question about the spread

[cantrell24x]

Is it normal for the chart price to be exactly in the middle of the spread? I have noticed that on gain capital, where I have my account, that if the price is going down the bid is closer to the chart price and sometimes above the chart price, and if the price is going up the offer is closer to the chart price and sometimes below. I was told by gain that they actually take the other side of all trades. Is this normal or are they able to manipulate the available prices to my disadvantage? This has actually caused me to take a small loss a few times when I could have broken even. I am just wondering if this is normal and I need to plan for it or should I find another company to trade?

Thanks

Chris

[bigfigure]

There are always Pros and Cons to things like these. Use them to your advantage...

[Hawkeye]

A real and good brokerage should NOT take the other side of trades. They become interested party and tempted to manipulate prices.

You should be aware of the technique they use to hunt for your stop loss levels. They can see your orders sitting there, so if they trade the other side they could easily reach for your stop and make some good pips staright off.

Chart prices most of the time do not match dealing prices, because the charts show one price, whereas the dealing platform show bid/ask (buy/sell) prices. Charts mostly show bid prices, some say their chart prices are the actually prices dealt at the banks.

[cantrell24x]

Hawk

I was told by the rep from gain that I deal with, that they(gain capital) take the other side of every trade. When I questioned this he said that they manage their risk. Something about if I buy 2 lots and they think I am correct they buy 10 fromsomewhere else. His excuse was something like that. What do you think of thta? It feels strange to me. I know its a tokyo holiday but today the bid price from gain was above the chart price by 5 pips. And most of the time the bid/ask doesnt change at all until the chart price moves 3 pips or more. I did use gains demo, 25,000.00 and was pretty successful mostly becasue I was not worried about the pretend losses. I just waited till the price came back my way or I took a significant loss that I always seemed to make back soon. I am starting to feel uncomfartable with gain though. I have read a lot about oanda on these forums. What do you think of them?

Thanks

Chris

[Marty]

Example, Reuters will use a chart point for say high or low by the actual rate that you can physically trade.

So if the Market hits say 27-30 and there is an offer in the Electric broker at 30, then 30 will be classed the high as it traded there.

If its 27-30 but theres no real offer to buy at 30 then 27 will become the high.

This technique is used for the large option deals, especially knock-out/Ins options

Reuters also look to see if theres a genuine bid/offer in the market or traded on the electrics, EBS,2002/2003, because for example if you were protecting or working a large stop or knock-out/in option you could say bid or offer USD 1 MIO well below or above the market and trigger that deal.

There are sometimes discrepencies on high and lows and they always involve arguements over stops, believe me, but in general all the Electric and voice brokers in London can agree on highs and lows.

[Hawkeye]

A broker by definition does broking, which is acting between a buyer and a seller. He does neither buying nor selling, but (should) merely bring a buyer and a seller together. FX brokerages should be no different.

Most brokerages would go to great length to deny that they do buying and selling. They argue that sometimes they need to spread their risk. Fair enough, sometimes a brokerage could have taken too much trades on one side, then they would unload some lots to other brokerages or banks. At the same time they would adjust their prices to attract buyers of one side to "balance their books" so to speak.

If your broker boasts that they take the other side of your every trade, then you know they are acting against you, not as a go-between. In that case, would you still trust them with the trades you place with them?

[Marty]

there are 2 types of brokers, the ones that match bids to offers, ie Reuters & EBS then there are the brokers that act as market makers or counterparties.

The counterparty brokers you have to remember normally have hundreds of retail accounts trading very small amounts which are "Run" as a position or traded out back into the market.

Any broker that has to take the side of a clients deal under USD 2mio i really dont think is worth trading with.

Marty

[dewton]

Hi,

Is it possible to deal with the banks directly while still having the 1:100 leverage? It would be nice if we didnt have to go through the middleman (the forex broker).

- Joel