Conflict of Interest, something we experience on almost a daily basis in different forms. When it comes to Forex this raises big concern for multiple reasons. Do we really want to have a conflict of interest with our FX broker? The very place you trust with your hard earned money. This is a no brainer. We are fortunate enough to have the freedom of choice. The options to choose which type of broker best suits your needs and ethical values. Forex Market Makers, or “MM” for short, are what I am referring to when we consider the conflict of interest factor.
You might not even know whether or not your broker is a market maker or not. Something often overlooked by traders in general. We get some consumed by online reviews, user feedback and special bonus offers that we are blindsided by one of the most important, if not the most important factor. How does my broker process my trades? 90% of you reading this will not be able to answer that question without doing some research first. The few of you that know the answer right off the bat are most likely with a non-market maker. The conservative and smart choice. What exactly is a Market Maker? Should I be trading with one? What conflicts of interest are there between trader and broker? A lot of questions you did not even think of before now start to surface. Let's jump right into it and get them answered.
Forex Market Makers
How Do Market Makers Operate
Market makers “make” or set both the bid and the ask prices on their systems and display them publicly on their quote screens. They stand prepared to make transactions at these prices with their customers, who range from banks to retail forex traders. In doing this, market makers provide some liquidity to the market. As counterparties to each forex transaction in terms of pricing, market makers must take the opposite side of your trade. In other words, whenever you sell, they must buy from you, and vice versa. – How Market Makers Work, INVESTOPEDIA
The above-mentioned should give you a detailed explanation to exactly what a Forex Market Maker is and how they operate. The main focus point is the fact that they provide the liquidity. This means they take the opposite side of your trade. Their profits are dependent on your losses and vice versa. They want you to lose. We can go as far as saying they need you to lose to stay afloat. To top it all off these brokers provide you with education, market reviews, seminars, trading indicators and tools free of charge. Does that make any sense? Absolutely not. Major conflict of interest!
How can we put any of those resources to good use if the broker does not have their traders' best interests at heart? I think my point has been made crystal clear. Don't panic if this comes as a bit of a shock. You can always make a change, going with a different Forex broker such as BlackStone Futures. We are a NOT a Market Maker in any sense of the word.
How Does Non-Market Makers Profit
Non-Market Makers such as BSF (BlackStone Futures) simply make a % of the spread for every trade opened and closed. The more you trade the more profit we generate. We, 100%, have our clients' best interests at heart. If you would lose all your funds on 1 trade and choose to never trade again we only made a few cents from you as a client. With such low all around spreads, we are very competitive. The EURUSD spread is a mere 1.0 pip (0.00010) on average. If you know a thing or two about Forex you would be aware that it is extremely low. More information on our spreads can be found by visiting the Market Information Sheet.
Should You Trade With a Market Maker
Getting back to one of our first questions. Should you trade with a MM? By looking at the above information and facts we can safely come to a conclusion that a Market Maker is much like a casino. You make money, they lose money. You lose money, they make money. Both work on the same principle. I’ll leave it up to you to make the conclusion. Choose wisely and do your due diligence beforehand. You could be doing yourself a huge favour. Happy Trading!
If you have any further questions don't hesitate to get in touch via phone, email or live chat.