Forex

I am thinking about trying out a live account with AC Markets at the end of this year. Their trading platform is by far the best, at least in my humble opinion. Actual I like the charting package that comes with it - a ProRealTime chart.

I think I am confident enough to make consistent profits, but there's also come this problem. Let say I keep on winning, then I will be able to long/short positions with bigger lots. In fact, the lot size gets bigger and bigger every new market entry. Obviously the broker will earn more if they do the following:
1) manipulate the price (only the price shown to me)
2) keep slipping my orders (though they promise no slippage at all)
3) always increase the spread (only to my account)

This is a conflict of interest. And I have heard terrible stories about it on the net. But stories on the net aren't reliable most of the time. So I need some advice from some gurus here.

If anyone out there who has been into forex long enough and consistently profiting, would you mind share some advice and experience with your broker. And please give some validated comment about AC Markets if you know about it.

Thanks and cheers

Hi Saphin,
I'm not sure about AC markets as I haven't used them, but I can say that it's true that brokers will slip you on occasions. It's also possible that some market makers will give you different prices than the market or try to trip your stops.

In the end it all depends if the market maker is holding the other side of your transaction or immediately hedging it. If the MM is hedging it they will want to keep you as a client making big trades, if not they will just want to take your money and close you down.

However, it is important to note that many times market makers can't profit just from the fixed spread and they have to make a few extra pips by filling you a few pips away from the market..

As with everything, try them out, and if they try to play funny games move to a different broker. If you like their charts keep a small account with them just for the charts..

Hi Sam,feeling happy as got response from senior member,

I have checked with ACM and here is what they claim:

An overall market position is built from all customer positions (i think they might group customers into categories such as winners and losers, thus results in 2 market positions). They will hedge any risk that position exposes them to with institutional counter-parties.

First, I don't understand why customer positions can expose ACM to risks since there's margin call. Aren't customers solely responsible for the consequence of good and bad trades?

Second, I don't really know how the hedging can be done on an overall market position. I think maybe each currency pairs have their own overall market positions, and they hedge it accordingly. Am I right? There's another question. Aren't hedging means holding the other side of a position or at least something else on the other side should the market turns against the speculation? If ACM is hedging based on customers' positions, then ACM will win if the overall position is wrongly speculated on an overall basis. On the other hand, ACM will lose if the overall position is correctly speculated on an overall basis. This is because ACM does not own the customers' positions, strictly speaking. Hedging is only useful if ACM owns both sides of the position. Theoretically, if all the customers are good speculators, then ACM will lose. This brings me to this hypothesis: ACM does not like winners, and so they will try to make things hard for big winners by implementing those unfair practices I mentioned in my previous post.

Furthermore, if ACM's speculation is wrong, then their hedging will turn into a big loss since billions are traded each month. And if ACM is at a loss, there's no good news for the customers too. On the other hand, the institutional counter parties aren't nuts too, so why do they accept to be ACM's hedging partner while knowing there's a high tendency of losing?

So what do you think?

While I can't comment on ACM as I don't know them. Basically what real market makers do is called inventory management and market microstructure.

This means they try to keep an inventory of different currencies in their posession and align them to customer orders.

I think there are many fx market makers simply hold their customers positions and only hedge them on occassions. This exposes them to risk if customers positions are profitable as they will have to pay out the profits.

But this can get quite complicated as a market maker may also choose to hedge a certain % of orders or only hedge when customers have already "bought" all a currency in their inventory or when they are low on that currency in their inventory.

This is of course a very simplistic explanation, but what I am getting at is there are market makers who don't hedge properly and thus lose if customers make money, but there are probably others who do manage proper hedges (such as banks which are the biggest FX MM's), and thus worry more about inventory rather than individual positions.

I hope this answers some of your questions although this subject is immensly complex and each MM handles it in their own way... ECN's however, claim to pass the risk directly on to another participant (bank, MM, other traders) and thus claim to not trade against you...