Forex on Five Hours a Week: How to Make Money Trading on Your Own Time

Chapter 12. Is My Broker Friend or Foe?

Figure 12.1. Sometimes the best position in the market is not having one. Learning to walk away from a difficult market, a bad mood, or a tough day is often the best lesson a trader can learn.: 2007 "Fxstreet.com. The Forex Market." All Rights Reserved.

One of the most common questions I get is whether brokers run stops. I'm not a broker, but I have to say that sometimes this question starts to take on a mythology like an X Files conspiracy theory. Stops are run in any market where market makers or pit traders or whoever can anticipate a large number of orders sitting at a fairly predictable price level or area. It's like shooting ducks in a barrel. . .not that I have anything against ducks.

What's interesting is that many traders feel that someone is out to get them. In a zero sum game, that feeling of suspicion is not entirely misplaced. Someone is on the other side of all trades because for every buyer you need a seller. In forex, since there is not a centralized exchange, your broker is your liquidity provider and therefore is taking the other side of your trade. I am simplifying this, but that's the gist of it. Now if your broker gives access to a large pool of liquidity providers as there is a new breed of brokers that don't take the other side of your trade but rather routes your order to a larger pool, it is someone else who will take ...