The Truth About Trading: How Institutions, Brokers & Prop Firms Profit Off Retail Traders
📍 Not All Brokers Are Created Equal (Understanding Different Broker Models)
There are two main types of brokers:
1️⃣ Market Makers (B-Book Brokers) → These brokers take the other side of your trade.
When you lose, they win—so guess what? They want you to lose.
They don’t send your trades to the real market—they keep them in-house.
This is why they love high leverage and encourage reckless trading.
2️⃣ ECN/STP Brokers (A-Book Brokers) → These brokers send your trades to liquidity providers.
They make money from commissions and spreads, not from your losses.
BUT most “ECN” brokers are fake—many still manipulate spreads and slippage.
📍 The Liquidity Game (Who Actually Fills Your Orders?)
When you place a trade, it doesn’t magically go to some big market in the sky. It gets filled by liquidity providers (LPs)—huge financial institutions that act as the counterparty to most trades.
🔹 Tier 1 Liquidity Providers:
Major banks (JPMorgan, Goldman Sachs, Citi) provide liquidity for institutions.
Retail traders never get access to this liquidity directly.
🔹 Tier 2 Liquidity Providers:
These are firms that aggregate liquidity from banks and other LPs.
Many retail brokers claim to use these, but most don’t.
🔹 Retail Liquidity Providers (aka, Your Broker in Disguise):
Some brokers pretend to be ECN/STP but actually trade against you.
If your broker manipulates spreads or execution, they’re likely taking the other side of your trades.
📍 Market Makers (How They Manipulate Retail Traders)
Market makers control price feeds, spreads, and execution. This gives them insane power to manipulate trades.
🚨 Common Broker Manipulation Tactics:
🔸 Widening Spreads Before News Events – Spreads suddenly increase, hitting stop losses.
🔸 Stop Hunting – Price conveniently spikes to stop you out, then reverses.
🔸 Slippage on Market Orders – Your order gets filled at a worse price than expected.
🔸 Delaying Withdrawals – They’ll process deposits instantly but delay your withdrawals for days.
📍 Funded Accounts & Proprietary Trading Firms (Are They Just Another Trap?)
Prop firms sell you the dream of trading their money—but most traders never actually trade real funds. Here’s why:
🔹 Most traders fail the challenges → 90% of traders blow the account before getting funded.
🔹 Even if you pass, they don’t give you a real account → Many firms keep you on a demo account while you "trade."
🔹 Payouts are not guaranteed → They’ll find any excuse to deny withdrawals.
📍 How to Pick the Right Broker & Avoid Scams
💡 Legit brokers have:
✅ Tight spreads & low commissions (Real ECN brokers don’t need to manipulate fees).
✅ Fast execution & no re-quotes (If your broker constantly re-quotes, they’re playing games).
✅ No insane leverage offers (If they’re offering 1:1000, they want you to gamble).
✅ Regulation in a strong jurisdiction (But beware—some regulated brokers still manipulate).
💡 Red Flags to Watch Out For:
🚩 Bonuses & promotions (No real broker gives out “free” money).
🚩 Guaranteed profits & signals (If they’re selling you a “winning strategy,” it’s a scam).
🚩 Negative reviews & withdrawal complaints (Check Trustpilot & Forex Peace Army).
🔑 Key Takeaway:
Your broker is not your friend. Most of them are just sophisticated casinos designed to take your money. If you don’t know how brokers operate, you’re already at a disadvantage.