The House Advantage.....

The House Advantage.....

This post is structured to help newbies understand the intricasies of the "house adantage" no different than if you were at a Casino.
Here's the scenario. You open an account at your favorite broker and you are ready to trade. You traded the demo before and you thought. "Boy this isn't so bad". So you brought your new found confidence forward and opened a live account. The first thing you notice when you decide to trade is that the software seems different. The price is more erratic and seems to move faster. You are correct in your observations. So you get your strategy in place and wait patiently for a trade (I hope). You take a position and you note that the market hesitates and then begins to move in your direction. Or it moves against you right away. So let's assume this trade is profitable and you decide to book your profits. You note as you are closing the position the market seems to jump in favor of the broker at least two to three pips before the position closes. Sometimes much more if there is strong volatility.
Behind the scenes a small game of roberry is occuring during any trade. Because the brokers are quoted from big banks or small banks there is no way that they can fill a 2-3 pip spread and make money. So they start down a pip or two before the trade is even under way. Remember these guys are market makers. So they can make the market anything they want. Do they ever lose on a position? Perhaps if they trade against you (which they all do regardless of what they say) and if you win, but in most cases you are always going to pay for the trade in slippage. Anywhere from 3-10 pips depending on the market and trade. Yes, on every trade. The house takes the trade against you because they are traders too and they have a 90% chance of winning the trade they take against retail traders. I don't know about you but I'd take that trade all day. Remeber that next time you take a position.