Forex Robots - legit or scam?

Trembling Hand said:

So you know that they hedge your position?? Not take the other side.

What do you mean ECN are MM

What do you mean CFDs have a central market?

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i know ibFX and OandA use this method.

ECN pass your trades onto a market maker. there is no central market for FX like shares. so everyone makes their own markets whenever two companies meet.

theyre just an aggregator, allowing you to have better spreads usually reserved for bigger players, or the best spread from a couple of bigger market makers.

they then place your order with those market makers for you and charge you to do it.

CFD's are based on the stock market price. they have a base market, FX doesnt.

Trembling Hand said:

So you know that they hedge your position?? Not take the other side.

What do you mean ECN are MM

What do you mean CFDs have a central market?

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This is the whole reason they are temporarily banning the use of this EA.

They cannot hedge the positions quick enough according to them.

Or so they say. I don't know if this is a liquidity problem with their liquidity provider or if they are just bull****ting and are taking the opposite side on most of these trades.

In which case they are obviously losing money and will take whatever steps they need to, to stop this from happening.

A permanent ban on anyone making money against them using this EA.

Bad side to using a Market Maker....

"Cons:

Because they may trade against you, market makers can present a clear conflict of interest in order execution.

They may display worse bid/ask prices than what you could get from another market maker or ECN.

It is possible for market makers to manipulate currency prices to run their customers' stops or not let customers' trades reach profit objectives.

Market makers may also move their currency quotes 10-15 pips away from other market rates.

A huge amount of slippage can occur when news is released. Market makers' quote display and order placing systems may also "freeze" during times of high market volatility.

Many market makers frown on scalping practices and have a tendency to put scalpers on "manual execution", which means their orders may not get filled at the prices they want. "


Pros and Cons when using an ECN Broker..

"Pros:

You can usually get better bid/ask prices because they are derived from several sources.

It is possible to trade on prices that have very little or no spread at certain times.

Genuine ECN brokers will not trade against you as they will pass on your orders to a bank or another customer on the opposite side of the transaction.

Prices may be more volatile, which will be better for scalping purposes.
Since you are able to offer a price between the bid and ask, you can take on the role as a market maker to other traders on the ECN.


Cons:

Many of them do not offer integrated charting and news feeds.

Their trading platforms tend to be less user-friendly.

Because of variable spreads between the bid and the ask prices, it may be more difficult to calculate stop-loss and breakeven points in pips in advance.

Traders have to pay commissions for each transaction. "


Now when an ECN Broker does finally set up a MT4 System and EAs are running I wonder how many Market Makers will be left....

http://www.atcbrokers.com/index_forexpro.htm

" Go Markets FX Update


Dear Client,



As you may be aware, due to severe illiquidity in the FX markets there have recently been some spread increases. Our risk management team is currently reviewing the market conditions and is looking to reduce spreads on some of the affected pairs shortly.



Please note that due to a review of our hedging policies the use of some Expert Advisor systems have had to temporarily be restricted. The use of FapTurbo will temporarily be made unavailable whilst the review is completed. Once any new systems are in place which allows the use of this particular EA we will inform the necessary clients. Please do not attempt to open any new FAP Turbo trades but existing open trades will of course be allowed to continue until they have been closed.

We would like to apologise for any inconvenience caused and will attempt to resume normal service as soon as possible.



Should you have any questions, please do not hesitate to contact your account manager.



GOMarkets Pty Ltd | Level 16 | 114 William Street | Melbourne | VIC 3000
Free Phone: 1800 88 55 71 | Phone: +61 3 9670 3055 | info@gomarketsaus.com

If you would like to unsubscribe or change your subscription, please send an e-mail to info@gomarketsaus.com.

A Product Disclosure Statement for this product is available from GO Markets Pty Ltd and should be considered before deciding to enter into any derivatives transactions also a financial services guide is available by clicking on the following link http://www.gomarketsaus.com/legal_documentation . Derivatives carry a high level of risk to your capital. Only speculate with money you can afford to lose. Derivatives may not be suitable for everyone, so ensure that you fully understand the risks involved, and seek independent advice if necessary. GO Markets Pty Ltd offers general advice only and no consideration will be given to individual investment objectives, financial situation and needs. AFSL 254963 ABN 85 081 864 039 "


They specifically make mention of their hedging policy...

Stormin_Norman said:

ECNs are just passing your trades to a market maker. everyone are market makers in forex.

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Yes I stated that.

Stormin_Norman said:

but please. ECNs just pass your trades to another market maker. maybe a larger one which means they can offer slightly better spreads. but they charge for it.

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ECN = the market you trade inside is much larger (and is NOT influenced by the broker!!) than any MM model employed by the likes of Oanda, GO Markets or IBFX and thus less likely to employ manipulative tactics in order to get more out of you than just a commission.

Stormin_Norman said:

broker's arent out to get you. they just want to make money. they do that through matching trades, not having you lose your money.

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Matching trades or straight-through processing is a key ECN characteristic, Oanda may claim they do this, but the lack of market depth casts a shadow over it as they're not exactly being as transparent as how a true ECN is by having Level 2/market depth available in their platforms.

GO Markets so-called "liquidity issues" during Janaury is another way of saying: our dealers/traders are on holidays and we can't keep up with you making so much money at this time.

fapturbo said:

Or so they say. I don't know if this is a liquidity problem with their liquidity provider or if they are just bull****ting and are taking the opposite side on most of these trades.

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Put simply, they are always taking the other side of your trade. As I've said (and Stormin_norman is confusing the point) the market you trade in when you choose a market making broker is small - it exists ONLY inside that broker's realm and is completely influenced by them. So when they state they have liqudity issues, they are having problems hedging each position they are a counterparty too - they're not passing trades off into the real interbank market through Currenex, Retuers or Duscacopy, they have dedicated dealers/traders which are actively trading in those markets so as they make just enough/more money to counter the money they lose when you win in their market.

It's an incredibly simple concept, one I don't particularly like but am putting up with it myself until I have enough equity to move to one of the Currenex brokers - THEN you have access to APIs where the broker doesn't give two hoots what strategy you use as they want you to push as much volume through their platform as possible and you actually negotiate commissions and spreads and sometimes you can negotiate to have commissions returned to you if you reach certain volume targets.

An ECN broker is going to treat you more as a business partner than any MM will.

Tayser why not use Interactive brokers?

tayser said:

Put simply, they are always taking the other side of your trade. As I've said (and Stormin_norman is confusing the point) the market you trade in when you choose a market making broker is small - it exists ONLY inside that broker's realm and is completely influenced by them.

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So are you telling me that Market Maker Brokers like Go Markets only want customers who lose money long term?

Isn't this a self defeating process? Stands to reason that the Broker will eventually lose all it's customers and the Long Term Viability of the Broker is in doubt.

fapturbo said:

So are you telling me that Market Maker Brokers like Go Markets only want customers who lose money long term?

Isn't this a self defeating process? Stands to reason that the Broker will eventually lose all it's customers and the Long Term Viability of the Broker is in doubt.

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only bucketshops want you to be losing money, as theyre betting against you.

http://en.wikipedia.org/wiki/Bucket_shop_(stock_market)

fapturbo said:

So are you telling me that Market Maker Brokers like Go Markets only want customers who lose money long term?

Isn't this a self defeating process? Stands to reason that the Broker will eventually lose all it's customers and the Long Term Viability of the Broker is in doubt.

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they rely on a steady stream of new customers to replace the old ones

white_goodman said:

they rely on a steady stream of new customers to replace the old ones

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Oh of course they do... because there must be a steady supply of new customers... considering the state the world economy is in....

fapturbo said:

Oh of course they do... because there must be a steady supply of new customers... considering the state the world economy is in....

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Funny, knowing nothing yet knowing all?

Trembling Hand said:

Funny, knowing nothing yet knowing all?

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You are right. I know nothing of how these Market Makers/Brokers function.

I presume they have a book of open orders. Longs and Shorts for each pair.

As soon as there is an inbalance they must take the opposing side.

Once they take the opposing side because they are after all the Market and they start losing money then by default they will need to do something about it. Keeping losing traders long term will not be of much use if not many new customers are joining.

That much is obvious.

So do they ban customers who are making money outright? In an attempt to keep the traders who are consistently losing money...

fapturbo said:

So do they ban customers who are making money outright? In an attempt to keep the traders who are consistently losing money...

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Yes. There are a few bucket shops which will not let some people open accounts. And its not because they lost too much $$:

Trembling Hand said:

Tayser why not use Interactive brokers?

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poor margin on offer, it's very low and a high value account opening.

Bluddy hell Fap.....looks like you will have to postpone your retirement ol'son :kebab

tayser said:

poor margin on offer, it's very low and a high value account opening.

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IB has 40:1 margin on the major currencies, but is designed for trades over a million dollars (equivalent to 10 standard contracts) so you need a serious balance in your account. IB with IDEALPRO doesn't work with standard contracts, instead you trade cash in multiples of a minimum order size $25000. I guess it is similar to the ECN Dukascopy where you need $50000 minimum in your account.

There is hope fap.

The long term strategy still makes a mint doesn't it?

just heard the news from go and had been with odl before them so where now? bit of a shame for my short term scalping fap but at least the long term one is fine.

i also been using forex meta robot on a couple of brokers and they haven't stopped me on that ea AND i been doing much better than fap since using it but its only been 3 weeks so far.

Seems that with the introduction of a number of EA's that trade the eurgbp and eurchf pairs during the asian session the spreads on most brokers are being set wider as a result.

fapturbo said:

So do they ban customers who are making money outright? In an attempt to keep the traders who are consistently losing money...

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no. the problem is they get swamped with a massive spike in a position, along with all the other brokers all at once.

25,000 people are running FAP apparently. that means that the small retail market maker gets a massive order, along with their counter parties - making it much harder to pass off these trades as their executed.

eg they get a massive order from a major amount of clients to sell at 100 all at the same time. they have a normal amount of customers wanting to buy at the 100, far less then the sell side.

they have a 2 pip leeway. usually they take the 200 short orders and the 75 long orders, match them up and take 75 * 2 pip profit. they then pass on the other 125 short orders at a lower spread to a bigger counterparty. they might make 150 pip profit from this example.

now say they get 1000 short orders from FAP all at the same second, and the same 75 long orders. after matching theyre left with 925 short orders to pass through.

there are another 5 brokers all using the same larger counter party. so the counter party gets 4500 short orders all wanting to be placed by the MT4 brokers at the same time @ the 100 price.

the counter party suffers the same problem as the MT4 broker, it cant match and pass on the trades because its another trading spike. so the counter party, if it accepts these trades will raise its price to 103, so it can take the trades and pass them onto other interbanks without losing money by doing so.

so now the sell that the MT4 client made at 100, if accepted by the MT4 broker can only be sold on for a 3 pip loss. a loss for them.

unfortunately for us, broker's arent in the business to lose money on these types of trades.

that is why people say that successful commercial EAs sold for money either dont work, or become victims of their own success.