It explains why Oanda so many brokers have a terrible support system that can sometimes take days to respond and usually are about as helpful as throwing your computer out the window. 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. A B-book is essentially a ledger of trades held by your broker listing trades which you placed, but these trades were not actually sent to the underlying market. I’ve been trading for over four years now, and in that time I’ve never really done any research into the backend of brokers and how they operate. I just assumed that because the brokers I use are regulated by financial authorities, they can’t be doing anything too shady. Recently I was interviewed by a forex broker about my knowledge of the TradingView platform.

b book forex

This means that when you place a trade, instead of forwarding it directly to the interbank market, they keep it within their own system. It’s like having a rival at the table, closely observing your moves, and opportunistically jumping in on the action. By acting as the counterparty to your trades, B-book brokers have full control over the execution and outcome of your trades. B book brokers, on the other hand, are more likely to manipulate the market as they have a vested interest in their clients’ trades. They may widen the spread or delay the execution of trades to ensure that they make more money. This can be detrimental to traders as they may end up paying more for their trades or missing out on profitable trades.

Best Brokers That Accept ITIN

You won’t be paying more to use an A-book broker than a B-book broker. But I don’t believe high leverage itself is responsible for most retail trader implosions. Rather it is the lack of understanding of how dangerous leverage can be. Many retail traders, especially those new to trading, typically have no idea what good “risk management” looks like. Many forex brokers offer paper trading tools that let you test different strategies without putting any money at stake. Virtual trading simulators like those are a good way to learn how to trade and understand the different strategies you might employ.

They want to see you become profitable – because they want you to trade bigger, longer, and consistently, so that they make more money from the fees they charge you. This is really the main reason why you should care if your broker is a B-book or A-book broker. What this creates is an atmosphere and culture of seeing your clients as prey rather than customers. Our editors independently research and recommend the best products and services. You can learn more about our independent review process and partners in our advertiser disclosure.

⭐ B-book Forex Brokers

They take the opposite side of their clients’ trades, which means that the broker’s profits are the clients’ losses and vice versa. This can potentially create a conflict of interest, as the broker benefits directly from client losses. In other words, even if the trade opened by the trader goes into profit, causing a loss for the broker, the broker will make up the loss with the trade he opened with his liquidity provider. Both traders and brokers have disadvantages when using the A-Book approach. In order to move customer orders to the external market, the broker must make agreements with a liquidity provider (or with many of them), secure licenses, and offer technical assistance to the liquidity provider. As a result, the A-Book broker is compelled to raise the mark-up on the spread in order to cover its overhead expenses.

b book forex

“C-Book” is a term that’s used to describe “risk management strategies” that forex brokers and CFD providers use that are supposedly different from A-Book or B-Book. This means that an A-book broker doesn’t want you to blow up your account. If you blow up, they don’t make any money – in fact, they lose a valuable client and source of revenue. If a B-book broker offers high leverage, it’s usually because they want you to blow your account – because they want your money.

Is Forex Good for Beginning Investors?

In contrast, A-Book brokers pass investors’ orders to liquidity providers who fill the other side of the trade. The broker does not act as the liquidity provider in this execution model. In the realm of forex trading, a B-book broker operates as a market maker.

  • As we understand each individual trader has their own needs, we encourage our readers to do their own research before investing.
  • This commission is a fixed fee per trade or a percentage of the trade volume.
  • In essence, B-Book brokers or Market Maker brokers act as the ‘house’ in the trading scenario, similar to a casino, where the odds are statistically in their favour given the high percentage of losing retail traders​​.
  • On average, a raw institutional spread on EUR/USD is around 0.1 pip and this is paid by the A-Book broker.
  • To efficiently identify profitable traders, as well as unprofitable ones, forex brokers have software that analyses their clients’ orders.

This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. Click here to view a list of trustworthy brokers where we trade our own funds. May sound crazy, but that’s how the inner workings of the brokerage industry operate.

Monthly A-Book Revenue Example

All of these factors were weighted based on their importance to users. Saxo Bank has operated in the United Kingdom since 2006 through its subsidiary Saxo Capital Markets U.K. Ltd (SCML) and, like many forex brokers, it doesn’t accept U.S. traders. As the forex market continues to grow in popularity, the need for brokers who can help traders navigate the market has also increased.

b book forex

We provide access to trading FX, Futures, Metals, CFD’s and Commodities on MT4 and word-class customer service. Given the fact that the so-called booking of trades is behind the scenes, most traders tend to miss this aspect. Once a trade is made, the only thing a trader is usually concerned about is whether or not their trade resulted in a profit. For most traders, A book and B book might seem like some technical jargon. If a broker has just one customer and uses B-Book execution, then obviously, it wouldn’t want the trades that its ONLY customer makes to win.

Benefits of B-Book Brokers

Excessive leverage can lead to you blowing up before you have the chance to educate yourself, and offering high leverage with minimal requirements is a common trait of B-book brokers. During their discussion on how forex brokers make money, co-founder of Global Prime Jeremy Kinstlinger quotes an interesting ASIC report. In essence a B-book broker simulates the real markets and your trade fills are based on the underlying market, but your trades are never actually sent there.

b book forex

Naturally, as the de facto reserve currency of the world, the US dollar takes up the majority of the transactions. A broker can hedge market risk in part and not in its entirety. This will reduce, but not eliminate, adverse price movements to the position being hedged. These execution methods are also considered controversial and it’s questionable whether forex brokers should be doing them.

You can see here how the misalignment of incentives can be a problem. But they still profit from the destruction of their own clients. So long as that is the case, they will continue to find new ways to “encourage” their clients to lose money and remain uneducated about the proper ways to trade and manage What Is Crypto Wallet And The Way To Arrange Crypto Wallet risk. Essentially, a B-book broker is a casino, and they want clients who are gamblers, not traders – and if their clients happen to ruin themselves financially, they could care less. The problem for us as traders and clients of their services is the conflict of interest this B-book model creates.

How are traders categorized as A-Book or B-Book?

That said, if you’re a seasoned investor looking to dabble in trading forex for the first time, you might benefit from going with a more traditional broker to start, like Interactive Brokers. Of course, leverage means you can also profit at the same speed, which — combined with liquidity — is what attracts investors to currency trading. The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments. I’ve even been told the regulators actually encourage the practice because it results in clients trades executing at a better price (due to the order being filled instantly). At the end of this post, you’ll be able to explain to all your rookie trader buddies the secret workings of the brokerage industry.