FOREX day traders are wary of brokers, because they think they pick their stops off and that's why they love them ? but the real reason is:
Day traders are guaranteed to lose their money without any help from a broker. I used to work in the back office of a broker and we factored them in as losing straight away and a big fat profit for us.
So here are the reasons we loved them and other brokers do to:
1. Day trading by its very nature doesn't work
Trying to trade in short time spans of a few hours or a day and to try and measure where prices are going is ridiculous.
All short term volatility is random and prices can and do, go anywhere.
We traded several thousand day traders and not one made money, they all lost.
The logic FOREX day trading is based upon is totally flawed.
Try this simple test:
Ask any vendor selling a system on the net and ask for a real time track record and see if you get one ? You won't.
Many of them are simply writers or failed brokers.
They make up track records sell them and then do a deal with a broker for a kick back commission and believe me the commission is good ? we paid out tens of thousands every month!
2 Great commission
Day trading is the best commission to equity you can get and for a broker that's great.
Lots of trades, eroding account equity to zero and paying commission every day.
Much better than a trader coming in and blowing his equity in a couple of trades.
Market makers are equally happy.
As they want the traders deposit lost and on their book.
They are trading against the client and don't need to worry it will soon be in the bank. Furthermore, as day traders never make any big profits (running profits is totally alien to them)
The risk of carrying a day trader on your own book as a broker is low.
DO BROKERS HUNT STOPS?
The answer is no.
Day traders believe this, but the real reason is they set their stops to close.
Support and resistance are meaningless in day sessions and that's why stops get hit all the time.
Its not the brokers fault, it's the day traders for being stupid and placing his stops in meaningless time frames where volatility is random.
There you have it.
The reason brokers love day traders is their great money earners for the house and guaranteed to lose as well, which is perfect for market makers.
