Mindblown: a blog about philosophy.

With A-Book (or STP) execution, the broker manages the risk of each trade individually. But what if one trader opens a long GBP/USD position, and another trader opens a short GBP/USD position at or around the same time? Rather than the A-Book broker having to hedge each trade separately with an LP, why can’t the risk exposure from the…

A-Book brokers are sometimes also marketed as “STP brokers”. But that’s actually inaccurate. While they’re both similar in the sense that they both transfer market risk, they are actually two different ways to execute an order. In this lesson, we will explain the difference between A-Book and STP execution. “Straight-Through Processing” is a term that is commonly shortened…

The A-Book execution model comes with its own unique challenges. An A-Book forex broker can only earn profits from markups IF the rates at which it trades with the LP are better than the prices at which the broker trades with its customers. If not, the broker transfers the market risk but does NOT make any profit and quite possibly,…

Not sure you noticed in the previous two examples in the previous lesson, but the A-Book broker did NOT make any money. The examples were shown this way to keep the focus on how the broker offloaded its market risk. So how do A-Book brokers make money? Unlike a B-Book broker, an A-Book broker does NOT make money when its…

What is a A-Book broker? While your forex broker will always be your counterparty and take the opposite side of your trade, it does NOT mean it has to be stuck with the potential scenario of ending up on the losing end of the trade and incurring a loss. If the broker does not want to “B-Book”…

When the retail forex broker takes the opposite of a customer’s trade, it can choose to ACCEPT the market risk or TRANSFER it to another market participant. If a broker chooses to accept the market risk, when the trade is executed, it is called “B-Book execution”. “B-Book execution” is just a fancy phrase for taking the opposite…

A lot of retail traders have no idea of how an order is processed or how forex brokers or CFD providers really operate. This lesson is intended as an introduction to the mechanics behind retail forex trading. It is aimed at forex traders wishing to gain a practical understanding of how forex brokers manage their…

When trading forex, where are you actually trading? In the previous lesson, you learned that retail forex traders do NOT trade in the “real” FX market. If that’s the case, then WHERE are you actually trading? When you click “Buy” or “Sell” on your forex broker’s trading platform, where do your orders go? ? That’s what we’ll reveal…

What is a CFD? CFD stands for “Contract For Difference”.? A CFD is a tradable financial instrument that mirrors the movements of the asset underlying it. A contract for difference (CFD) is an agreement between a “buyer” and a “seller” to exchange the difference between the current price of an underlying asset and its price when the contract…

As a retail forex trader, what are you actually trading? New forex traders might be puzzled about how it’s possible to trade currencies they don’t physically own. They’re also often confused about how it’s possible to sell something before buying it. Let’s revisit a part of the earlier story about Batman and Spider-Man: Oh really? Let’s make a bet…