How do FX brokers decide to hedge or book a customer's trades?
How do FX brokers decide to hedge or book a customer's trades?
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xyzt · External communityPost link
External question — Quantitative Finance Stack Exchange
Author: xyzt
Original post: https://quant.stackexchange.com/questions/51015
License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/
Adaptation: HTML converted to plain text; contact email addresses removed.
FX brokers try to be more profitable by,
- booking(b-book) the traders that are predicted to be losing money according to the trader profile or trading history. so, if the customer loses money, the broker will earn money.
- hedging(a-book) the traders that are predicted to be earning money according to the trader profile or trading history. so, if the customer earns money, the broker will not be affected because he hedged the customer trades.
In order to do that categorization, brokers should make some analyses, of course. I wonder how they analyze their customer base. What are the criteria? For example, a customer lost $200 by trading 20lots of trades, yes he/she lost money but traded high lots which means he may be considered successful. I mean, just looking to the profit column of the customer may not be the correct way.
What do you think the key points of that kind of analysis?
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Quoted from Forex.com.bd-Editorial External question — Quantitative Finance Stack Exchange Author: xyzt Source score (net votes, not local likes): 1 Original post: https://quant.stackexchange.com/questions/51015 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. FX brokers try to be more profitable by, - booking(b-book) the traders that are predicted to be losing money according to the trader profile or trading history. so, if the customer loses money, the broker will earn money. - hedging(a-book) the traders that are predicted to be earning money according to the trader profile or trading history. so, if the customer earns money, the broker will not be affected because he hedged the customer trades. In order to do that categorization, brokers should make some analyses, of course. I wonder how they analyze their customer base. What are the criteria? For example, a customer lost $200 by trading 20lots of trades, yes he/she lost money but traded high lots which means he may be considered successful. I mean, just looking to the profit column of the customer may not be the correct way. What do you think the key points of that kind of analysis?
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