Forex Broker strategy - Fixing losses

January 10, 2008 – 4:57 am

Basis of this broker strategy is the following thesis: dealing center doesn’t use brokerage as the basic technology, a basis of profit are the client’s losses. The client transactions completed in current of one day, as a rule, do not bring to dealing center neither greater profits, nor heavy losses. In a total sum these transactions make small profit. The basic money appears when positions open in current of several bank days and lead the client to greater, significant losses.

Acceptance of such thesis as an axiom (statistically and empirically confirmed) assumes next model of actions. It is not done anything with client positions during the moment of opening. Dealers simply observe the change of client’s profits and losses. Dealers begin to undertake any actions on overlapping client positions only when sizes of current client losses reach certain boundary values. For example, the client position can be blocked when the current loss on this position will reach, for example 30 % of the client deposit (this figure management of dealing center, naturally, can vary in the any order, proceeding from own reasons). Or the client position can be blocked when the current loss on it will reach such sizes, that through a small number of pips (for example, 20-30 pips) this position will need to be closed for restriction of possible superlosses.

As it is possible to see, the technology of overlappings described above aspires to technology of “kitchen” and as a matter of fact is kitchen, but with administratively entered boundary conditions.