# Rigged MarketMaker CFDs



## Duffenator (16 December 2008)

Lots of people who trade CFD's think that when they are taken out of the market by a stop and then the trend proceeds in the original direction, that the CFD provider has sort our their stops. I have suffered the same inconvenience, but have since adjusted my technique. I believe that most of the time it is nothing more sinister than an educated trader knowing where the stops are likely to have been set by us plebs, and taking advantage of it.

It is bad for us, but I take my hats off to these people as they possess a very useful skill.

HOWEVER- today, when trading the AUS200 cash cfd, I saw something to lead me to believe otherwise. Now, before I go on, I am happy for someone to prove me wrong on this - in fact I would be stoked!

I believe this to be a bit of rigging by my marketmaker because I also watch the actual SPI contract. If you look below, the chart on the left is the CFD and the right is the SPI. You can see that the price drops away rapidly, before it starts to consolidate. And it is in this consolidation that I believe the rigging occurred. You can see that at no stage does the price of the SPI rise much above 3530. 3530 is a level equivalent to 3520 on my CFD chart. However, if you look at the CFD chart, the price rises significantly above 3520! I should also say that the green candle soon retraced and moved back below 3520 after the screenshot was taken!

Can anyone suggest a reason for this difference in price move? Could there have been a large spread in the bid/ask price of the SPI at this point?


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## Gundini (16 December 2008)

My experience with the Aus200 index CFD was that it had no basis for the movements, relative to the SPI.

I came to the conclusion it was very difficult to trade. It seemed wherever I placed my stop/sell order, the Index would act like a magnet until it triggered, knocking you out of the trade with a loss.

Also, the more quantity you purchased, or doubling down to average down, the more of a target you seemed to be for the marketmaker. The marketmaker put you in so much pain you just had to get out, then, it would turn around and move back towards the SPI.

At the end of the day/beginning/overnight it would usually reach parity with the SPI. 

The best way it seemed to trade the Aus200 was to trade the opposite direction to the trend. So, if you thought the trend was Long, everyone else usaully did as well, therefore, by placing a short, you had a better chance at profit while the marketmaker tried to squeeze out the Longs.

To me it was a game, that usually ended up in a loss. This may not make sence to those who have not traded the AUS cfd, but this is my experience, and the only way I would play this cfd is either as a hedge, or on a longer term view disregarding short term movements.


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## skc (16 December 2008)

May be try GoMarkets. Sounds like they use real numbers. See thread here

https://www.aussiestockforums.com/forums/showthread.php?p=373204&highlight=gomarkets#post373204


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## Duffenator (16 December 2008)

I have to say I haven't found it as difficult as that Gundini...but that being said, I know that feeling.

Until this point I have been relatively neutral about whether marketmakers seek out stops or other "untowardly" practices. However, in this instance, with this provider, I can see no reason for the spike. I even started up a demo account with IG and had a look at their 1min data - It doesn't show the spike in price that I got with my provider!

TH - you have asked for proof of marketmarket makers rigging price action...I think this may be it. But as I said in my first post - I would like to be proved wrong....


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## Duffenator (16 December 2008)

skc said:


> May be try GoMarkets. Sounds like they use real numbers.




I am leaning more and more towards trading SPI directly...

The aus200 cash CFD, with my provider is based on "fair value". I have asked them what this means and was told it is affected by various factors - including time. Time? how does this affect price? maybe we should all add indicators to our charts showing the change in price over time...oh hang on a min - isn't that called a price chart?

Anyways, I have asked for the formula they use for calculating price and I will be getting a call from their deal desk. No doubt to give me the run around...but if anyone is interested in knowing how price is calculated on an index CFD - might be worth your while staying tuned to this thread! And if your not interested in that, might be worth a laugh at all us CFD index traders!


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## James Austin (16 December 2008)

when i've paper traded the index cfd i've been surprised how rountinely my paper stop has been hit.

2 conclusions came from this experiment:

1] i need to improve my entry
2] that's just intraday index trading


the cynic in me would like to think MMs may be up no good,  but these days i think its more a reflection of my trading skill


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## cogs (16 December 2008)

Duffenator,

There is nothing new here as much as some would like to palm it off as "poor trading techniques, poor psychological planning, " etc.

This happens quite often. Some would say 'why would they bother'? Well simple, 'a lot of a little makes a lot'. Many have become very wealthy through this simple rule. If have a dozen small stops were taken out with various clients throughout the day, they have their wages, just like any employee or business. They simply don't just earn from spreads.

I am sure TH with have plenty to say here.


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## Cartman (16 December 2008)

Duffenator said:


> I am leaning more and more towards trading SPI directly...
> 
> The aus200 cash CFD, with my provider is based on "fair value". I have asked them what this means and was told it is affected by various factors - including time. Time? how does this affect price? maybe we should all add indicators to our charts showing the change in price over time...oh hang on a min - isn't that called a price chart?
> 
> Anyways, I have asked for the formula they use for calculating price and I will be getting a call from their deal desk. No doubt to give me the run around...but if anyone is interested in knowing how price is calculated on an index CFD - might be worth your while staying tuned to this thread! And if your not interested in that, might be worth a laugh at all us CFD index traders!




Hi Duff   Could be an arbitrage op if you have quick enough fingers   Name of Provider please?


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## Duffenator (16 December 2008)

James Austin said:


> the cynic in me would like to think MMs may be up no good,  but these days i think its more a reflection of my trading skill




I agree - I used to think the same thing. But I found it was just in my head. I would remember the bad, i.e, when I was stopped out before a potentially good profit. However, I would forget the times where I was within a point of being stopped out, but wasn't, before making a good profit. Once I quantified this, I no longer had any worries.

Until today, I had nothing that seemed to provide solid evidence of what a lot of us suspect. However, the thing with this instance, is that I can find no reason in the underlying price for this spike. It wasn't there in the SPI, it wasn't there on IGs 1 min chart.

Furthermore, the level of the price spike was pretty much the only opportunity anyone would have had to short on the earlier downward leg because the price move was extremely fast.

I know it is nothing new, but I remember reading in another thread, that someone wanted some proof of dodgy moves in market maker cfds...and as far as I can tell, this could be it!

Cartman - it is GFT. good luck, its something I'm going to have a look at!


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## James Austin (16 December 2008)

Duffenator said:


> Until today, I had nothing that seemed to provide solid evidence of what a lot of us suspect. However, the thing with this instance, is that I can find no reason in the underlying price for this spike. It wasn't there in the SPI, it wasn't there on IGs 1 min chart.




duff,
MMs "may" fish for stops, but i dont think so. And what you've got is just one example, not enough proof

better evidence would be futures/cash discepancies right across the chart, or across a period of time, afterall there are stops everywhere that are worth seeking out


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## prawn_86 (16 December 2008)

My biggest question as to if MM actually hunt stops would be "Why my stop?"

Theoretically, people have stops all over the place so why would they just hunt yours, or those that trade in a similar style? It just seems a bit paranoid to me


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## chops_a_must (16 December 2008)

They operate off the spreads, not the last price.

I think we've been through this all before...


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## Wysiwyg (16 December 2008)

cogs said:


> Duffenator,
> 
> This happens quite often. Some would say 'why would they bother'? Well simple, 'a lot of a little makes a lot'. Many have become very wealthy through this simple rule. If have a dozen small stops were taken out with various clients throughout the day, they have their wages, just like any employee or business. They simply don't just earn from spreads.
> 
> I am sure TH with have plenty to say here.




Maybe he scalps to beat them at their own game.

I have no doubt stops are hunted  but for the life of me can never understand why little `ol me.

The most blatant was when I moved my take profit stop away 3 times and it kept coming.After third move I stayed and market went over by one pip (got records to show) and dropped over 800 pips over weeks after that.I just had to be squeezed out and THAT my friends is what I have experienced.  

Bucket shops are for newbie suckers (like me) before they wisen up to better service providers and methods of trading.



cogs said:


> There is nothing new here as much as some would like to palm it off as "poor trading techniques, poor psychological planning, " etc.




Answer ...



> In reality most forex traders are *under-capitalized. This forces them to trade **with too tight of stops to protect their already too small capital*. Unfortunately, *with a stop that tight, the broker doesn't *even really *have to do anything*. The market can just *hiccup and you'll be **taken out of the trade*.




Try an ECN ...



> ECN is an acronym for *Electronic Communications Network*. *A Forex **ECN does not operate a dealing desk *but instead provides a marketplace where multiple market makers, banks and traders can enter competing bids and offers into the platform either inside or outside the spread, allowing traders to trade against each other and with multiple counterparties. A trader might open a trade with liquidity provider "A" and close it with liquidity provider "B", or have the trade executed against the bid or offer of another trader. Participants of the ECN send in competing bids and offers into the platform and the combined volume is usually displayed to traders at each price. Orders are matched between counterparties, usually for a small fee.


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## Duffenator (16 December 2008)

James Austin said:


> duff,
> MMs "may" fish for stops, but i dont think so. And what you've got is just one example, not enough proof




true, one example is not proof...but, what it shows is that the price was "significantly" different on the marketmaker compared to the SPI which it is based in at least one instance.


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## Wysiwyg (16 December 2008)

Trade anonymous (STP) and take the human factor out!


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## Cartman (16 December 2008)

Duffenator said:


> Furthermore, the level of the price spike was pretty much the only opportunity anyone would have had to short on the earlier downward leg because the price move was extremely fast.
> 
> Cartman - it is GFT. good luck, its something I'm going to have a look at!




Thanks Duff  Dont have an acc with them so cant comment on specifics If the price moved real quick most cfd mobs wont let you on even if you have superman fingers so pointless really  Your chart does look to have an anomaly though


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## skc (16 December 2008)

Duffenator said:


> true, one example is not proof...but, what it shows is that the price was "significantly" different on the marketmaker compared to the SPI which it is based in at least one instance.




There is actually no need to prove anything. The moment you sign up to a MM you have decided that they can screw you however they want. This is a clause from one provider's PDS. Check your provider and chances are they have similar provisions.

_*3.19 Clients may be treated differently*

CMC Markets in its absolute discretion may quote different prices, and charge Commission, Financing Charges, Rollover Charges and other charges at different rates, to different clients.
_


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## Duffenator (16 December 2008)

Guess I should also say that I was already out of the trade, so I had made my profit, and that this isn't a case of me being "just" stopped out and feeling bitter at the world.


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## Duffenator (16 December 2008)

Cartman said:


> Thanks Duff  Dont have an acc with them so cant comment on specifics If the price moved real quick most cfd mobs wont let you on even if you have superman fingers so pointless really




...and as I have found GFT loves to re-quote...it even re-quotes it's re-quotes!

SKC - I have read that also. And yes it is in the PDS of GFT - I actually asked them about that the other day and was told they are referring to better brokerage etc if you are a large client...I laughed on the inside and thought "yeah right".


If a marketmaker can just move the price around - I think that the ATO should class trading CFD's as gambling and not take half our profit....but that is a totally different subject and will derail any discussion - so forget I said that! lol


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## prawn_86 (16 December 2008)

Duffenator said:


> If a marketmaker can just move the price around - I think that the ATO should class trading CFD's as gambling and not take half our profit....but that is a totally different subject and will derail any discussion - so forget I said that! lol




They do, hence why no CGT on CFD profits.

Do a search for the topic


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## Trembling Hand (16 December 2008)

LOL guys!!!

Yeah they rig it, its impossible to trade profitably because they take out all your good trades.


OR
A CFD chart is a bid or ask chart not a price chart that could be 4 to 5 points away from the actual trade price + the spread


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## Cartman (16 December 2008)

Trembling Hand said:


> LOL guys!!!
> 
> Yeah they rig it, its impossible to trade profitably because they take out all your good trades.
> 
> ...





GO charts work off the bid  ---  IG are middle of the spread --- 2 points oz daytime   City Index are middle of the spread 2 points oz daytime  Dont know about GFT

ps Have you had a crack at GO yet TH ??  we are all interested


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## Trembling Hand (16 December 2008)

Yes but that is my point. A futs chart is never going to be the same as a CFD chart.

Especially when you look at a thin order book like the SPI


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## Duffenator (16 December 2008)

prawn_86 said:


> They do, hence why no CGT on CFD profits.
> 
> Do a search for the topic




Not going to go into this too much - but my understanding (and previous tax assessments) is that it is only gambling if it is random and not your main source of income. Otherwise, taxed as a business. (But i'm sure this can change depending on your circumstances.)



Trembling Hand said:


> Yeah they rig it, its impossible to trade profitably because they take out all your good trades.




This is why I have posted an instance where I was not actually in the market, to try and avoid this thought process. 

OR
A CFD chart is a bid or ask chart not a price chart that could be 4 to 5 points away from the actual trade price + the spread[/QUOTE]

This is what I was waiting for - the cfd chart I have is a bid chart. And if these are based on the SPI, shouldn't the bids roughly follow the bids on the SPI? Where as in this instance, the bids on my CFD chart show movement above and beyond any executed trade on the SPI?

Apart from being rigged, the only thing I can think of is this happened:
1. The CFD chart is a bid chart. (which it is).
2. The CFD chart is based on the Ask price of the SPI rather than the bid price of the SPI (like I assumed)
3. At the point in time I am referring to, the ask price on the SPI was significantly above the traded price on the SPI. As a result the bid price on my CFD chart (based on the ask price of the SPI rather than the traded price or the bid price), moved well above the the equivalent traded price on the SPI chart.


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## Duffenator (16 December 2008)

Trembling Hand said:


> Yes but that is my point. A futs chart is never going to be the same as a CFD chart.
> 
> Especially when you look at a thin order book like the SPI




...but the cfd chart did follow the pattern of the SPI until that point...then it went its own way...for a few minutes

p.s. sorry about the big "OR" above...not sure how it got there lol.


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## Trembling Hand (16 December 2008)

Duffenator said:


> 3. At the point in time I am referring to, the ask price on the SPI was significantly above the traded price on the SPI. As a result the bid price on my CFD chart (based on the ask price of the SPI rather than the traded price or the bid price), moved well above the the equivalent traded price on the SPI chart.





Thats it


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## Duffenator (16 December 2008)

Trembling Hand said:


> Thats it




crap - that's no fun then!


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## Duffenator (18 December 2008)

Duffenator said:


> 3. At the point in time I am referring to, the ask price on the SPI was significantly above the traded price on the SPI. As a result the bid price on my CFD chart (based on the ask price of the SPI rather than the traded price or the bid price), moved well above the the equivalent traded price on the SPI chart.




Unfortunately, that is not it!

Rigged is not the correct word - I think I should be saying "adjusted". I have been watching this closely since I started this topic. Everyday, around 11am, the prices of the AUS200 cfd, begin to move differently to the SPI. Large moves in the SPI appear generally dulled down. Although occasionally there are random spikes.

GFT tell me what I am actually trading is "fair price" of the SPI. When I asked for them to tell me how they calculate "fair price" and provide me with the formula this is the response I got.

"In response to your conversation with one of our representatives regarding the AUD200 Cash and the subsequent  request for the formula: Firstly, the Cash price is priced by the Underlyning Future contract and the fair value is the diffrenece between the two prices. 

This calculation, is not simply one formula or exact formula, it takes a number of factors into consideration, which in turn calculates the fair value (Such indicators include future interest rates, divdend payments..). We can not give you a formula as it is far more complex than this. 

I hope this solves any issues you have with the calculation. If you have any further problems do not hesitate to give us an email/call, and we will be more than happy to resolve this issue. "

I wrote back and told them that it is bulls#@t that it is more complex than a formula and the only way it can be more complex is if it is adjusted at the whim of their employees.

This was the next response:

"Thank you for your query regarding our pricing model for the .AUS200 cash index. As you are aware, we generate our cash price from the most liquid futures contract [typically the front month] basis fair value.

Take the following hypothetical example ...

Suppose the AUS200Z8 index is trading at 3556/60, and the fair value is 60. What we do is take the mid-point [3558.0] and factor for fair value, yielding a cash index mid-point price of 3552.0. Then we purely add an index point either side to generate the 2 point spread resulting in a .AUS200 price of 3551.0/3553.0"

a bit more useful...but still not explaining exactly how "fair" is created!


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## amy997 (18 December 2008)

I traded with Ig for a year before moving to IB. I used charts of the spi to select trades and never looked at the graphs provided by ig. 

What i found happened regularly was around 10.10-10.30 the price offered by ig would move away from the spi by around 5-10 points, quite regularly i would be in a trade and say the spi was moving down, ig would also be moving down but then it would "readjust" itself and suddely half your profit was gone even though the spi was still moving down. I put down the "readjustment" to ig adjusting for the differences in the premium as the contract moved closer to expiry. 
I never noticed it happening at other times of the day, usually it was sometime not too long after the open, i don't believe they are targeting stops i think it is some kind of adjustment process to bring their price in line with where they thought it should be in relation to the spi.
This happened to me 2-3 times a week and is one of the main reasons i stopped using them.


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## amy997 (19 December 2008)

A good example of the above happened this morning.

I brought the spi at 3505 which corresponded to 3505 on ig's aussie200, i exited at 3522, and brought it again when it came back down to 3505 but instead this time ig's corresponding price was 3516, somewhere around 10.30 this morning they adjusted their aussie200 index by 10 points upwards


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## James Austin (19 December 2008)

when i experience this type of thing, i'd love to blame my provider.

but its not really proof is it?!

*green arrow* = long trade stop     

*red arrow* = short trade stop


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## nuking (19 December 2008)

That happens because the spread at night are crazy .I seen up to 80 points at one stage.
Dont using stop loses at night on MM, try to exit at market.


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## James Austin (19 December 2008)

nuking said:


> That happens because the spread at night are crazy .I seen up to 80 points at one stage.
> Dont using stop loses at night on MM, try to exit at market.




its not night


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## acedrum (19 December 2008)

How about these spikes yesterday morning??


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## Duffenator (24 December 2008)

James Austin said:


> when i experience this type of thing, i'd love to blame my provider.
> 
> but its not really proof is it?!




Being stopped out isn't proof - but I deviations in the price trends between a MM and the underlying SPI show, without a doubt, adjustment of the CFD by the marketmaker (see figures in first post).

My provider will claim it is a "fair value" adjustment, but will not tell me how it is calculated. So, basically they have the ability to do what they want...if they consider it "fair". Fair could very well mean, if they lost a lot of money on an obvious trade, traded by the masses...but this is just speculation.


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## chops_a_must (24 December 2008)

But you aren't trading the SPI are you? So get used to it...


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## nuking (24 December 2008)

Duffenator said:


> Being stopped out isn't proof - but I deviations in the price trends between a MM and the underlying SPI show, without a doubt, adjustment of the CFD by the marketmaker (see figures in first post).
> 
> My provider will claim it is a "fair value" adjustment, but will not tell me how it is calculated. So, basically they have the ability to do what they want...if they consider it "fair". Fair could very well mean, if they lost a lot of money on an obvious trade, traded by the masses...but this is just speculation.




then You've got to try to use them to your own advantage.
Believe it or not I made more money on MM than the real SPI.
Inspired by TH.


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## >Apocalypto< (24 December 2008)

Wysiwyg said:


> Maybe he scalps to beat them at their own game.
> 
> I have no doubt stops are hunted  but for the life of me can never understand why little `ol me.
> 
> ...




Ha ha ha

ECN wont help u. In the FOREX you're playing with the big boys and they do flush out stops. It's well known that funds, banks and all other major players (the true market makers) in the FX market hunt obvious stop areas. 

Learn to place better or don't trade FX :

cheers


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## >Apocalypto< (24 December 2008)

amy997 said:


> I traded with Ig for a year before moving to IB. I used charts of the spi to select trades and never looked at the graphs provided by ig.
> 
> What i found happened regularly was around 10.10-10.30 the price offered by ig would move away from the spi by around 5-10 points, quite regularly i would be in a trade and say the spi was moving down, ig would also be moving down but then it would "readjust" itself and suddely half your profit was gone even though the spi was still moving down. I put down the "readjustment" to ig adjusting for the differences in the premium as the contract moved closer to expiry.
> I never noticed it happening at other times of the day, usually it was sometime not too long after the open, i don't believe they are targeting stops i think it is some kind of adjustment process to bring their price in line with where they thought it should be in relation to the spi.
> This happened to me 2-3 times a week and is one of the main reasons i stopped using them.





why not learn to take advantage of it if you could


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## >Apocalypto< (24 December 2008)

look at all these tails o my GOD my broker is trying to get me, this is a ECN. 
O what shall I do  they're all out to get us.

This is trading people get used to it Jeeezzzzzzzzzz


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## Wysiwyg (24 December 2008)

>Apocalypto< said:


> look at all these tails o my GOD my broker is trying to get me, this is a ECN.
> O what shall I do  they're all out to get us.
> 
> This is trading people get used to it Jeeezzzzzzzzzz




Yeah, the words of experience!No point bitchin` `bout the game rules.Gettin` street smart is a tough gig.


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## nuking (24 December 2008)

thats the market.
Specially on MM you just have to find the way to go under it, over it, around it or through it.


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## >Apocalypto< (24 December 2008)

regardless of whether you trade on ECN Currenex or dealing desk market maker at certian times of the year and the day there is just no liquidity and you will get evil price action that will just chew you out.

have a look at the green circles in both the high biz and low biz times. This is the EUR/USD the most liquid market on the earth. there is nothing there see the massive ranges this is a key sign we have no action and a penny will spike the market.

this is the exact reason I clock off for the year on the 19th. there is no liquidity in the FX markets ATM. It matters not what broker u use it's going to be the same for u.

the chart posted is a ECN broker ATC Brokers. they get their feed direct from Hotspot fxi.

so keep this in mind when looking at your Market Makers prices. 

Merry Christmas all


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## Duffenator (25 December 2008)

Think my point is getting a bit lost in here. I am not saying MM seek out stops, or that spike s in price action are dodgy, and I am not saying that I am not profitable because of MM.

I am saying that MM appear to be able to change their price of an underlying contract at their whim. Also, I am saying they, at least my provider, is very reluctant to let their clients know how price is calculated. This in essence means you do not know what you are trading and is more akin to a gamble than a trade. Such behavior by a MM makes trading patterns difficult because you are no longer trading a price that represents human nature, you are trading a price that represents MM nature.

Also, if we do not know how their prices are calculated, then it opens the door for price manipulation in their favour, if they so choose. However, any such manipulation is completely within their rights because they would just label it  "fair value".


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## chops_a_must (25 December 2008)

Duffenator said:


> I am saying that MM appear to be able to change their price of an underlying contract at their whim. Also, I am saying they, at least my provider, is very reluctant to let their clients know how price is calculated. This in essence means you do not know what you are trading and is more akin to a gamble than a trade. Such behavior by a MM makes trading patterns difficult because you are no longer trading a price that represents human nature, you are trading a price that represents MM nature.



Yeah.... maybe that's because they are market makers perhaps?


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## mr.x (11 January 2009)

did i read that properly no cgt on cfd trading.


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## lucky milo (12 January 2009)

I dealt with them 3 years ago & met a broker who use to work with them..put it this way it a great business model....BEWARE...what I heard was shocking. They set out to get as much money from you, they just rely on big turnover of clients.


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## James Austin (12 January 2009)

lucky milo said:


> I dealt with them 3 years ago & met a broker who use to work with them..put it this way it a great business model....BEWARE...what I heard was shocking. They set out to get as much money from you, they just rely on big turnover of clients.




lucky,
please be more specific and detailed.
thanks
james


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## lucky milo (13 January 2009)

??? I'm just stating what happened, I don't wanna write an essay about it..


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