Secrets of your broker
It's a lot of typing. I know what you mean at a glance. Maybe off-topic - read the book "How to Cheat Your Broker" :-D By the way, tell me later what it's all about)
I'll read a lot of books later and answer more thoroughly ))
I'll read a lot of books later and answer more thoroughly ))
The hard truth
I've been through it, read it... Bullshit...
Myth63:
I'm sure there's some truth to it.
I've been through it, read it... Bullshit...
I don't know about it on the other side, but hunting for close stops from the broker side I know from my own experience.
lostourist:
I'm sure there's some truth to it.
not an ounce...
I'm sure there's some truth to it.
sandex:
I don't know about it on the other side, but I know from my own experience how close stops are hunted by brokers.
Find any demo terminal for real volumes and you will understand everything....
I don't know about it on the other side, but I know from my own experience how close stops are hunted by brokers.
Myth63:
not a gram...
Specifically in what not a gram
not a gram...
sandex:
Exactly what is it?
no brokerage house has the money to move the price by 1 pip
Exactly what is it?
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And indeed, the question is quite relevant and even important.
The interesting thing is that when I think about how to answer this question, I look carefully at the person who is asking me about it.
With my answer I can either hurt or help them.
If this is a novice trader who has recently read a lot of smart literature on the subject, he probably believes that I am taking a big risk by not using a stop loss.
If this is a trader with significant experience in real trading, the answer is doubly interesting to him. He certainly knows what a stop-loss order to limit losses is.
And so, in order not to hurt either of them, and at the same time to answer this question correctly and "graphically", I will tell you about some secrets of brokers.
What is a broker? This is the generic name of the company you "give" your money to by opening a trading account with them. You buy and sell, and the brokerage company executes the orders coming from your trading terminal. This is the company which gives you access to the Market and services your account. So, as you can see, you cannot do without a broker.
Almost every day we see advertisements of different financial companies, which offer us from TV screens to come to them and finally become a wealthy person. Become independent.
They will teach you. They will show you. They'll tell you... All for free...!
All these courses and seminars on trading in financial markets, they arrange for you for free.
Why is that? Why is it free? What's their interest in that? And what is the intrigue?
They are not lying when they offer you to become a millionaire. They are not lying when they suggest you take a training course and understand how to profit from price fluctuations.
The financial markets undoubtedly offer an opportunity to make money. They also undoubtedly need you to make exchange transactions. Actually, exchange transactions are the express purpose of markets (at least foreign exchange markets). But with their development and human progress, markets have become trading platforms for a very diverse set of participants. And now, in our time, markets are organized in such a way that as many people as possible lose as much money as possible...
Every financial company has its own way of making money out of their clients. It's a very wide field of discussion. But I will not digress from our topic.
Beautiful promising advertisements do not tell us about sad statistics that about 90% of beginning traders will lose their money and will never return to the markets. And of those 10% who are left, only 1% can earn as a result of long efforts. Just look at these figures... 99% will lose money. And 1% will take it back. Of course, not all the money will go to these successful traders. But some of it will go into their pockets.
Markets are always in need of fundraising. That's why there is such a propaganda among the population. Come and try it. Maybe you will succeed. And they do not lie. Someone does it. There are clear examples of successful people.
One example of how brokerage companies "shake out" money from clients is as follows. It is just about stop-losses to limit losses.
Imagine a brokerage company which provides access to global markets to its clients.
Such companies have dealing rooms where traders also sit. They execute and service the buy and sell orders they receive. And they see all the levels where the orders of their clients are placed. Your orders. Your buys and your sells. They can also clearly see at which levels you place your Take-Profit and Stop-Loss. They operate with very significant amounts (lots). If necessary, they are able to move the price up and down with their operations. And if they see that a certain amount of orders has accumulated at these levels, they simply drive the price to these levels. They cut your positions, taking your money. Even if the volume of your positions is not large, in the scale of the entire audience of client accounts, the amount of positions cut by them will be very large.
When I was learning to trade I tried to follow money management rules. I tried to open positions with small volumes, and always set stops to limit losses. To my surprise almost all such positions, even if I knew they were profitable (opened in the right direction), were closed with a loss. I placed stop orders and watched as price was literally magnetically attracted to the levels where the cutoffs were placed. Having cut my forecasted positions the price returned, as if nothing had happened, to its previous course. And I lost money and wondered why...
And this happened all the time, if I, a person with a small capital, could not allow myself a huge drawdown and therefore set stops relatively close. This is what the broker takes advantage of. Brokers have a lot of clients with small capital. They attract clients through advertising and propaganda of free independence. They show you the tenets of stock trading in their classes. They tell you about risk management. The rules of capital management. The importance of protecting your positions. They emphasise the importance of setting stop losses. They tell you it's important. And they're not lying. They really are. What if you haven't anticipated the direction of a trend correctly? If the price moves against you, you will fix the loss, but you won't lose all of your money. That's right.
What they don't tell you is that you cannot place a stop loss at a safe distance to avoid being hit by "noise" when trading with a small capital. If you set the stop order relatively far away, you will have to endure a serious drawdown. So you're looking at a distance so you have something left over if price moves against you and a stop is triggered.
And the result...? You and many others like you, traders with small capital, set your stops so close to current levels that it is easy for the corporate traders sitting in the halls to cut your positions. They will take your money. Cynically and ruthlessly. In doing so, they joke amongst themselves. And compete with each other.
This is how your broker hunts for your money.
When you trade, remember this and don't think it's none of your business.
So what do you do? How do you deal with these circumstances? How do you come out the winner in this fight?
The answer is a bit complicated.
Large cap traders can afford to put stops. When they are defending a position, they will put a stop that far away. At the same time you, being able to tolerate drawdowns, will not lose much if the price goes against you. As you can see everything depends on the size of your capital.
Equity provides survivability. And the bigger your equity, the more room you have to maneuver.
The challenge for all beginning traders is not to make mistakes. You can't open losing positions. Your analysis must be accurate and optimal. Your start-up strategy cannot be called anything other than aggressive (which is unacceptable, in fact), because you are forced to survive. And if you suffer a drawdown, but believe your prediction and analysis - the Market will reward you generously. The smaller your capital, the less chance you have of using stop losses to limit losses.