How Cfd brokers is operating

[Ego is the Enemy]

HOW DO CFD BROKERS OPERATE???


Ok, here goes. This information is what I gained from talking to the head trader at City Index.

I can split them up in discussion points

1/
CFD brokers basically split clients into two categories. A book clients and B book clients. It is not their profitability that decides whether they are A Book or B book. It is the size of their trades.

If an A book client trades, brokers will tend to hedge their exposure, as most CFD brokers have a maximum risk limit they want to have on their books. This is usually decided by the board of the company.

If a B book client trades, then the broker will do nothing – unless a sufficient amount of B book clients all trade in the same direction and it approaches the maximum risk a CFD broker is prepared to have on their books.

2/
A CFD is essentially an artificial product. It is an agreement between you and the broker to exchange the net result of your trading – in monetary terms. It means you never physically own what you trade. If you trade say Facebook shares on a CFD, you don’t actually become a Facebook shareholder.

It also means that whenever you do trade, your trade does not actually impact the “flow” in the market.

3/
As CFD traders (and spread betting/spread trading traders) we are essentially trading on the prices that is produced by demand and supply in the underlying market. The broker makes those prices available to us from exchanges all over the world. However, instead of having individual relationships with say Chicago Board of Trade and Chicago Mercantile, CFD brokers will get ALL their prices through what is known as liquidity providers. These liquidity providers has made it their job to make a market for CFD brokers. Some of the most famous liquidity providers are LMAX and Goldman Sachs.

4/
Price spikes happen. Bad data happens. Especially on the open on a Sunday night. I have been on the receiving end many times and it is frustrating when it happens, BUT I have NEVER EVER been with a broker that pushed the market on their quotes just to stop out clients. I have traded with ALL the major CFD brokers in the world, and not once did I see any of them cheat like that.

I think the reason is that they can never get away with it, with the exception of the periods of time when they make a market during the night when the underlying market is closed. EVEN SO, it is very dangerous for them to do so for two reasons:

a/ their reputation will be shot to pieces

b/ they open themselves up to “arbitrage” if they artificially move the price beyond the norm. I can explain that really quickly.

Say BROKER X is 15,810-815 in DAX during the night, and BROKER Y is 15,810-815 as well. Now broker Y decides to take out a bunch of stops to cheat their clients. So, they go 15,840-845. Well, they may have taken out stops, but they also have the potential of other brokers seeing that (all CFD brokers have accounts with all the other CFD brokers!!!!!) and now SELLING SHORT at 15,840, and then buying it back somewhere else immediately at 15,815. That is arbitrage or – as I call it – RISK FREE MONEY.

I hope this makes sense to you. Please stop thinking the broker is working against you and they want you to lose. Do you know how much it cost for a broker to acquire your business – from a marketing point of you? We are talking about big bucks. Companies like PLUS 500 spend millions a month on marketing. Why would they spend so much money on acquiring your business, only to then want to get rid of you? They know you will statistically lose the money anyway. They just have to wait for you to be “human”, meaning you become impatient, or you refuse to take a loss.

Does this make more sense to you now?

 

[Mwl.RCT]

A book clients and B book clients. It is not their profitability that decides whether they are A Book or B book.

Hapa ndipo tunapata

• MM model broker
• ECN, DMA, STP model broker

Changamoto iliyopo ni kuwa hata broker wanaojitangaza kuwa ni ECN, A-Book, lakini ukiafutailia utagundua sio kila order inapelekwa kwa liquidity Provider, LP.

 

[Ego is the Enemy]

Navyojua hata ukitredi mwanzoni anakupa liquidity ,hata Aki hedge your positions ama akikuuzia Haina shida Mana Kama uko sahihi,uko sahihi hakuna shida.
Huwa wana watalaamu wanajua huyu for long run ata loose tu so anakuweka wa kwake, sema ukianza kuwa profitable anakuhamisha direct to liquid providers.
Why akupeleke huko na utaenda kuliwa unapoteza hela ambazo yeye angezichukua hata mie ama wewe ungefanya hili.
Anajua kuwa huko unakoenda lazima Kuna kuliwa so why asikae na wewe anajua hata mwaka haumalizi,Mana akaunti ndogo ama uwezo wa fuso ni tank 10 wewe Ila unaibebesha Tani 20/30 anajua lazima gari lako halitodumu so anabaki na wewe nyumbani kwake.
Ila ukianza kumuotea anakusukumizia wengine hata kwa brokers wengine pia.
So don't worry kuhusiana kuwa whether your broker is A/B book

 

[Dit000]

sijui nitakuwa sawa?

1. mt4 server, broker mwenyewe ndio kaitengeneza ili uone kitu gani kinafanyika kwenye ECN network na baada ya kuona basi sever inakuruhusu kuweka bets kwa broker katika namna flani ya kubofya buy au sell, japo wengi hujua anasell au kubuy kwelikweli kwenye underlying market so ukiplace bets zako unasubili majibu kwenye screen yako, ambacho unachokiona kwenye screen ni reflection kutoka kwenye ECN network, sio kwamba unatrade kupitia ECN network hapana, na pia pia kama ulivyoeleza keisangora kwamba broker anakuwa na yeye kuna pesa kairisk kwa bets zenu ikitokea nyote mmewin mana yake mnaichukua pesa yake yaani mnacash out money kutoka kwakwe na ndo tafsiri ya neno hedging inatokea yaani broker anatake risks juu yako kwa lolote litakalotokea kwake either faida au hasara.
2. nanukuu "It also means that whenever you do trade, your trade does not actually impact the “flow” in the market" hapa nilichoelewa nikwamba bets zenu zote mlizoplace kwakwe hazina madhara yoyote kwenye soko halisi la fedha kwani unabet kitakachotokea kwenye mfumo wa fedha so kumbe wewe sio partcpant kwenye kundi lolote la wauzaji(supply) na demand(wanunuzi) kumbe kichwani unatakiwa utambue kwamba wewe sio real demand ama supply, we ni demand ama supply speculator japo wengi huamini na wao wanamove market ahahaha
3. hata sir jeff platform yake ni yeye mwenyewe kaidesgn ili watanzania waplace bets zao kwake
4. nilitaka na mimi kuuliza je nivigezo gani unatakiwa kuwa navyo ili upartcpate kwenye mfumo wa ECN?? na je huo mfumo ni nani aliutengenza? huwezi kushirikiana na hao waliotenegezaa wakawa wanakupa siri ya forces za supply and demand ili ubashiri vyema na upige mpunga mrefu?
5. je hata banks zetu za tanzania na zenyewe zinatumia huo mfumo wa ECN?? na bank zetu zikitaka kutuma pesa abroad ni kweli zinatumia huo mfumo au kuna njia zingne zinatumia??
6. je haujiulizi kwamba kuna demands an supply wengi wa sarafu flani lakini hawatumii huo mfumo sasa nguvu ya demand na supply inayooneshwa kwenye huo mfumo ndio inatumika kutoa final answer ya kwamba sasa sarafu flani iko weak au strong na kusahau kwamba kuna idadi kubwa ya watu wanabuy na kusell hiyo sarafu kwa njia nyingne ??? mfano ninapomtumia mtu nje pesa kwa visa card si namimi nakuwa demand wa hiyo sarafu ya nje kwa kuwa nimeuza tanzania shilling pasipokutumia huo mfumo??
7. je server ya ECN ikoje,??
8. JE trillion 6 ambazo huwa zinamove daily, ndizo pekee zinadetermine strongness na weakness ya sarafu!? kwani hakuna sarafu zingne zinazomove nje ya mfumo??
9. Je ikitokea impact news , kuna connection ipi na huo mfumo kufanya kutokea kwa spikes kwenye charts??

MAJIBU TAFADHARI