Let's face it, you can't start placing trades unless you have a BROKERAGE ACCOUNT.

In today's world we have more than thousands of brokers to choose from? Have you ever wondered is this the right broker for me ? or
how well do I know the broker?




Choosing the right broker is no different than picking the right stocks or placing right trades that would ultimately give you profit and peace of mind at the end of the day.

We all want to win and succeed in life and it would be catastrophic to see our hard earned money sliding out of our pockets due to lack of common sense.

I strongly believe selecting the right broker should be the first step in FOREX TRADING JOURNEY. They are the ones who will be handling your money so why not waste some time in knowing your broker before you start building trading relationship with them.


BASIC THINGS TO CONSIDER : -

1. Regulated Forex brokers are always a safe bet.

2. Get an ECN broker -- There are mainly two types of brokers ECN And Market Markers. ECN brokers offers lowest spread than MM brokers however they do charge commission. I always prefer ECN broker as they usually never trade against clients.

3. Forex Broker with sufficient leverage.

4. Easy Withdrawal Policy.

5. Availability of Demo Accounts in order to test platform.

6. Account Types. (Variable as per Clients)


These are some of the basic guidelines that every new and professional trader should look for in any Forex Broker. But are these enough? Does it say everything about the broker ?

Well, guess what? That surely doesn't. You also have to know how your broker places your trades.

So, What exactly is A BOOK and B BOOK ?

Trading Forex market is not like trading equities or bonds because your broker can manipulate your trades if they want.

A BOOK:-

When broker transfers all your trades to liquidity providers or real market and matches with other buyers and sellers.


B BOOK:-


When broker holds your trades in the house and bets against all your trades. In other words, they don't send your trades to the real market to get better deal.

For example let's say you bought 10 lots of EUR/JPY at 140.00 so what would your broker do? Broker would sell 10 lots of EUR/JPY.

Wondering about who would win the trade?

Well, either party has equal chance of winning it but considering 95% of Forex traders lose money , you would lose the trade.


What's the benefit of B book for Brokers?

A BOOK REVENUE

Let's say a Broker has 100 clients with average deposit size of $1000 and Total deposit size of $ 100,000. Total trading monthly volume is 200 lots with commission around $ 7 to $ 8.

This would approximately generate a revenue of $ 4200 to$ 5600 for the broker considering there are 3 to 4 trades per day with a trade size of 0.1 lot per client.

We can roughly sum it up and make an average of $ 5000. So that's your broker revenue for the month from all clients.


Now, when your Broker B BOOK , most clients lose 10 to 15 percent of deposits within very first month and that would fetch your broker a revenue of $ 10,000 to $ 15,000 which is more than double if they choose A book


So It's not a rocket science why most brokers would prefer B BOOK style.


One thing we should note that bad trades that we place is not broker's fault . It's our fault. Brokers can just identify those bad traders and hold their trades to make money off them.


HOW THE IDENTIFY BAD TRADERS?


This is termed as hybrid model adopted by most brokerage firms in order to identify between winning traders and losing traders. They have specialized software to find that information.

Signs they look for to be considered as a BAD TRADER?


1. Maximization of leverage.

2. Risking more than 10 percent of Equity

3. Trades placed without Stop loss

4. Total deposit Size less than $ 10,000


These are the signs that software look for to identify a bad trader and tells a broker if the client is worth B Booking? Meaning they would not send their trades to real market and bet against them.


So how well do you know your Broker?



Thanks.
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