Do You Have the Money OR Is It Just An Illusion?
Have you ever been sold a dream? All sunshine and rainbows, the greener side of the fence, the better products, and all those dreams?
If your answer to my question is no, well then, I am extremely happy for you. BUT, you’re probably lying to yourself because everyone is a victim of this! If you are a trader and don’t think you’ve been sold dreams, you’re in real trouble.
What dream have you been sold as a Forex trader, you might ask? – Your brokers. Those are the biggest dream sellers. They sell us the idea that we will save money on the low spreads/ commissions that they provide us on the fence’s retail side.
However, they fail to tell us that they have different books for us to play in. Profitable individuals, who repeatedly extract value from the markets, are put into the A book to deal directly with the “liquidity provider” such as the Banks!
All this means is that instead of having a middle man (broker), you are going directly to the supplier!! You’re fighting against the big boys now. It’s no longer you against the broker but you against the Big Banks.
On the other hand, we have the B book. Most Retail traders start here. Now this book represents the brokers’ balance sheet!! The brokers place our trades on THEIR OWN BALANCE SHEETS!!
Instead of your order going directly to the liquidity provider, it is only going as far as your broker. Meaning your broker takes the other side of your trade and make whatever you lose. This is where you find market manipulation with MANY BROKERS!
NB – To avoid this make sure you trade with a tried and tested broker. We suggest one of these 3:
You may ask yourself, is it possible to avoid all the chaos and not suffer at the brokers’ hands or find a broker that doesn’t do this??
Is it legal? Yes, it most definitely is, as the brokers have a “market maker license” whether regulated by the ASIC, NFA, FSCB, or the FCA. Meaning the broker has the clear option to clear your position into the market (A Book) or fill the order in-house (B Book).
As I said, we all start somewhere, and you will never really know which book you’re in. Though, in most cases, large accounts are directed straight to the liquidity providers
How do you know what book you are in?
Look at how long it takes for your orders to fill. If your orders are filled quickly in times such as high impact news, you’re safe, i.e. you are in the B book. You will know this because traditionally, liquidity dries up when volatility spikes in the market.
So as Forex traders, it is crucial for you to know whether you are a part of the A Book or B Book to ensure brokers won’t manipulate you. If you need more information, check out this article written by Nick McDonald at ForexSignals.
Happy trading, fellow traders!