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Newbie Questions-Why don't brokers like Scalpers ?

Discussion in 'Beginners Bootcamp' started by Johnny16, Feb 25, 2009.

  1. Johnny16

    Johnny16 Recruit

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    This is my first week studying about Forex. Before this, I have never known what it was all about. I've read a couple of books, and went through lots of sites. Also played a few Demo's. I'm a calculated gambler in Blackjacks and other casino games. Calculating the odds with Forex, I believe I have a great chance of success because the market can either go UP or Down. In a way, I have a 50% chance it will go either way making scalping very feasible.

    Without knowing anything about this forex business, I turned my demo account of $5000 to $17,000 in two days spending around 20 hours total. This is not bad for a newbie.

    Then here I am, seeing the bad side of things...scammers...scammers...and more scammers...It seems that a lot of the brokers are worser than the casino's.

    If the brokers are truely making their money on commissions and on spreads, why are they so against Scalpers ? The more transactions you complete, the more they make...Am I missing something ?

    Why would a broker want you to fail if you can generate them a lot of commissions ?

    Some insights would be appreciated...:err:
     
  2. Cyclon

    Cyclon Company Representative

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    They don't mind.

    Brokers come in different flavors. Ecn brokers don't care because they pass your order through. Bucket shops don't care because even though they may take the trade against you internally they feel the odds are in THEIR favor.

    They could easily adapt if you do prove them wrong.

    You just may want to re-examine the odds picture.

    So 50%-50%? Then you could by that logic just as easily turn your $17,000 into $0.

    What is the criteria on assuming the streak continues? Does that happen at the casinos?

    The odds as they exist are 9 to 1 against. Average losses per trader are $15,000.

    The bucket shops are not against scalpers. If you are in with the 90% then they probably prefer that you move quickly. They may not like successful scalpers. 8- )

    This is an excellent article which you may want to take into account on how the odds do work:

    http://www.forexpeacearmy.com/forex...2272-how-manage-risk-while-forex-trading.html

    If you got those results by protecting your equity properly then you may yet find yourself to be in the top 10%.

    So good trades to you.

    Cheers,
    Cyclon
     
  3. tingtong

    tingtong Private

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    Cyclon said so nicely: what they might not like usually is successful scalpers.
    My first account was wih a broker whom ( i found out later) didnt like trades less then 10 min, and with whom i had mainly trades for around 3-4 min...never mind, they didnt stop me on the way blowing my account up citing the rules :)
    Since time passed, i learnt a few things, changed broker.

    As a sidenote: demo gains not mean much. I was like you, doubling money on demo weekly with few minutes trading. Did not stap me losing first on real account.
     
  4. Cesil

    Cesil Private, 1st Class

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    I've read about people's experiances with this business with brokers in several threads on these forums, & I still don't get it (along with many many other things...). If you're trading regularly & making money, surely that's in their best interests? The more you trade the more they make (spread & commission if applicable), & the more you make the more likely you are to trade larger sums = more money from their spread. Why on earth would they want to stop this? Even if you're doing better than them why would they care? They're still making money on you, & if you're doing that well then you're inadvertantly giving them pointers on what trades they should be making. They win every which way you look at it, don't they??!!!
     
  5. Cyclon

    Cyclon Company Representative

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    Two sides to the story

    This is certainly true if that is the only game in town, legitimate profit from the spread.

    But it is not. If one of the dishonest brokers are creating artificial spikes to stop you out - just to name one of the tricks - then they have the spread and your entire margin from that trade.

    Again they are working the numbers. If the average trader loses $15,000 then it likely means they just keep re-funding their accounts because I don't think the average account opens at $15G.

    When they are working with a demographic which loses consistently it means there are going to be more in the downward spiral with accounts which will pay them less and less over time, not more and more.

    They are not creating this situation, just taking advantage of it. The push they give is not the significant part of the picture.

    The real issue is on the side of the market participants' lack of understanding of what they are doing.

    On Fighting and Winning

    As far as a broker goes the first thing to watch for is a solid reputation as far as funds handling. The tricks issues will (most likely) follow suit. If they have no bad marks in the customer service area and access to funds is never an issue then you should be ok.

    The reason you do not need to worry about the tricks is that you WILL use a good risk percentage so the market (or broker) does not have the capability to hurt you in a significant way on any given trade. Additionally you will have a system which accurately identifies the reversals (or else STOP - go and test your broker's withdrawal process for the full amount of your Equity).


    A concept of stoploss hunting actually shows more of a lack of understanding of the size of the patterns in play. Coming in at the wrong spot midstream on a trend which has its roots sometimes several hundreds if not thousands of pips away does not give much chance of holding against the natural corrections which would easily exceed (in BOTH directions) the 40 - 100 pip stops most would use (even though they should definitely do so).

    Position size and leverage controls are instruments of scale or "control knobs" which a trader does have control over. One must use these to assist but the best approach in such huge waveforms is the correct entry/reversal points. Brokers cannot defeat these.

    Cheers,
    Cyclon
     
    #5 Cyclon, Mar 4, 2009
    Last edited: Mar 4, 2009
  6. bullthebear

    bullthebear Recruit

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    to scalp or not to scalp



    There can be other motivations involved... someone who generates tons of trades every day (or hour) can be a big hassel for a clearing bank. It's more work for them to deal with all the orders, so sometimes they bump up the price for "scalpers", and this gets passed along to the broker, who passes it off to the trader.
     
  7. Cesil

    Cesil Private, 1st Class

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    Interesting - but I'm not convinced. Maybe its because I don't use stops (before you all jump down my throat, read my thread under trading strategies) I don't get to see this side of my broker. I also mainly trade a pair that has sporadic liquidity which may be masking the reasons for sudden widening in spread that pops up occassionally. Having said that though I made 16 trades pre/post the BoE rate announcement with minimal spread occurances of the spread widening because of the announcement (traded on Saxo). Who knows, I guess everyone & every broker is different to a smaller or larger extent...
     
  8. echonomical

    echonomical Recruit

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    They don't care how you trade, as long as you trade... and they really like it if you trade a LOT. The more you trade, the more they get paid, whether you're winning or not. What you may be thinking of is some scalping techniques, like the ones that I use, usually only have you in 1-3 trades a week because the entry conditions are so particular (but are extremely high probability). Brokers are not too fond of that... though there's nothing they can do because most of them only require you place one trade every couple of months or so.
     

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