If you are trading through a B-book trader and your account goes into the negative, it really means nothing. The broker hasn’t lost any money, because they never sent your trades to a third-party. They can simply reset your account balance to zero if they want to, and because they don’t owe anyone any money on your behalf, it’s basically a fake debt. B-book brokers profit from the losses of their clients, and they lose money when their B-book clients win. A market maker is often a synonym for the B-Book Forex broker.
The most common currency pairs traded are the US dollar, euro, pound sterling, Japanese yen, and Swiss franc. Most of these currencies are also known as “safe havens.” All transactions in Forex are conducted between two foreign currencies, also known as fiat money.
What B-Book Brokers Don’t Like
Global Prime is able to show you the liquidity receipt for every single one of your trades. Just drop Jeremy from Global prime an email () with your trade ticket number. This is one of their unique selling points, which no other broker will do. Clearly you can understand why a broker would choose to B book their clients. Remember not to choose your broker based on the speed of account opening, website design or their advertising.
If you are executing a winning strategy at A-book brokers, you will not receive a message to close your account, as happens at many B-book shops. For now, just know that when a forex broker chooses to accept market risk (“B-Book execution”), a major downside to doing this is that a potential conflict of interest does exist between a broker and its customers. We won’t go into examples of broker shadiness just yet since the focus of this lesson is how forex brokers manage their market risk . It’s an extremely tough business for a retail forex broker to operate as 100% A-Book. It’s hard to make a lot of money and with margins so tight, it’s not surprising why brokers running a B-Book as an additional source of revenue.
Market Execution
In the previous article, we wrote that UpTrader Forex CRM has a useful system for controlling fund deposit and withdrawal. In short, it allows you to flexibly configure the approval settings for withdrawal requests though a variety of parameters. All these settings are extremely useful and allow the broker to protect themselves from many unpleasant situations.
These customers typically fall under the category of B-book liquidity. There are some orders meanwhile that cannot be performed in-house due to the size of the trade or because doing so would put the dealing desks’ counterparty role at danger. For fulfilment, certain orders will need to be directed to outside locations. This is the fundamental procedure that allows forex brokers to divide their clients’ orders into the A-Book and the B-Book, two different liquidity pools. Trading with an A book broker is preferable if you are in a very active time zone, such as the European trading session. Due to greater liquidity, you are more likely to obtain the greatest potential spreads.
Profitability of A-Book vs B-Book Brokers
During their discussion on how forex brokers make money, co-founder of Global Prime Jeremy Kinstlinger quotes an interesting ASIC report. However, trading using a B-Book broker may turn out to be advantageous for traders. For instance, traders might obtain full guarantees for their deals. Additionally, since the broker serves as the market maker, investors typically receive decent processing of their orders even during periods of low liquidity. It is important to note, however, that A-Book brokers are not without disadvantages.
So they would not do this, as they would risk their entire business just to earn some money from 1 customer. Basically that is outright illegal, and if their regulator like ASIC, UK FCA audit and find out they have been manipulating price, they might lose their what is b book broker licence. Nonetheless, I don’t believe brokers are doing it, else they will be banned from operating in their respective jurisdictions. If you are very serious about trading with a broker that does not trade against you, you can try Global Prime, or IC Markets.
Aurora Platform
This book of business is often the key profit center for such individuals. Our team is ready to provide a detailed advice list on the basics of Forex broker risk management with the help of Soft-FX technologies. Comprehensive software solutions for brokerages, digital asset platforms and prop trading companies.
- The broker charges fixed spreads that the trader pays every time he opens or closes a position.
- The trading process involves a trader purchasing a currency pair and selling it back to close the order.
- Timothy Li is a consultant, accountant, and finance manager with an MBA from USC and over 15 years of corporate finance experience.
- Once a trade is made, the only thing a trader is concerned about is if the resulting trade ends in Profit or not.
- After all in this situation if the client “wins” on the trade, then by default the broker must “lose”, and vice versus.
- Depending on their view of whether the price will rise or fall overall they may favor buying or selling more.
Forex is different from equities or futures trading because your broker can choose to trade against you. When your broker sends all your trades to the real market or their liquidity providers, this is known as A Booking. Statistically, the profit of an A-Book forex broker is less, but more stable. It is well known that 80-95% of traders lose their initial deposit within 6 months, which plays into the hands of the Forex B-book broker. But don’t forget about unforeseen circumstances that regularly occur and make B-book brokers suffer huge losses, often for many months in a row.
Forex Trading: A Guide to Passive Income with Discipline
Only a few of our clients take advantage of these features, while they are available in UpTrader Forex CRM completely free of charge. As an illustration, we would like to share with you a recent case from one of our clients’ operations. Thanks to a well-configured withdrawal control system, the broker team noticed that something was wrong, quickly reacted to an unusual situation, and prevented a large-scale case of fraud. We conclude that none of the schemes can be a panacea for losses.
Cryptocurrency on Forex market
Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas’ experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning. Any action you take upon the information https://xcritical.com/ on this website is strictly at your own risk and we will not be liable for any losses and damages in connection with the use of our website content. Alert E-mail – You can get several different types of alert e-mails in real time. Tick Data Analysis – All the tick data will be analysed statistically in real time.