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Ask Your Advocate: Are Forex Brokers to Blame for Traders Losing Money?

13 Years ago | October 22, 2014 10/1/22, 12:00 AM

Question for Your Advocate: Skeptic always said retail traders will always lose money when we trade via a market maker. How true is that?

Your Advocate Says: Before I begin, I need to make it clear that I am not here to defend forex brokers, including those who act as market makers and that traders have to take responsibility for losing as well as take credit for winning. It should not matter to a trader if a broker is a market maker as long as you get consistent pricing/executions and your stops are being treated fairly. The key words here are consistent and fairly. Once you know your broker’s ground rules, you can adjust your trading accordingly (e.g. spreads widening ahead or after data, etc) assuming you are being given a level playing field to trade. If not, then look for another broker.

The main issue with a market maker or any forex broker is that most traders have only one account so are dependent on that broker for entering and exiting trades. There is no common clearing. If there was common clearing, where you could trade with one broker and exit with another, it would force a broker to provide a consistent service. This is why I emphasized the words consistent and fairly. In any case, someone has to take the other side of your trade, whether it be a market maker, ECN or a bank/liquidity provider in the case of a no dealing desk.

So, to answer your question, success or failure does not depend on whether you are trading with a market maker. It is determined by a variety of factors, such as your individual skill, ability to manage risk, money management to name a few. The market maker, although it may be betting on you to lose, is not the main reason why retail traders lose money.

Follow up article:

Can Forex Traders Make a Difference in Your Trading (follow up)?

Jay Meisler, founder

Global Traders Association

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