What does broker know?

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Overweight
112
Overweight  

Can a broker detected what indicator does a client use in chart?

for example I use ATR in my chart, Is broker know it?

Sergey Golubev
Moderator
106126
Sergey Golubev  
No, the broker does not know about what indicator or EA you are using.
Sergey Golubev
Moderator
106126
Sergey Golubev  

This is reply from MQ - 

Форум по трейдингу, автоматическим торговым системам и тестированию торговых стратегий

Do brokers see the installed EAs

Renat Fatkhullin, 2017.02.19 13:22

The question constantly pops up, the answers were repeatedly given.

Never any broker sees and does not have access to the trader's computer, does not know and does not have access to his robots or any other programs.

But each order has a type of reason, which indicates how it was created - manually or by experts.

To be afraid of knowledge by the broker ("trader trades experts") does not make sense. At a huge number of brokers, the percentage of autotrading more than 50% of transactions - everyone understands that this is a new reality.

Sergey Golubev
Moderator
106126
Sergey Golubev  

Forum on trading, automated trading systems and testing trading strategies

Press review

Sergey Golubev, 2018.09.28 08:59

How Forex Brokers Make Money (based on the article) 

When trading Forex, most people don’t think about how brokers make their money. However, this is a fundamental thing to understand before depositing, as you should understand where money flows throughout the system. Nobody cares about your account more than you do, so keep that in mind when figuring out who you should trust. In this article, I’ll take a look at how Forex brokers make money, and what their role is in facilitating liquidity.

Understanding how Forex brokers make their money can help you choose the right broker. Most brokers have a handful of charges that they use to profit from their clients. Getting familiar with these options will help you know where your money is going.

The main source of income are broker fees

Some Forex brokers will charge a commission per trade, while others will charge the spread between the bid/ask prices. The main way that Forex brokers make money is by keeping the spread or charging a set fee per round turn. Some brokers even charge both, but that’s becoming less common these days as the commoditization of the business demands lower pricing. Unfortunately, some less than scrupulous Forex brokers have previously mentioned that they have commission free trades, but what they typically do is charge more in the spread to make up the difference.

Sometimes the spread is fixed, sometimes it is variable. In a variable spread liquidity pool, the amount of the spread will depend on how many orders are out there. When there is a major announcement such as the Nonfarm Payroll Numbers coming out of the United States, the spread will typically widen. Because of this, in a volatile market you may end up paying more in spread than you anticipate. This is the major advantage for a fixed spread, because at least you’ll know what you’re going to be charged to facilitate buying and selling.

Alternate sources of income

Some Forex brokers will charge extra for “bells and whistles” when it comes to customer service and education. For example, some will offer signals, some will offer in-depth analysis, and some will even offer private educational classes and webinars for those who are willing to pay more or have a larger account. That being said, if you understand trading and proper money management techniques, these things are very rarely needed.

Another way that some Forex brokers will make money is in financing the “loan”. Remember, when you buy or short a currency with margin, you are in fact taking out a loan. This can get a bit dicey and complicated, but suffice to say the FX broker with large amounts of orders can get paid interest in the true Interbank market, something that you will not be participating in. Despite what people tell you, as a retail trader you get nowhere near the true Interbank market, because orders need to be much larger to function in that arena. Typically the Forex broker will work with the liquidity provider that shops up these orders in smaller chunks, allowing people to trade back and forth. The true Interbank market is made up of the largest banks in the world, who cannot be bothered with a small trade that is worth $500 (for example).

Some myths

Some of the prevailing myths that endure for many years is that brokers are out there “stop loss hunting”, meaning that they are moving the prices on their servers to wipe out a bunch of traders in one shot. This is because the marketplace was previously full of unscrupulous dealers that would do such things. As a general rule, if you stick with a regulated broker, you won’t run into this issue.

Another myth is that brokers are traders themselves. In all honesty, they very rarely are. They are simply filling orders for traders. In fact, you’d be surprised how little somebody running a Forex desk for a brokerage knows about actual trading. They worry about order flow, system analysis, statistical analysis, and that everybody gets what they asked for in an ordered manner.

It’s also thought that Forex brokers go out of their way to take money from the clients. Nothing could be further from the truth. This is because most client accounts are closer to $1000 in value than they are $10,000. Despite the advertisements that you see of people in the Caribbean on a beach, or perhaps getting off of their private jet, most retail Forex traders do not have that much money in their account. Statistically speaking, most Forex traders will lose a large percentage of their account within 90 days, so the Forex broker doesn’t need to cheat them. This is especially true when a Forex broker is well-capitalized. For example, brokers in the United States need to have a minimum of $20 million in the bank. The purpose of this capital requirement is to absorb losses for traders, and to have the ability to pay when that trader cashes out. This makes the counterparty risk very low. Unfortunately, there are Forex brokers out there that used to be capitalized with as little as $10000, making them an accident just waiting to happen. Once you understand how Forex brokers make money, you’ll also understand the need for using a regulated broker, and you’ll be in a stronger position to trade the markets safely and intelligently.


Sergey Golubev
Moderator
106126
Sergey Golubev  

Forum on trading, automated trading systems and testing trading strategies

Press review

Sergey Golubev, 2017.03.21 10:41

We are having many threads opened by the members for the asking about forex brokers based in the US. So, I just found one article about those brokers:

Top Forex brokers based in the US

As we are not allowed to discuss about the brokers in extensive way (especially their pros and cons for example) so, please, do not discuss about them (or about any brokers) on the forum. Just this one article only.


Anton Nel
49614
Anton Nel  
Sergey Golubev:
No, the broker does not know about what indicator or EA you are using.

Brokers do know if the trade is placed by Manual or Expert. See picture below:

Even they can see the magic number ordered by EA.

Anton Nel
49614
Anton Nel  
Overweight:

Can a broker detected what indicator does a client use in chart?

for example I use ATR in my chart, Is broker know it?

The answer is no.

Sergey Golubev
Moderator
106126
Sergey Golubev  
Anton Nel:

Brokers do know if the trade is placed by Manual or Expert. See picture below:

Even they can see the magic number ordered by EA.

Yes, they see - manual trade or by EA.

Marco vd Heijden
Moderator
8178
Marco vd Heijden  

But they can see your stops, if you do not hide them...

Maybe you should think about that, in stead of worry about them seeing your ATR indicator...

The big advantage over running virtual stops is that you can check differences in spread, before the levels are hit.

That is a significant difference when compared to stops residing on the broker's server.

Anthony Garot
1864
Anthony Garot  
Marco vd Heijden:

The big advantage over running virtual stops is that you can check differences in spread, before the levels are hit.

This is interesting. A few questions:

(1) Say you have a virtual stop set, either in an EA or mentally, and this price is hit. You check the spread, and it's very wide. Would you then just wait until the spread is more favorable? What if the market continues to go against you?

(2) Would you advise having a broker-level stop loss in addition to a virtual stop? The level would be much further away, basically as a fail-safe for unlikely contingencies.

Fernando Carreiro
4420
Fernando Carreiro  
Anthony Garot:

This is interesting. A few questions:

(1) Say you have a virtual stop set, either in an EA or mentally, and this price is hit. You check the spread, and it's very wide. Would you then just wait until the spread is more favorable? What if the market continues to go against you?

(2) Would you advise having a broker-level stop loss in addition to a virtual stop? The level would be much further away, basically as a fail-safe for unlikely contingencies.

  1. Since the OHLC prices are based on Bid prices and almost all Indicators too, it is better to use bid prices to mark both the Entry and the Exits, which includes both Stop-Loss and Take Profit. However, Sell Orders will close on Ask prices when S/L and T/P levels are reached, which will be skewed from reality of your strategy because the spread values could be quite different to what was used to calculate the stops when you first placed the Order. So by using Virtual or Stealth stops, you can better control the exact price at which those levels are hit. How you handle this depends obviously on what strategy rules are are being applied and how you wish to manage the risk. This is also the reason why I don't use Pending Orders in my EAs and instead use Market Orders so that that the Buy orders enter the Market when the Bid price is at the level that I have specified, instead of the Ask price that is used by Buy Pending Orders. Obviously it will still open at the current Ask price but at the Bid level that I have defined.
  2. Yes, always! I always place them further out at a point which will protect the position in case of a failure, such as the EA becoming non-responsive, or PC crash, or loss of communications with the broker. They are placed in way that the extra risk is within the parameters that I have set for my Money Management. For example, if my strategy is using a risk of 1% per trade, I may set my physical stops to 2-3% risk for example depending on the strategy. I will also consider the expected volatility so that they don't get triggered prematurely if they are placed too close to the virtual stops.
  3. Another advantage of using Virtual Pending Orders and Virtual/Stealth stops, is that you get more accurate results in the Strategy Tester, because when you use real Pending Orders and/or real Stops, they will be hit at the exact price that they are set at and will suffer zero slippage, instead of having them trigger at the Market price with slippage.
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