February 4th, 2010 | 
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joseph w asked:
I’m curious because if they take the opposite side of your trades, and you always win, then they lose money with you, right?
I’m curious because if they take the opposite side of your trades, and you always win, then they lose money with you, right?
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Forex Brokers are never lose. They have got their money from your spread. Even unregulated brokers always make money from traders. As you know there are bigger losers than winning traders. To choose a good broker, visit:
They make the spread. So the more successful you are, the more you will trade and the more money they will make. Don’t forget there is a massive amount of Forex traded each day, your trades are a drop in the ocean.
Hi there,
yes as many mentioned here, they do earn from the spreads.
Do note that there are also brokers with “no dealing desk” which means they do not take positions against you, but rather route your orders out to the interbank markets.
This way, their risk are minimized and they earn from the spread.
Spread is the difference between your bid and ask price.
If you want to read more on basic forex, my blog has articles for newbies.
trade safe !
Ye they do earn from spreads
In order for a dealer to make the spread on a trade, the dealer has to match up a buyer and seller at the exact same time for the same amount. This doesn’t occur very often.
Therefore there are two other ways the dealer will operate.
1. Take the other side of the order. If a trader consistently loses money, it will be advantageous to take the other side of the trade,.
2. Wait seconds or minutes to offset the trade at a better price. For example, you buy EUR/USD at the price 1.4350 and the dealer waits seconds or minutes to hedge the position at a lower price. This works because many traders are range traders so they are naturally fading the market momentum.
This works for range traders where the market is moving against you and the dealer can get in at a better price. But what happens if you are a trend trader. It takes at least a couple of seconds for the dealer to react to begin with. So if you go with the trend, chances are good in an active trading period that you could recover the spread in a very short period (maybe a second or two). If you do, then the dealer has lost out on the spread. This is why you will receive a requote from a dealer if you’re trading with the momentum of the market and the position becomes profitable. This is the problem with trading through a dealing desk broker.
No Dealing Desk (NDD or STP) brokers do not have this problem since the trade is offset immediately at whatever price the bank is offering, and a portion of the spread or a commission is paid to the broker as their fee.
Two type of dealers:
NDD or STP which do not trade, only clear your trades for a few pips charge.
Non NDD or TRading desk lines have sometimes a 2 15 second lag, depending where they are routing their information. They can clear positions in house based on this lag or Re quote for a better position.
NDD or STP trading lines are the best way to keep your best position with out the house playing against you.
I leave dealing desks alone because of the requote. Large banks are the best for NDD.