Does your broker offer a fixed spread?
Yes? Then you are trading with a
market maker. There is not one market in the world where prices do not
fluctuate. Based on that, how can a broker offer a fixed spread if they are not
making false markets?
Avoid brokers who offer forex
bonuses.
Offers
of trading bonuses that seem too good to be true usually are. How can a broker
take the risk of doubling a clients deposit and take the risk of losing it all
in the real market? It would be financial suicide, and I’ll explain:
Trader A
deposits $100 and receives a $100 bonus, if the broker is a true STP, this
means that $100 of its own money is at risk!
Now imagine
that the STP gets a $10 commission from the liquidity providers (based on
spread) for every lot that is traded. If the client opens 1 lot with leverage
of 1:500 the margin required is $200 without considering the spread costs. Now
if that trade goes against the client, his order will be stopped out in a
matter of seconds. Let’s do the maths...
1 lot
traded for the broker = $10 profit
$100
bonus given away and lost
Equals
- $90 (loss)
Now the same scenario with a
market maker, the bonus is used as an incentive for you to sign up with them,
remember you are playing a numbers game with the market making broker and the
funds don’t actually go to the market and the broker has ZERO exposure.
Trader B deposits
$100 and receives a $100 bonus, now the trades are not going to the market; it
means that the broker has no risk here.
The
client opens the same 1 lot order and losses it all within minutes.
The market
maker also gets the entire spread as profit PLUS anything that the client
losses. Let’s do the maths...
1 lot
traded for the broker = $15 profit (spread 1.5 [minimum])
$100
bonus is a virtual number and means NOTHING in this calculation
Clients’
losses equal $100
Brokers
total profit = 100+15= $115
Yadix, a TRUE STP FOREX BROKER offers the most rewarding cash forex rebates for its clients.
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