How do Market Makers actually work?

[peteuk]

Do they just create an insulated market between their own customers (traders), or are they part of the wider FX market and simply act as go-betweens?

Do they balance who is long and who is short within their own system before accepting a trade, and is it usual for them to hold prices until they are in profit themselves?

The reason I ask is that I had an open position yesterday and the price moved in my favour on my charting package (which is supplied by a different company) but the price on the dealers platform moved only a couple of pips and at one point was 20 pips behind. Is that usual for Market Makers? It's not the first time I've noticed it but it seems to becoming worse. Perhaps time to move my account, or are they all roughly the same?

Can anyone throw any light on the subject? Thanks!

Pete

[Avatar]

Let me tell you something about market makers, they can make you go broke if you don't pay attention, they have the possibility to change the price to where they want no matter how the market is moving, and like all things, some are less friendly to the "magic fingers" and some are too much, it depends on you to choose one that doesn't go there so much.
btw, who is your broker? so i can stay away
hope it helps

[jasonjm]

20 pips behind?

I also want to know which broker this is....

Would be great! you know that if they are 20 pips behind they are eventually going to have to close the difference...

Might be possible to steal 3 pips or so every time they get out of sync / lag behind the official market quotes, because they obviously cannot keep that kind of differential.

[peteuk]

maybe I should consider all things before publishing their name on a public forum...

I suppose one could benefit from it providing the price didn't retrace immediatly, my experience has always been in a fast moving volatile market when I've wanted to jump in and out quickly for a few scalped pips.

Any answers on the other points at all?

Cheers
Pete

[peteuk]

Despite all the experience on this forum no-one was able to answer....hmmm, maybe they were all too busy

Pete

[currencia]

I can answer U, but not on this forum.. U can send me an email if u like. currencia@direcway.com

[peteuk]

Thanks for your email, it helped explain a little more. I also found this post on a forum. It related to a particular market maker and as it's not really relevant I've replaced it with *'s, made interesting reading though....

Posted on a chat room:


As far as re-quoting and off market prices - guys...you don`t seem to understand that the rates that you see on Reuters/Tele-rate/e-signal and all thsese companies are INTERBANK rates...meaning..that BANKS are dealing those rates..
read your agreement w/ the compnay you`re with...any compnay...and they will tell you that they will quote you wahtever price they want irrelavent of the marlet...if they chose to keep your position or to throw it at a bank or clearing house...its up to them.
most of the companies that you see and deal w/ are `bucket-shops` including *...meaning..your loss is their profit and your profit is their loss....hence it is up to the dealer to throw your order at another bank or keep it (if he/she reckons its a losing trade)...
I dont work for *...but again..I have several large accounts w/ them...to me they seem good...get to know your dealer...let him get to know the way you trade...
Re: stops that get hit before market...
guys...the operators `fish` for stops...if you really want to place a stop order then that means that
1)very hectic and volatile market that you are worried that you will miss the price
2)your placing the order and walking away (right way of doing it)
BUT..if you are sitting infront of the screen...then my friend do it MANUALLY...
A NOTE : if resistance is at 1.1580 and you are short...place your stop away from resistance by 13 to 14 points...
whole numbers are usually tested and hit....
anyway...* works fine for me.,..yeah they can be a'holes at times...but hey...I get the quote I want...I have a freindly dealer that i can call up any time and discuss themarket...
so again...no matter what compnay you chose...they arent here to `serve` you...they want your money...so ita an all around thing.
hope that helps you all...
oh yeah...FOREX is all about information...
be uptodate with info and PRICES....get as many feeds as you can! dont rely on one or the one that the platform is supplying you..THAT IS ALWAYS DELAYED!

[ifsclusa]

What you were seeing is how many of these "Market Makers" make there money. There truely is no regulations for Forex and that is why they can "lean" on you. That is why you must be leary of tight prices with no commissions. Every broker out there is there to make Money, the question you have to ask yourself is how. If you cover all of your clients positions and scratch on the way in, then they are looking to make money from you on the way out or if they "bucket" they want you to lose. You hope that you are dealing with a reputable company, but unfortunately many are not. Some brokers have their system specifically designed to give different clients different markets, and you will never see this on a demo. If you are working a stop it will always hit it, if you are working a limit it will need to be well through it to get filled. When you are scalping a 3-wide market becomes 7-10 wide. I have been in this business for a while and I hope that business of this type goes away, there are ways for a broker to make money without hurting their clients. If you have any other queries feel free to e-mail me knelligan@ifsclusa.com