Many foreign exchange players claim that foreign exchange is a scam. They feel that once they go into the market and trade, the brokers trade against them.
To say this is quite unfair on the customer’s part. For one, not all brokers are market makers. The Electronic Communications Networks (ECNs) just pass on your order to the market, just like how the stock broker passes the order to the stock exchange. The broker neither loses nor wins as what they get is only a fixed commission based on the transaction.
The stock market also has the market maker although this is limited to certain stocks. So if you trade a particular stock with them where they act as market maker, chances are you will not be able to maximize your profits, as they have a certain control over the bid and the asked prices as they do have the inventory.
This is the same way the market makers in the forex industry work. Since they provide liquidity, they are always there to provide a quote and is always on the opposite side of a buy or a sell. They provide the balance and take no sides. Their main motivation is to get the spread on each and every transaction they make.
There are also forex brokers who act as market makers. What they do is offset customers shorts and longs against one and another. Doing this, some brokers do experience an “overbalance”: in this aspect brokers differ in the way they react, often following a set of internal policies that address such situations. Since positions they take are based on outcomes of future transactions, they may either keep the exposure or offset this in the market.
Another claim of the forex players is that their brokers run their stops, that is, their transactions have been closed early in trading, supposedly to stop any further losses. Although this may happen, the possibility is very small as the brokers have to keep their prices tight, otherwise they run the risk of losing business. The claims may have come from players who have set their stops very near the market and were taken out early because of the normal volatility of the market.
Forex trading is really for people who have the guts to accept volatilities in the market they have chosen to go into. There are no fool proof trading systems that can boast of continued successes.
Lastly, your brokers handle a lot of trades within the day and he could not specifically check each and every customer’s open positions and make decisions based on them. So if you were hit on a stop, then it is because of the market