Forex from scratch --a helping hand from pipshower...
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@ankit
From my experience and the knowledge that i have gathered over the last 4-5 years (I have to mention in this topic/context there are not too many materials published about market makers-it is more about learning from experience and experience of fellow traders)-
yes,market makers and market maker brokers mean 2 different things-probably the things that they have in common is-
1.They provide liquidity 2.They assume the risk to profit from the spread.
but as far as forex is concerned there are 2 catagories of brokers.
1.Market Maker Brokers (or otherwise commonly refered to as MM)
2.ECN Brokers
MM's role is to provide liquidity and make the bid/ask quote available to their participants-1.could be other banks,ECN's or corporations in case of institutional market makers
or to 2. retail customers if they are retail market makers. (These are ones whom i am wary of).
MM's are obligated to take a counterparty role at their displayed quote, or in other words have to take the opposite side(sell) if a buyer buys and (buy) when a seller sells.Depending on the MM and the profile of the client,MM's might opt to hedge their counterparty position or they may simply hold ur order and trade against you (Again most common in retail MM's).
Here arises the conflict of interest in order execution-if you win,they lose and vice versa.Hence the dirty games start-slippage,requotes,screen locks,stop hunts because of mysterious price spikes in ur brokers platform or the most common technique delayed executions (by 5-10 secs)...
The breed of MM to be extremely careful about are the "bucketshops"-who just have an internal book and NEVER hedges their counterparty trades...as a result as long as their clients loses,they win and everything is fine.But,in the off-chance that clients win big lets say $2 Million,they just shut shop and you can as well say bye to ur money.
Of course,we do our due dilligence and stay away from such unscrupulous bucket shops-the quality we look out for in a MM broker
1.The reputation
2.Their capitalisation
3.Whether they are regulated and have seggregated accounts
4.Do they/their regulator offer protection to ur capital in the even of their bankruptcy (please note that for indians it does not matter,the protection kicks in only if u r a resident of the country where the broker and regulator's jurisdiction).
As you had posted
"There is a lot of difference between the two. While the "Market Makers" depend on the spreads for profiting(and thus they never loose), the "Brokers" are the people who take positions opposite to you. "
As far as retail MM's are concerned-they do both.AND the common retail investor because of his capital limitation has access only to retail MM/bucketshops-and hence my statement "if a retail trader wins,he beats the MM"
finally as long as we win-we don't care who the counterparty is....
but when u r losing,and losing because of ur MM broker's delayed execution,screen locks etc-the conflict of interest becomes pretty important-does it not??
Looking forward to your views and pipshowers opinion....
p.s-Most of the above points is much more important to a scalper than a positional trader (wherein a few pips or a few secs delay is not make or break)
Regards,
Scalper
I think 2 terms got mixed here.
1. Market Makers
2. Market Maker Brokers
There is a lot of difference between the two. While the "Market Makers" depend on the spreads for profiting(and thus they never loose), the "Brokers" are the people who take positions opposite to you.
When we talk about profiting from markets, as pipshower said here, we dont care about the brokers. All we care about is extracting profit and depending on our system and strategy, we pick our brokers.
There is a lot of hue and cry in Fx world of Brokers taking the other side of your trades and all, but I consider that as a part of the business cost( to an extent). I mean, think about this, whenever you trade an exchange listed entity, dont you pay brokerage, exchange commission, tax etc? Going by those standards, Fx trading is still the cheapest.
So, I think the discussion swayed a little..What we are essentially discussing here is "To Beat the Markets" and not "To Beat the Brokers"
__________________
From my experience and the knowledge that i have gathered over the last 4-5 years (I have to mention in this topic/context there are not too many materials published about market makers-it is more about learning from experience and experience of fellow traders)-
yes,market makers and market maker brokers mean 2 different things-probably the things that they have in common is-
1.They provide liquidity 2.They assume the risk to profit from the spread.
but as far as forex is concerned there are 2 catagories of brokers.
1.Market Maker Brokers (or otherwise commonly refered to as MM)
2.ECN Brokers
MM's role is to provide liquidity and make the bid/ask quote available to their participants-1.could be other banks,ECN's or corporations in case of institutional market makers
or to 2. retail customers if they are retail market makers. (These are ones whom i am wary of).
MM's are obligated to take a counterparty role at their displayed quote, or in other words have to take the opposite side(sell) if a buyer buys and (buy) when a seller sells.Depending on the MM and the profile of the client,MM's might opt to hedge their counterparty position or they may simply hold ur order and trade against you (Again most common in retail MM's).
Here arises the conflict of interest in order execution-if you win,they lose and vice versa.Hence the dirty games start-slippage,requotes,screen locks,stop hunts because of mysterious price spikes in ur brokers platform or the most common technique delayed executions (by 5-10 secs)...
The breed of MM to be extremely careful about are the "bucketshops"-who just have an internal book and NEVER hedges their counterparty trades...as a result as long as their clients loses,they win and everything is fine.But,in the off-chance that clients win big lets say $2 Million,they just shut shop and you can as well say bye to ur money.
Of course,we do our due dilligence and stay away from such unscrupulous bucket shops-the quality we look out for in a MM broker
1.The reputation
2.Their capitalisation
3.Whether they are regulated and have seggregated accounts
4.Do they/their regulator offer protection to ur capital in the even of their bankruptcy (please note that for indians it does not matter,the protection kicks in only if u r a resident of the country where the broker and regulator's jurisdiction).
As you had posted
"There is a lot of difference between the two. While the "Market Makers" depend on the spreads for profiting(and thus they never loose), the "Brokers" are the people who take positions opposite to you. "
As far as retail MM's are concerned-they do both.AND the common retail investor because of his capital limitation has access only to retail MM/bucketshops-and hence my statement "if a retail trader wins,he beats the MM"
finally as long as we win-we don't care who the counterparty is....
but when u r losing,and losing because of ur MM broker's delayed execution,screen locks etc-the conflict of interest becomes pretty important-does it not??
Looking forward to your views and pipshowers opinion....
p.s-Most of the above points is much more important to a scalper than a positional trader (wherein a few pips or a few secs delay is not make or break)
Regards,
Scalper
I think 2 terms got mixed here.
1. Market Makers
2. Market Maker Brokers
There is a lot of difference between the two. While the "Market Makers" depend on the spreads for profiting(and thus they never loose), the "Brokers" are the people who take positions opposite to you.
When we talk about profiting from markets, as pipshower said here, we dont care about the brokers. All we care about is extracting profit and depending on our system and strategy, we pick our brokers.
There is a lot of hue and cry in Fx world of Brokers taking the other side of your trades and all, but I consider that as a part of the business cost( to an extent). I mean, think about this, whenever you trade an exchange listed entity, dont you pay brokerage, exchange commission, tax etc? Going by those standards, Fx trading is still the cheapest.
So, I think the discussion swayed a little..What we are essentially discussing here is "To Beat the Markets" and not "To Beat the Brokers"
__________________
Lets continue it here itself. I dont think there is any need of a separate thread for discussions.
Welcome back TFL.....:thumb:
I agree to all the points you made about the MM broker. But again, the perspective got lost. I was trying to highlight the operations of "Market Makers" of any Market and not necessarily Forex. I have worked as a Market Maker for ICICI Bank and thus can tell you there is a lot of difference between a MM Broker and a MM otherwise. Nonetheless, every word that you wrote above is 100% accurate and I agree with it all.
But the question still remains.."Do we want to beat the markets?"...My answer is still a big fat NO....We just want to swim with the market flow..
Btw, it would be interesting if you open up a thread on scalping in FX. I have always thought its not sustainable, but in recent past have been proven wrong. It would be interesting to know your side of trading story.
Ankit
I agree to all the points you made about the MM broker. But again, the perspective got lost. I was trying to highlight the operations of "Market Makers" of any Market and not necessarily Forex. I have worked as a Market Maker for ICICI Bank and thus can tell you there is a lot of difference between a MM Broker and a MM otherwise. Nonetheless, every word that you wrote above is 100% accurate and I agree with it all.
But the question still remains.."Do we want to beat the markets?"...My answer is still a big fat NO....We just want to swim with the market flow..
Btw, it would be interesting if you open up a thread on scalping in FX. I have always thought its not sustainable, but in recent past have been proven wrong. It would be interesting to know your side of trading story.
Ankit
Hi Ankit,
I am going to have to mention that i COMPLETELY agree with you that market makers and MM brokers are 2 different entities...
1.However,since this is a forex thread,and for the sake of simplicity i meant MM to be a Market Maker Broker.
2.Do we want to beat the market??
The implied meaning is it is "us" vs "the others as in market",since it is a zero sum game.When u win-some1 is losing,could be another client,your market maker broker or even some bank (that is a stretch of imagination though).
Trading with the market or trading with the trend is completely different from beating the market,which means that u would like to make money in this market (and therefore some1 loses on the other side).
3.I would definitely open a scalping thread soon-i am waiting to open an account with IB or dukas first so that i can post live examples like what pipshower is doing in another thread.
4.Finally,i would also like to know how is your account doing this year compared to last year?
(For me Q4 of last year and Q1 of this calender year was very profitable-in fact a bumper period).
Thereafter it has been very slow for me-my consistency has taken a hit...
how abt u??
Regards,
Scalper
But the question still remains.."Do we want to beat the markets?"...My answer is still a big fat NO....We just want to swim with the market flow..
Btw, it would be interesting if you open up a thread on scalping in FX. I have always thought its not sustainable, but in recent past have been proven wrong. It would be interesting to know your side of trading story.
Ankit
Hi Ankit,
I am going to have to mention that i COMPLETELY agree with you that market makers and MM brokers are 2 different entities...
1.However,since this is a forex thread,and for the sake of simplicity i meant MM to be a Market Maker Broker.
2.Do we want to beat the market??
The implied meaning is it is "us" vs "the others as in market",since it is a zero sum game.When u win-some1 is losing,could be another client,your market maker broker or even some bank (that is a stretch of imagination though).
Trading with the market or trading with the trend is completely different from beating the market,which means that u would like to make money in this market (and therefore some1 loses on the other side).
3.I would definitely open a scalping thread soon-i am waiting to open an account with IB or dukas first so that i can post live examples like what pipshower is doing in another thread.
4.Finally,i would also like to know how is your account doing this year compared to last year?
(For me Q4 of last year and Q1 of this calender year was very profitable-in fact a bumper period).
Thereafter it has been very slow for me-my consistency has taken a hit...
how abt u??
Regards,
Scalper
Would love to see the scalping thread.
As I said before, I was a MM for ICICI and thus those results I cant really disclose in a public forum. But, that was a different sort of stuff all together. Making market is an entirely different sphere to work in and you cant really compare it with your retail trading. With my work on, I had little chance of trading my own account and almost all my trades were on the House(ICICI). Thus, there is no way to compare my returns of last year vs to this year. Probably, next year, I will have one such stat
Ankit
As I said before, I was a MM for ICICI and thus those results I cant really disclose in a public forum. But, that was a different sort of stuff all together. Making market is an entirely different sphere to work in and you cant really compare it with your retail trading. With my work on, I had little chance of trading my own account and almost all my trades were on the House(ICICI). Thus, there is no way to compare my returns of last year vs to this year. Probably, next year, I will have one such stat
Ankit
Ankit,
Do you still hold your job with ICICI?
In case you do,i will respect the fact that you should not divulge details and strategies.
But in case u don't work there anymore,could you share your experience about the work atmosphere,trading platform(it is something like currenex right?),interesting anecdotes,any moral dilemmas as in did u have to shaft ur in-house customers to profit for the house?do big investment banks get together and orchestrate big moves?? etc etc..
and if u are ethically bound not to divulge any details of your work,please feel free to say so.
Regards,
Scalper
Do you still hold your job with ICICI?
In case you do,i will respect the fact that you should not divulge details and strategies.
But in case u don't work there anymore,could you share your experience about the work atmosphere,trading platform(it is something like currenex right?),interesting anecdotes,any moral dilemmas as in did u have to shaft ur in-house customers to profit for the house?do big investment banks get together and orchestrate big moves?? etc etc..
and if u are ethically bound not to divulge any details of your work,please feel free to say so.
Regards,
Scalper
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