Do some brokers deliberately cause you to lose?

sharesr4us · Jun 7, 2015

Hi,

I've been reading reviews about certain brokers and to say I'm not happy is an understatement

.

I don't know how true this is, so please do correct me if I've got wrong information as. I've read on some reviews and sites that certain brokers use underhand tactics with their trading platform to avoid a trader making profit.

For example one reviewer said broker's trading platform would stop working almost every time if the new trader made any profit, yet only to strangely start working again once they were back at a loss.

Another example says that the customer set and order to open at a certain price, but the broker opened it almost 30 points below it, classing it as slippage.

Is this true? Has anyone else experienced such issues? If so, with which brokers and did you resolve this issue?

I was looking forward to opening a live a/c after doing well on demo for a few months, but now I'm in two minds and worried about getting myself burnt. Is there any advise you recommend for new starters like myself to watch out for?

drtro · Jun 7, 2015

If you believe in the Illuminati and "the market is rigged!" and "the pro's are out to get me!" then you aren't in the right state of mind to be a trader.

LON:RMG · Jun 7, 2015

What would the broker have to gain from you losing?

Think of it this way. They largely generate their revenues from trading commissions. If their customers are losing every time they place a trade, do you think they will make more or less trades?

hhiusa · Jun 7, 2015

I agree in part with @LON:RMG. Non-direct access brokerage firms do and can direct orders to market makers are paid for liquidity flow. While this isn't trading against you, they may not be sending all orders to market makers with the best prices. If you are truly worried about it, one way to help would be to get market depth.

By the way do you work for the Royal Mail @LON:RMG?

sharesr4us · Jun 7, 2015

@ drtro - I was simply stating what has been written on a lot of review and being fairly new, don't you think I should be cautious? If this was the other way around and I went in without thinking and got burnt, I'd get the same people telling me that it's my own fault for being stupid and not reading and asking questions.

@ LON:RMG - I agree with you mate. All it is that I read a lot of bad reviews where IT systems are going down, Trading Platforms freezing where traders are in profit and wasn't too sure, so I thought I'd best ask...better to be safe than sorry.

@ hhiusa - Thank you, which brings me back to my other question, which trading platforms do you recommend that are reliable, good spreads and can do direct orders?

hhiusa · Jun 7, 2015

sharesr4us said:
@ drtro - I was simply stating what has been written on a lot of review and being fairly new, don't you think I should be cautious? If this was the other way around and I went in without thinking and got burnt, I'd get the same people telling me that it's my own fault for being stupid and not reading and asking questions.

@ LON:RMG - I agree with you mate. All it is that I read a lot of bad reviews where IT systems are going down, Trading Platforms freezing where traders are in profit and wasn't too sure, so I thought I'd best ask...better to be safe than sorry.

@ hhiusa - Thank you, which brings me back to my other question, which trading platforms do you recommend that are reliable, good spreads and can do direct orders?

I don't know enough about retail brokers in the UK. It seems like IG is working alright for you.

If you want direct orders, you will need a direct access broker. I have not seen any direct access brokers myself that had less than a $10,000 deposit to start. Unless you have that much to start with, I am skeptical you will be able to find a direct access broker. I am certain there are many good retail brokers in the UK. I don't like that the fact that some brokers let you leverage your account with so little money.

sharesr4us · Jun 8, 2015

Thank you for clarifying that hhiusa. Yeah 10k deposit is way out of my league...I only plan to play with no more than 1-2k and only if i succeed do i plan to move up further.

One thing if you could please help me with regarding guaranteed stop. Assuming the market falls suddenly, does a stoploss definately guarantee me losing money or can a broker still ask for a loss if it went past the stop?

hhiusa · Jun 9, 2015

sharesr4us said:
Thank you for clarifying that hhiusa. Yeah 10k deposit is way out of my league...I only plan to play with no more than 1-2k and only if i succeed do i plan to move up further.

One thing if you could please help me with regarding guaranteed stop. Assuming the market falls suddenly, does a stoploss definately guarantee me losing money or can a broker still ask for a loss if it went past the stop?

Are you referring to the advertisement (sorry "advert") on this website? I am not following your question. You are trading on margin when you day trade futures, CFDs or do spread betting. Since they do not require you to pay the full amount of the trade value as you would a stock, there is a greater risk of loss. If you pay $1,000 for a $10,000 trade value, then you are leveraged 10:1 and if the instrument price decreases by more than 10%, you will end up with a negative balance. This means that you owe more than your initial deposit.

100 shares @ $100 = $10,000 for which you pay $1,000
price drops to $90
100 shares @ $90 = $9,000. $10,000 - $9,000 = $1,000 loss. Since you only had $1,000 to start with, you have now lost all the money in your account. The guaranteed stop places an order for you so that you do not end up with a negative balance. This is my take from what those advertisements claim.

DionysusToast · Jun 9, 2015

Brokers don't benefit from you losing at all. They want you to win and generate more commissions.

Dealers absolutely benefit from you losing. They take the other side of your trades.

So stocks & futures - you are dealing with brokers.

Forex, spread betting - you are dealing with dealers.

hhiusa · Jun 9, 2015

DionysusToast said:
Brokers don't benefit from you losing at all. They want you to win and generate more commissions.

Dealers absolutely benefit from you losing. They take the other side of your trades.

So stocks & futures - you are dealing with brokers.

Forex, spread betting - you are dealing with dealers.

That's nice. What I said still stands!

highbury fx · Jun 9, 2015

DionysusToast said:
Brokers don't benefit from you losing at all. They want you to win and generate more commissions.

Dealers absolutely benefit from you losing. They take the other side of your trades.

So stocks & futures - you are dealing with brokers.

Forex, spread betting - you are dealing with dealers.

This isn't correct.

A spread betting, forex, cfd or any other firm that is licensed to internalise risk will have an interest in their clients losing.

A spread betting, forex, cfd or any other firm that is licensed as an agency broker will pass their clients trades to a market maker and generate their income from the volume of their clients business rather than their trading losses.

hhiusa · Jun 9, 2015

In the US the brokerage firm has no obligation to pass your order to market maker(s) with the best prices. This does not mean that they are trying to make you lose but that they will choose the market makers that pay the best for liquidity flow. Retail firms give you no control over where your orders are directed. This is why I prefer direct access trading.

highbury fx · Jun 9, 2015

hhiusa said:
In the US the brokerage firm has no obligation to pass your order to market maker(s) with the best prices. This does not mean that they are trying to make you lose but that they will choose the market makers that pay the best for liquidity flow. Retail firms give you no control over where your orders are directed. This is why I prefer direct access trading.

but the guy asking the question was from the UK so I answered it from a UK perspective. Only a goddam fool would open a trading account from the UK with a company in America.

it's very interesting hearing about you but I was responding to someone else.

leave financial services to the brits and you guys can continue your quest for world domination

timsk · Jun 9, 2015

Hi highbury fx,

highbury fx said:
. . . Only a goddam fool would open a trading account from the UK with a company in America.

In days gone by, from the U.K. I've had accounts with IB and TradeStation in the U.S. to trade stocks and with Infinity Futures to trade the e-mini YM. What does that make me!
:cheesy:

highbury fx · Jun 9, 2015

timsk said:
Hi highbury fx,

In days gone by, from the U.K. I've had accounts with IB and TradeStation in the U.S. to trade stocks and with Infinity Futures to trade the e-mini YM. What does that make me!
:cheesy:

lol... well, you're certainly no ones fool. That much is obvious.

The UK lead the way in financial services. Its what we do, so why would you trust a company thousands of miles away in a territory that actively discourages UK investment houses and brokerages from setting up business there whilst US brokerages having no qualms about coming to the UK and operating amongst local firms here.

from my side its a disgrace. I can't set up in the US but a US firm can come here and operate in our mature regulated market.

tomorton · Jun 9, 2015

highbury fx said:
This isn't correct.

A spread betting, forex, cfd or any other firm that is licensed to internalise risk will have an interest in their clients losing.

A spread betting, forex, cfd or any other firm that is licensed as an agency broker will pass their clients trades to a market maker and generate their income from the volume of their clients business rather than their trading losses.

Absolutely right.

It makes no sense for any firm in any industry to set out to wipe out its own customers. If successful, that would be an efficient way of surrendering market share to competitors, driving your own revenue to zero, eliminating your profile for recruiting new business.

This would then allow an enterprising new organisation to step in and dedicate its marketing to a contrary approach - they would gain dominant position in the market in no time. The absence of UK SB firms advertising that they don't trade against their customers suggests that none of their competitors are doing so.

There is a myth that UK spreadbetting firms try to wipe out their clients as quickly as possible. Its just a myth. Probably started by two groups - the poor traders (who would have wiped themselves out anyway regardless of means of access to the market), the scalpers/arbitrageurs (who the firms try to exclude as they find it so hard to manage their own risk on trades of tiny breadth lasting just seconds).

timsk · Jun 9, 2015

highbury fx said:
. . . The UK lead the way in financial services. Its what we do, so why would you trust a company thousands of miles away in a territory that actively discourages UK investment houses and brokerages from setting up business there whilst US brokerages having no qualms about coming to the UK and operating amongst local firms here.

Hi highbury fx,
I suspect your question is a rhetorical one, but I'll answer it anyway. At the time I had those accounts, I conducted due diligence and felt - rightly or wrongly and perhaps naively - that my money was as safe with them as it would be with a U.K. firm. Also, it was hobson's choice in that there wasn't a U.K. broker (that I was aware of at the time) that offered the products and services that I wanted. To this day, I recommend futures traders check out Infinity Futures in Chicago - who are by far and away the best broker I've ever been with. Now I've said that, they'll go belly up - owing their clients millions!

Tim.

highbury fx · Jun 9, 2015

timsk said:
Hi highbury fx,
I suspect your question is a rhetorical one, but I'll answer it anyway. At the time I had those accounts, I conducted due diligence and felt - rightly or wrongly and perhaps naively - that my money was as safe with them as it would be with a U.K. firm. Also, it was hobson's choice in that there wasn't a U.K. broker (that I was aware of at the time) that offered the products and services that I wanted. To this day, I recommend futures traders check out Infinity Futures in Chicago - who are by far and away the best broker I've ever been with. Now I've said that, they'll go belly up - owing their clients millions!

Tim.

Hi Tim

where you put your money or where any one else puts their money is their prerogative and just because I think its stupid doesn't actually mean it is.

My beef with the US is that they demand foreign brokerage firms have clear regulatory capital in excess of $20m in order to be able to apply for the licenses we would need to be a compliant regulated US financial services firm, but they aren't put under similar obligations here.

Small US owned firms can come here and stump up anything from £125k to £750k and be a regulated brokerage able to internalise risk and promote themselves from within our own EU domestic market. I don't like that, I don't think its fair and I like things being fair. If they have a chance to operate here we should be able to operate there.

sharesr4us · Jun 9, 2015

Thank you to everyone for helping me. Like highburyfx has stated, I'm only interested in UK firms who spreadbet and being a beginner hope someone more experienced can answer some of my questions on here.

Bear in mind that I'm only playing with demo a/c at the moment as I don't want to jump in too soon...at least until I'm sure I'm successful with most of my trades.

If I may give an example....

Lets just assume I am with IG Index and have £2000 in my account. I put in a bet for GBP/USD @ 10000 to go UP at £1 per point. This bet is set to a GUARANTEED STOP LOSS of 9900 (100 pips below current price)

BUT! Due to some terrible news, the GBP/USD price collapses and shoots down to 9500 instantly.

So here are my questions:-

1. Is my stop loss guaranteed to STOP huge losses and me racking up a massive debt with IG?

2. Or would it still go through because IG will count this as a slippage?

3. Roughly what balance should I end up with in this scenario?

hhiusa · Jun 9, 2015

highbury fx said:
Hi Tim

where you put your money or where any one else puts their money is their prerogative and just because I think its stupid doesn't actually mean it is.

My beef with the US is that they demand foreign brokerage firms have clear regulatory capital in excess of $20m in order to be able to apply for the licenses we would need to be a compliant regulated US financial services firm, but they aren't put under similar obligations here.

Small US owned firms can come here and stump up anything from £125k to £750k and be a regulated brokerage able to internalise risk and promote themselves from within our own EU domestic market. I don't like that, I don't think its fair and I like things being fair. If they have a chance to operate here we should be able to operate there.

So the world isn't fair, fancy that. Maybe the UK should raise their standard to the US level. How any company could manage with £125k is beyond me. That is amount required by my broker to have a reg T account.

Another reason not to trade in the UK (as there are many), is that there are about 10x fewer financial instruments to trade, not to mention a dearth of liquidity compared to US markets.

There are 20+ stock exchange with more than 30,000 stocks in the US as opposed to one.
https://www.interactivebrokers.com/en/index.php?f=1563

Futures
CBOE, CBOT, CME, ICE US, NYBOT, NYMEX and One Chicago which @timsk mentioned as opposed to the intercontinental Exchange in the UK.

Do some brokers deliberately cause you to lose?

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