What is scalping?

[phildunn]

Originally Posted by cyberwave

This is exactly what i am talking about

brokers do not make there money from spreads,...they take your position after u dump it and keep it open for them,...then they close it when they win from it,..in scalping maybe it is hard for them to do that for some reason

If brokers don't earn profit from spreads, how they actually earn from us? Are they act like casino? They earn more if we lose more?

[cyberwave]

Originally Posted by phildunn

If brokers don't earn profit from spreads, how they actually earn from us? Are they act like casino? They earn more if we lose more?

I had a friend of mine i trust,..he made an MBA in the states and had a friend with him,..they made a joint graduation project,..they created a forex company "brokerage firm".. on paper

for this,..his colleague had to work in a real forex firm,...and he discovered that spread barely covers costs to make and create the position for the client and they make money by keeping losing positions open for themselevs after u lose and close

example if u go eur/usd long at 1.2000 and it went to 1.1900 and u lost 100 pips and got out

they do not close the position,..they take it for themselevs and they enter long at 1.1900 and as soon as it bounces up to a little value,..not necessarily a big value,..they sell for a prift of 20 pips or whatever

this is what i was told but it is not very clear to me,..anyone with a clear idea of this system,..feel free to popin

[TraderABC]

Originally Posted by phildunn

If brokers don't earn profit from spreads, how they actually earn from us? Are they act like casino? They earn more if we lose more?

They trade against you. They know that 90% of people loose, so it is very advantageous for them to use that statistic. Plus the teach courses to us that help them make sure that the statistic holds. Period.

[cyberwave]

Originally Posted by TraderABC

They trade against you. They know that 90% of people loose, so it is very advantageous for them to use that statistic. Plus the teach courses to us that help them make sure that the statistic holds. Period.

Thanks for your input

This means that most of the time they are on the other end buying what i am selling or selling what i am buying instead of matching me with another client,..if what you say is true (which i think it is,..this was my original personal opinion to begin with) .. it means they want more people to lose money,...the question that rises here,..is the trading courses they offer for free when you sign up,..why do they offer training and do they put misleading infos in that training ?

i have studied the full V.I.R.T corse and i found some info in it useful,..but why train us if they want us to lose ? unless we r getting from them false info that make us lose in the forex market ?

[Ray G]

Now that's something I've never heard. I'm not saying it isn't true, just that I've never heard of that.

Brokers could indeed make plenty of money from spreads alone whenever you consider the volume of trades that they process. In a sense, they're practicing the same concept as scalpers, just shave a few pips off of every trade and they don't have to worry about the direction of the market, as long as people are trading.

But obviously there is something more to it or otherwise we wouldn't be having this discussion.

I think it probably has more to do with network congestion and the possiblity of causing slippage that would eventually affect the broker as well as the clients.

[Ray G]

I posted directly to the reply I saw in my email box and didn't see these other posts.

If what this MBA friend said is true, it would be a very hectic business trying to match all of those failed trades to the new, broker entered trade wherein they would pick up their 20 pips or so.

So let's assume the worst case scenario here and conclude that the brokers are doing this (even if they're not - it's better to have our guard up anyway).

What do we do about it? If it were illegal, some political wannabe like Spitzer would have already jumped on the practice for their own reasons.

So we don't use broker initiated training and we trade as short term as possible without coming on to the broker's radar screen.

what time frame would that be? I think probably anything more than 10 minutes a trade. Any other suggestions?

[cyberwave]

Originally Posted by Ray G

I posted directly to the reply I saw in my email box and didn't see these other posts.

If what this MBA friend said is true, it would be a very hectic business trying to match all of those failed trades to the new, broker entered trade wherein they would pick up their 20 pips or so.

So let's assume the worst case scenario here and conclude that the brokers are doing this (even if they're not - it's better to have our guard up anyway).

What do we do about it? If it were illegal, some political wannabe like Spitzer would have already jumped on the practice for their own reasons.

So we don't use broker initiated training and we trade as short term as possible without coming on to the broker's radar screen.

what time frame would that be? I think probably anything more than 10 minutes a trade. Any other suggestions?

I do not think it is illegal if they do that,.... i just want to make sure if it is really true that it will be in the broker's benefit for the client to lose money

then we should never listen to there trainings,..and we try to stay away from there radar like you say,..because there is nothing we can do about it...but worse,we should expect some nifty tricks in the software to make us lose money ? that would be terrible

so far all pplatforms i have seen i do not like,..the only one i think looks decent is the DealBook FX-2 and u wait till some major announcement is on,..u will lose big money due to chunks of data they send to delay any order you put at the time and excute it too late after the run and watch u lose your account on the retracement,...been there .. and cannot even send them a complaint about it,...but we just need to make sure there is a clean decent company that does not do that to its clients,..even if it wins from there losses,..we can always stay away from there trainings and manuals

the rule of casinos comes to mind

the house always wins,.. maybe this is why only 5% makes money on this market,i am started to doubt if an honest trader like most of us can make money out of this market ?

[phildunn]

I found a article about this issue at http://electronicforextrading.com/fo...commissionfree

Forex Brokers. Are They Really Commission Free?

Submitted by Forextrading on Mon, 2005-04-25 22:36. Forex Brokers

Most, if not all, Forex brokers attempt to entice prospective traders by claiming that they do not charge commissions for trading currencies. Indeed, most Forex brokers do not charge commissions, but make their money on the spread (1-5 pips depending on the broker). As you may remember from your stock trading days, the spread is the difference between the bid and the ask.
So does a pips or two make a difference? You bet it does. Many traders like the Forex market because of the leverage (400:1 depending on the broker), which gives the trader substantial buying power and control over large blocks of currencies. Let's assume that you decide to buy 100,000 block of currency. If this particular broker charges a 4 pip spread, you will end up paying the broker $40 just to enter the position. Spend another $40 to exit the position and you end up paying your broker $80. These type of costs eat away a trader's profit and increase losses.
Another way some brokers make money is by maintaining trading desks that trade against customer positions. If the broker feels that a customer entered into a losing position, it will take the opposite side of the trade and make the money that the customer ends up losing. Does this this mean my broker wants me to lose money? Judge it for yourself.
Next time a broker entices you to open an account by claiming that they do not charge any commission, make sure to find out the spread on major currency pairs. Also inquire whether they trade against their own customers, because you don't want your won broker to turn against you.

Look like it is true that brokers earn big money by trading against us !!!