Comments on: The Use of Forex Mini Trading http://www.plentyofluck.com/forex-mini-trading/ Tue, 06 Jan 2009 22:07:02 +0000 http://wordpress.org/?v=2.7 hourly 1 By: Jonty http://www.plentyofluck.com/forex-mini-trading/comment-page-1/#comment-102 Jonty Fri, 30 Nov 2007 01:50:05 +0000 http://www.plentyofluck.com/forex-mini-trading/#comment-102 One must be careful with this distinction "real market". Everyone that makes a market and find deals for the prices they make participate in the real market. While there can be no doubt that as short a time as 5, 6, 7 years ago retail traders were at the mercy of dealers in a forex retail brokerage dealing room one must also recognize who quickly and how much things have changed around. Retail forex is recognized as a force in currency trading world wide. The sell side providers (the so called Interbank) see the typical retail forex brokers as what they call "liquidity aggregators". The reason is that they have a reach where the sell side can't get and they aggregate many small trades, package them and pass them on through the system (a back to back clearing house system for risk you are not prepared to take in house) where the eventually reach the sell side and can be counted. It is estimated in the August 16 - 17th (2007) rout that 35% Japanse retail traders lost their accounts due to the lethal combination of too high leverage and un-protected carry trades (short JPY, long USD, AUD, GBP and other high yielders). As the number of retail traders increased (and still do) the dynamic of the retail market has changed a lot. It is not a fair representation of a typical large forex retail dealing room as a handful of rogue dealers sitting ready to run poor new trader's stops. The volumes going through these dealing rooms because of thousands and not one tens or 100s of clients make it actually possible to be profitable from being an intermediary, i.e. making money of the spread. technology advances made it possible to aggregate trades automatically and pass on to a clearinghouse or prime brokerage which can accept odd lots due to the technology. Dealer intervention is thus minimized and limited to high risk periods like low liquidity fast markets, like around economic data releases. Beginners should under no circumstances be concerned that it would be to their disadvantage to trade with smaller positions being offered. Although volumes have increased remarkably you can't run a forex brokerage by trying to con traders out of a few cents here and there. One must be careful with this distinction “real market”. Everyone that makes a market and find deals for the prices they make participate in the real market. While there can be no doubt that as short a time as 5, 6, 7 years ago retail traders were at the mercy of dealers in a forex retail brokerage dealing room one must also recognize who quickly and how much things have changed around.

Retail forex is recognized as a force in currency trading world wide. The sell side providers (the so called Interbank) see the typical retail forex brokers as what they call “liquidity aggregators”. The reason is that they have a reach where the sell side can’t get and they aggregate many small trades, package them and pass them on through the system (a back to back clearing house system for risk you are not prepared to take in house) where the eventually reach the sell side and can be counted.

It is estimated in the August 16 - 17th (2007) rout that 35% Japanse retail traders lost their accounts due to the lethal combination of too high leverage and un-protected carry trades (short JPY, long USD, AUD, GBP and other high yielders).

As the number of retail traders increased (and still do) the dynamic of the retail market has changed a lot. It is not a fair representation of a typical large forex retail dealing room as a handful of rogue dealers sitting ready to run poor new trader’s stops. The volumes going through these dealing rooms because of thousands and not one tens or 100s of clients make it actually possible to be profitable from being an intermediary, i.e. making money of the spread. technology advances made it possible to aggregate trades automatically and pass on to a clearinghouse or prime brokerage which can accept odd lots due to the technology. Dealer intervention is thus minimized and limited to high risk periods like low liquidity fast markets, like around economic data releases.

Beginners should under no circumstances be concerned that it would be to their disadvantage to trade with smaller positions being offered. Although volumes have increased remarkably you can’t run a forex brokerage by trying to con traders out of a few cents here and there.

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