March 21, 2012

Forex Trading Robots, Is the Order Flow Toxic?

Forex Trading Robots, Is the order flow toxic?
OneStepRemoved on why forex brokerages try to stay away from toxic order flows which result from forex trading robots with scalping strategies – 
Brokers with market positions hate scalping EAs. Trades that enter and exit quickly interfere with the broker’s goal of maintaining a position of a certain size. The amount of work required to maintain the exposure generally does not offset the amount of profit earned from the scalping trader. It’s business they don’t want. The industry term for unwanted business is toxic order flow or toxic trade flow.

Traders loved it. It was the closest thing to near instant profit. Brokers, on the other hand, despised FAP Turbo. Most brokers don’t care if individual traders make money off of them. When 10% of their customer base earns off of them and does so all at the same time, it’s a massive problem. The order flow was toxic to their businesses or to those of their liquidity providers.

The liquidity providers that filled the first wave of orders are not happy, either. This is probably the biggest problem of all. All forex brokerages rely on the dealing desks of major banks (i.e., liquidity providers) to some degree. There are only 10-15 major banks worth dealing with. It’s a small, almost incestuous community. If you get a bad name with one of them, you get a bad name with all of them.

The liquidity providers go back to the brokerages and dictate that they either shut out the toxic order flow or threaten to sever the liquidity relationship.  When the choice is between a critical supplier or a single customer, it’s always the customer that gets the boot.

At least the demo forex accounts with a forex trading robot may provide as much fun as playing Zombie Jombie.

Tags: forex toxic order flows, forex expert advisors, forex trading robots, fapturbo trading robot, robot-forex-trading