already over 100 000 traders.





Everyone is trading as usual... paying commissions to our broker (it's all our own broker) As soon as we have reach the lots to cover the cost of our broker's activity... We can keep trading until the end of the month at no charge. From 0 pips to 0.5 (Liquidity provider)

If we could open trades without commissions we could scalp market from 0 pips spread on eurusd. That mean we could close hundreds and hundreds winning orders in a row.

I hope such a story can interest all the community.

Prílohy:

Členom od May 04, 2012   1608 príspevkov
Jan 24, 2014 at 05:02 (upravené Jan 24, 2014 at 05:02)
In theory it is a good idea.

The main issue here is that establishing a brokerage company is pretty costly, requiring significantly larger sum than the 10k per month cost mentioned above.

Nevertheless, 10-20 interested traders - most likely ones with stable winning strategies - might be able to pull it off. The practical aspects of such an enterprise would be a definite challenge as it would require complete strangers to trust each others.
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Členom od Feb 22, 2011   4862 príspevkov
Jan 24, 2014 at 08:38
CrazyTrader posted:
Brilliant... this does already exist : )

well man,

try them before you say brilliant - it sucks
Členom od Feb 22, 2011   4862 príspevkov
Jan 24, 2014 at 08:42
If the question is
How to trade with much better conditions?
then the answer is not:
hey guys let's make our own brokerage
the answer is:
yes and it is the solution that already exist:)
so the answer is:
let's see if you would like to know it
TheSmokedAce
forex_trader_163226
Členom od Nov 19, 2013   67 príspevkov
Jan 24, 2014 at 09:32
As someone who worked in a brokerage let me tell you why this is never going to work.
There are SOO many hidden costs you dont even know about, that the broker covers with the extra .7 pips* they charge you.
*This is the normal amount, anything above that is not competitive, anything below that and the broker is really risking losing money.

______________________________________________________________________________________________________
1. Merchant Fees... Forex falls into the HIGH risk zone, so typical fees are about 4% of deposit. Most brokers eat it.
also there is a 6 month 10% rolling reserve, you want a WD back to your card? another 12$ or 2% which ever is MORE.
so guess what, you deposit $100, make one or two small trades, decide you want to close the account,
broker losses 4$ on merchant fees, 10$ is held for 6 months, and then another 12$ for refund.
thats 16$ per account and this is before technology fees, server fees, MT4 monthly fees, rent, phones, salaries, advertising, IB commissions, bank fees and bonuses.

As much as you want to think they are making hand over fist, most of the brokers who make money are doing it by taking extra risk and B booking people. As being an ECN and that all, earned you a revenue of about 2% of AUM per month... before all expenses... oh and you need a huge float, as most banks only give you about 20:1 while you are offering 200:1...

it all adds up.
Členom od Mar 29, 2012   192 príspevkov
Jan 24, 2014 at 11:01
TheSmokedAce posted:
...There are SOO many hidden costs you dont even know about, that the broker covers with the extra .7 pips* they charge you.
*This is the normal amount, anything above that is not competitive, anything below that and the broker is really risking losing money.
.....

Checkout the professional account there: https://www.excelmarkets.com/fr/accounts

It comes from the people who made cashbackforex. You can also add cash back to reduce your spread even more.
A smooth sea never made a skillful sailor.
Členom od Nov 21, 2011   1718 príspevkov
Jan 24, 2014 at 18:57
togr posted:
CrazyTrader posted:
Brilliant... this does already exist : )

well man,

try them before you say brilliant - it sucks

Yes they say they povide 0 pips spread but I downloaded Demo and they have like any broker spread. o_O
Členom od Nov 21, 2011   1718 príspevkov
Jan 24, 2014 at 19:05
FxMasterGuru posted:
In theory it is a good idea.

The main issue here is that establishing a brokerage company is pretty costly, requiring significantly larger sum than the 10k per month cost mentioned above.

Nevertheless, 10-20 interested traders - most likely ones with stable winning strategies - might be able to pull it off. The practical aspects of such an enterprise would be a definite challenge as it would require complete strangers to trust each others.

Yes I have no clue... i just provided figures to illustrate an example.

Off course we should all trust each other... the goal is simply to trade without sharing our gains with brokers if we can get touch FX market without them.

Also we don't need Licence or stuff like that at the beginning as we do it for ourself.

Indeed it will work with good traders only... otherwise after 6 months our community will be divided by 10.

I think it is possible... We can also pay commission as usual for a year or so... Then the enterprise have found to grow up... step by step.
Členom od May 04, 2012   1608 príspevkov
Jan 24, 2014 at 22:46
The biggest challenge would be finding 10-20 consistently profitable traders, who have liquid assets to ground such an operation AND who would still be around after 6-12 months.

And of course, all 10-20 of them would have to trust each other to form a company. Another challenge.

Nevertheless, the idea is excellent.
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Členom od Nov 21, 2011   1718 príspevkov
Jan 24, 2014 at 23:02
I'm sure it can't be so hard to find 20 reliable traders with proven history track record willing to participate to the adventure.

It in our own interest.

As far as I know... you do PAMN Account, See 1 trader can be already 1 to 10...

Dear traders whose ready to collaborate? 😉
Členom od May 04, 2012   1608 príspevkov
Jan 24, 2014 at 23:38
You can count on me as one. I am interested. Are you willing to draft a business plan?
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Členom od Mar 29, 2012   192 príspevkov
Jan 24, 2014 at 23:41
What I would be the most worried about are the necessary licences/regulations which needs a solid legal service :S
A smooth sea never made a skillful sailor.
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