Angus Walker (ex-General Manager of IC Markets) is extremely critical of the B-book model after having witnessed how it operates from behind the scenes of the industry. Become profitable trader with a help of our great community. This A-Book transaction is what most people understand as the role of a traditional broker.
The main reason I kept using Oanda for so long is because their platform is fully integrated with TradingView, and they allow me to trade in any position size (units instead of lots). I’m now a client of Global Prime, and I do all of my trading through their platform. Having a broker who profits when you profit is like having them https://www.xcritical.in/ as an ally instead of just a facilitator – or in most cases, an adversary. But if you’re unaware that you’re gambling your money in a casino run by your broker – then that’s a problem of communication and education, and perhaps even an ethical problem. Please share your inside tips and experiences for the benefit of our community.
A big question regarding B-book models is why financial regulators allow them to operate at all. One could argue that it’s not the broker’s responsibility to educate their clients on how to trade. We all make our own decisions, and it’s our own responsibility to inform ourselves and educate ourselves on the risks we take. On the other hand, if you’re trading a small account the odds are that your trades are executed on B-Book.
Brokers that are pure A book
By choosing to deal through an A-Book Forex Broker, the trader cuts out both the market maker and their dealing desk. Therefore removing the parties that would otherwise profit from their transactions. These Brokers make money by increasing the spread or by charging commissions on the volume of orders. Therefore, there are no conflicts of interest; they earn the same amount of money with both winning and losing traders. They do not take many risks but potentially achieve lower profits because they earn only on margins/commissions. Sound risk and money management are vital to financial market navigation with A-Book Versus B-Book Brokers.
In the world of forex trading, selecting the right brokerage model is essential for traders. Two prominent models that shape the trading experience are A-Book and B-Book brokers. Each model has its own characteristics and implications for traders.
You might still pay commissions and/or a mark-up on the spread, but this does not mean that your trades will go STP. To explain this in simple terms, if you place a buy order, your broker will be selling to you and vice versa. Many traders are starting to doubt this type of forex brokers. what is a book vs b book The primary concern is that these brokers could potentially take advantage of your trading history and pattern and thus make a profit off you. A forex broker can execute your trades in a number of ways. And it is in your best interest to understand how the trades are processed.
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However, selecting the best broker to access the markets is a critical step that traders should not overlook as they embark on trading live financial markets with A-Book Versus B-Book Brokers. It’s good that ASIC have forced these B-book brokers to reduce these shady practices which have exploited ignorant retail traders for the past few decades. Whereas an A-book broker is a business that offers their services to professional traders.
We come to the conclusion that none of the plans can be considered a cure for loss. After considering your company objectives and strategies, you must pick which business model is best for you to implement. A similar argument may be made for traders who choose their broker. Logically speaking, it would be good to trade with brokers that are ‘on your side’ isn’t it?
So while I think it’s a bit of an over-reaction to the problem, it does make it harder for B-book brokers to let their clients blow up. The difference between the A-book and B-book forex brokerage model is pretty simple. The A-book utilizes interbank market executions for clients’ orders, while the B-book process leads to internal order fulfilment without the usage of the interbank market. In some instances, such brokers typically use what is known as a dark pool to mask the true identities of where the orders are being fulfilled. A dealing desk is a department within a retail forex brokerage that is responsible for matching and executing trade orders of their clients.
But if you are in a timezone such as the European trading session which is very active, trading with an A book broker is more ideal. This is because you are most likely to get the best possible spreads due to higher liquidity. They need losing traders more than they need profitable clients. Well, if your Forex broker purely B books you, without giving you slippage, then it is actually good for you! You can deploy strategies that won’t work on A book brokers such as news trading. When a Broker operates under the A-Book model, it passes the orders directly to the Liquidity Provider.
A-Book and B-Book models of managing client’s orders
You will also learn the difference between DD and NDD brokers and get acquainted with NDD order processing sub- types – STP, ECN, DMA, and MTF. Regardless of whether it is an A book or a B book execution, you cannot avoid costs such as spreads, commissions and overnight swaps. This is where brokers can choose whether you put you into the A Book or the B Book. In this case, depending on various parameters and your risk profile, the broker can choose to pass your orders as STP or to treat them in-house. During regular market hours, you can see the spreads on such currency pairs tighten. But, during off-market hours such as the early Asian trading session, you can see the spreads widen.
Dealing Desk brokers create a market for the client, serving as market makers. A Dealing Desk can change the leverage, spread, affect the accuracy of the quotes, artificially increase slippage, manipulate client’s orders. None of the Forex models, such as A-book vs B-book brokers, guarantees that you can make profitable deals constantly. These structures are one of the business instruments; the benefit you can obtain depends on how effectively you utilize them.
- Obviously, no brokerage will like to see their positions fall into losses on account of these traders.
- It is inherent like these brokers that they never fulfill orders in-house.
- This article deals with different types of order processing models.
- In the end, it is a long-term collaboration that wins the day.
The quick answer is that no matter what market you trade, you can only access the financial markets through a broker. They connect market participants and give them access to liquidity providers. Many major Forex brokers use a hybrid methodology that involves entering transactions into either the A-Book or B-Book based on trader characteristics. This allows these brokers to better manage their risk while still providing their clients with access to the market. Statistics says that 90% of traders lose their deposits within 6 months. This type of model (No Dealing Desk) operates as a middleman between the trader and the market.
Ultimately, the choice between A-Book brokers and B-Book brokers depends on your individual trading preferences, goals, and risk tolerance. If the broker operates in this manner, it effectively leads to some dangers. Clients who have been duped will not keep quiet and will undoubtedly damage the broker’s image, which is crucial for achieving success in the forex market. In the end, it is a long-term collaboration that wins the day.