What is Forex Brokerage strategy?
Definition: Brokerage is the act of dealing with the client's transactions at the stage of their performance. Since the market "moves" against the client and is feasible to alter, the broker makes money using different methods. Because of that, brokerage can only be cost-effective when the number of clients, as well as the amount of transactions per client, is high. In addition, all the transactions pass through the dealer before they read the client.
How it works: this causes the dealer to be the intermediary for the client and the broker. Upon the opening of a position by the client, the dealer passes the broker's quotation to the client. The market prices are identical for both the client and the dealer. When the client opens a position and requests a quotation, the dealer knows for sure the client's future action, which can be either a purchase or sale.
The dealing centers' profit consists of the difference between the price at which the dealer closes the position and the price at which the client closes the position. With the information mentioned above, the dealer can change the market for the client in any way. The dealer gives the client a quotation set at the worst price, which is way below what the current market is set at during that time of the transaction. The client will usually close the position under the dealer's price.
The dealers get familiar with the behavior of the client right at the time when a client opens a position. At this time, a good dealer can accurately forecast the client's future behavior and thus can easily "shift" the market. The dealer does this when the client requests a quotation, but can also repeat the process at the moment of the closing of the position. As a result, the dealer always trades at better prices than what the client does.