I carefully study your response about trading on news. Please i want to know if trading the news is bad? and why will fxopen not allowing clients close profit position?. i need to know.
Thanks
Depending on the size of the broker, particularly with trading account services, they actually disassociate themselves immediately with any order, as do banks. What that means (in a picture)
A) You (have USD$$$ want EUR EEE), Your broker (has nothing), Other dude (has EUR EEE, will sell them for USD $$$)
B) You USD--> Your broker EUR <--- Other dude
C) You EUR, your broker (nothing), Other dude USD
When B happens, it's just like any store (they get the EUR in this case at cost) and sell it (to you) at the marked up price. But, there's a problem...You're not at 1:1 leverage, so you're actually 'buying' one lot of EUR. So the broker gets the profit from the markup, and can sometimes do it in house which means there are no other fees. So now you've borrowed cash and offered collateral for the one lot, and the 'other dude' either did that too or already has a deal and this cancels out the loaned cash. Regardless, the LOAN ON EACH SIDE CANCELS OUT for the broker. So what does this mean? It means that the broker holds zero risk, but gets to hold your account balance hostage...yikes...but there are two good things about this.
1) if they aren't investing companies, this means that the broker doesn't add additional risk to your investment.
2) it doesn't matter if you are one of the estimated ten percent of traders who are actually profitable.
So what's with the ramble?
You asked why they wouldn't allow news trading or scalping. In news trading you can get spikes in both directions to the tune of 40 pips before settling on a direction that lasts more than 20 seconds. If you attempt to trade in that time, then the broker is risking the 'risk free' status of completing both deals before the spread is no longer profitable on one side.
This is why our bro Pharaoh was asking for a definition of scalping, because if you're getting in and out of a deal in literally a fraction of a second, it's just not worth the risk to the broker to fill the deal.
Again, that's good for you so that you don't have the threat of a gazzillion super-human scalpers bankrupting your broker and leaving you with empty pockets. (That's rather impossible, but some big big big companies have supercomputers to do that, called flash trading...but its days may be numbered or already outlawed.)
