A lot of those companies actually actively bet against their customers, i.e. they make money when their customers lose. It’s a wonderful industry…
While some platforms act like true brokers others are more akin to bookmakers. They’re understood to split their trades into what is known in the industry as “A-books” and “B-books”.
The “A-book” describe the trades the broker receives that are passed on to the inter-bank market with the broker clipping a ticket.
The alternative “B-book” consists of trades that the broker has not passed on to the market but taken on themselves.
Why would brokers take on their clients? Because an estimated 95 per cent of retail traders are pre-programmed to fail, which means the brokers will ultimately win by taking them on rather than passing them off to the market.
The existence of leverage amps up the movements in clients’ positions, making it more likely that a stop-loss (mandatory sell order) will be triggered, speeding up the inevitable loss. And with brokers trading against their clients, they may possess the ability to tilt the game in their favour.