If brokers were turning every trade with the market maker, it would stand to reason that they would not care about scalpers, because indeed, they would earn a 'turn' from every trade.

So, why do they not like scalpers? Because you, as a scalper, are not playing by their rules and what is more, probably causing them to lose money!

It is rumoured that some brokers 'fix' the scalper by creating a feed that deliberately 'spikes' the trader. I say 'rumoured', because I have not been presented with hard evidence.

The fundamental problem is, that you, as a private investor, are not getting the 'true' interbank rate. This is the rate available on the EBS Interbank system. You won't get this because the market makers do not want you to see it. Even Reuter's rates have a delay (due to the distribution - about 30 seconds behind the real events). Therefore you are a) not working in real time and b) subject to the prices your broker wants to show you.

There are many Interbank traders and futures markets participants who 'scalp'. In fact, an open outcry market probably would not function without the liquidity provided by scalpers.

This 'price delay' it is claimed, works to the disadvantage of brokers, and they do not like, nay, will not tolerate price arbitrageurs. That is, you have three connections open on the Net to 3 brokers. You see 50-53 on FXCM, 50-53 on Saxo, and 55-58 on ACM. So you sell with ACM because ACM has not changed the price.

Certain brokers have told me that their market makers refuse the trades therefore they are not a charity. This is very funny, because a certain Swiss broker is proud of showing that they are members of the ACI, the professional Interbank traders association. In the model code of the ACI, it says

"A dealer quoting a firm price, either through a broker or directly to a potential counterparty is committed to deal at that price in a marketable amount provided the counterparty name is acceptable"

In other words, if you quote a price, you stick to it, or get out of the game. I don't believe that serious banks who are the market makers, refuse to trade on their prices. They would lose all credibility if they did.

Otherwise, it would seems that some brokers have not read the rule book of the organisation that they are so willing to (illegally) flaunt the logo of on their home page

If the problem is with the delay on the Internet, brokers should offer to their clients that they can trade on the phone. You should demand this. This will stop any nonsense about the 'delay causing losses'.

So there you have it. Heads they win, tails you lose. They want you to be 'normal', that is trade to make them profit. It is definitely not a level playing field.

The broker that will 'allow' scalping is the one that has the best STP (straight through processing) of trades. That is, there is no intervention between you the trader and the market maker - their software is taking care of the margining, etc. This means that they will have the fastest feed, the price that is closest to the market because they give the client direct access to the market. So it is probably the broker with the 'slow' feed and the classic 'bucketing' business model that will object to your trading patterns.

One of these brokers (out of 4 with the STP system) is Hotspot FXr, LLC in the U.S. I asked Barry E. Calder. SVP and one of the founders of the company, if they have had problems. He stated that of course, his company reserves the right to turn away a client, if the market maker complains that they are losing money because of a client's trading patterns. In practice, they would look for the evidence first and speak to the client, but according to Barry, it has never happened with them.

I suggest that you find such a company, but bear in mind that you will always have problems with the 'other' party if you are going to monitor 2 or more brokers to find the 'slow' feed. If you are just going to pick up on the very short term fluctuations in the market ('spikes' that are not wilfully generated by stop-hunting brokers), then I think any respectful broker with a serious market maker substantiating the prices would accept your business

very interesting and useful posts, Admin. thank you. didn't see them before. i just posted this in the Experiment thread and i guess this is the right forex thread for it---
------------------------------------------
i'm posting this in the forex thread too but just realized it's useful here as well. after a long night of trading i've come to the idea that a short (timewise) string of small gains/losses is better than a long (timewise) play or two. here's why i think this...
1. time is money (as mentioned earlier in the Experiment too)
2. emotions management gets more difficult with the passage of time. in a long (timewise) trade you are more likely to exit with a tiny total profit for the 3 or 4 hours it takes you because you've weathered some nasty dips along the way and just want OUT- and then price naturally zooms your way the instant you pull the trigger. OR, at some point you can't stand the heat and exit with a substantial loss.
3. in short (timewise) trades, with great discipline, you jump in and if it goes against you a certain amount you jump out. if it goes your way, you jump out with a certain profit, look for another entry point, and so on. overall, if you apply quant or TA skills (i use both), at session's end you should come out pretty green. basically it's an alley fight- you cut 'em every time you get a chance, and sometimes you get cut but if you plan carefully and limit how bad they can cut you then you end up cutting them a lot more than they cut you. "death by a thousand cuts".

i think this applies no matter how much cash you've got but i'll give an example scaled for a lot of the new folks i see with limited budgets (and i ain't rich yet myself )... let's say you put up $250 and you're leveraged 50/1 and trading only the eur/usd pair. this is a "learning level" of cap so the example won't show much profit- but multiply it by 10 and you'll see what you "might" do with $2500 instead. with that $250 setup you can comfortably pick up 7,000 units per trade. (i won't get into what units means or what lots or minilots mean.) assume that on average you can spot 3 good trades an hour. in the daytime you might see 8 good ones per hour. let's pick a middle figure- 5 good trades per hour, mixed shorts and longs. if you consistently exit on a $2 loss or minimum $1.50 gain, it sounds like you'll lose money in the end. but with good skills you actually should make money because your good calls should outnumber your bad calls 2:1. so in 2 hours of 10 trades you should have abt minimum $3 profit. sounds horrible, but in fact there'll be times when you exit with a $2-2.50 profit too because the run will happen faster than you can pull the exit trigger. personally i don't like setting programmed stops or t/p's (take profits) because i just don't trust the system but i only occasionally miss a loss exit i wanted and then it usually just means i'm stuck for awhile waiting for recovery (unless the picture is real bad in which case i might exit to save time, which is money).

just my thoughts, but now i can apply these lessons to stocks too. tonight the knife 'em and run strategy worked well for me- i had sat out a 5-hour trade for peanuts, then got out my knife and made more in 20 minutes than i had in 5 hours.

__________________
___________________________________________
[SIZE=2"No more riddles."[/size]
___________________________________________
get the cd. it's how money gets made.