“I Was Only 1 Pip Away…, ”

Joined : 23 Dec 2007 Posts : 239 Location : Nigeria

By BC Bonta

“I Was Only 1 Pip Away…, ”
How many times have you heard a trader say “I called it right and went long, but I got stopped out by only 1 pip and then the market took off without me.” Sound familiar?

Unfortunately it happens all the time. This brings us to the most asked question in retail Forex trading:

Do Forex brokerage firms have a hidden agenda when it comes to your success or, more importantly, your failure in the Forex market?

Is the industry itself causing 95% of individuals to lose in the market?

The debate rages on with some believing it’s the fairy tale world of bitter traders who need another excuse for their losing trade, another exciting story to tell about how they picked the perfect trade, but got stopped out just before the move.

Or is it the truth? Are Forex brokerage firms secretly sabotaging your trades?

Well, I can end the debate right here and now from an insider’s view. Retail firms with dealing desks do cause many of the losses individual traders experience. I have seen it with my own eyes and I know institutional traders from major firms that you have heard of (and may have an account with) that can tell you horror stories. This is not to say that all traders using this argument are in the right -- there are many bitter incompetent traders who want a ready-made excuse. But, the fact is, retail firms have an interest in making sure the individual trader loses.

Why? Many people ask me what the motivation is behind this deliberate attempt at client sabotage. Why would a brokerage firm (which should be non-biased and making money on trading volume alone) be interested in the trading results of its account holders?

Simple. If the brokerage firm has a dealing desk, which most retail firms do, they are taking the other side of your trade. When you go long, they are going short and vice versa. They now have a vested interest in you losing because when you lose, they win.

It’s not unlike being a Vegas casino where the house eventually wins. They don’t care about long term business from small fish. They know that most individual traders will open accounts with small amounts just to “try Forex out” just like they would throw their hard earned money on the soft felt of the Black Jack table. $5,000 here, $10,000 here, the brokerage firms eat these small traders alive. The brokerage firm’s traders on these desks know where the market is moving and they also know where every order is placed. So, if you place a stop order at a certain level and it’s in their best interest to fill that order, they will take you out. Many times you will see an “air filled” rally or decline meaning the price is sharply moving up or down with no volume just to wipe out certain levels where individual trader orders are stacked. The brokerage firm had to take your order out knowing they were in trouble with the short term move coming. They can see the move coming, they can see your position and they can see your stop. You’re giving them all the information needed to put you out of the juicy market.

What’s the solution?

You have to trade with a brokerage firm that does not have a reputation for unethical practices such as running stops. There are few out there now but many more will be coming on to the scene as traders like yourself find out what’s happening. These firms need account holders to do well and continue trading through them to make money.

Another huge advantage is if they send orders through to different liquidity pools without the banks knowing what your orders are. So, if you have a stop loss to sell EUR/USD at 1.3350, your firm may pass that order to Deutsche Bank for execution and your original buy order was placed with JP Morgan. This is ideal because they just see an order at a specific price without any knowledge of where your other trades are. They don’t care if you make money or not. That sell order at 1.3350 could be losing you 50 pips or making you 100 pips, they wouldn’t know because they can’t see your original order and like I said, they don’t care because they are paid purely on volume. This puts you and your brokerage firm on the same side of the table. Forex trading is hard enough; don’t fight an uphill battle with a brokerage firm that is out to see you lose.

If you don’t believe me, then you’ll eventually learn the hard way. To see a list of the major brokerage firms that have a "bad rep" and to get the tools that will show you what the banks are doing, please visit http://www.fxnationlive.com

How to Protect Yourself When Selling Short:http://forexgreenland.foruma.biz/forex-technical-analysis-strategies-f3/how-to-protect-yourself-when-selling-short-t10.htm

For example:

Sell short and then set your stop by eyeing the chart.

So what's the problem with that? When you're selling short, you're creating a position by selling. So if your trade went the other way, and you had to stop-out, then you're forced to buy the sell back in order to close your trade out. So it's the buy price that has to be the focal point in the case of a short sell.

Yet here's the problem. As an industry standard, charts show sell prices only, not buy prices. So with many currency pairs, your trade could be very easily off 3-9 pips or more and you'd never know it due to the spread of the pairs.

How do you get around this? Look at the difference in the quoted sell price and the quoted buy price for your pair. Once you calculate the difference, you'll know to account for that amount over and above the sell price shown on the chart. So, in other words, add the difference to the current sell price. Once you have your number, that's where your stop-loss should be - that much ABOVE the sell price on the chart.

So why don't traders do this?

http://forexgreenland.foruma.biz/forex-technical-analysis-strategies-f3/how-to-protect-yourself-when-selling-short-t10.htm