The Trading Industry Is Designed For You to Lose
Complete exposé on trading industry conflicts of interest. How brokers profit from A-Book vs B-Book models, market makers manipulate through 3 market phases, and why 90% of traders are designed to fail within 90 days. Follow the money to understand the game.
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Trading is one of the most competitive businesses on Earth. And most retail traders enter it believing one dangerous assumption: that everyone in the market wants them to succeed.
They don't.
In fact, nearly every major participant in the trading ecosystem is financially incentivized for you to lose. Today we're exposing all of it.
The Core Principle: Follow the Money
This entire lesson comes down to one simple principle:
If you want to understand trading, follow the money.
Before you can see the conflicts, you first need to see the board. Let's start at the bottom and work our way up through the trading hierarchy.
The Trading Hierarchy: Where You Actually Sit
The Complete Trading Food Chain
- Retail Traders & Passive Investors (You)
- Regular individuals trading their own funded accounts through retail brokers
- Profit source: You make money if your trades win. Clean and straightforward.
- Retail Brokers & Introducing Brokers
- Companies and people who bring you into the market
- Revenue: Spread, commissions, financing interest, and OTC gain (most important)
- Investment Banks
- Provide massive credit lines allowing brokers to offer leverage
- Example: Broker deposits $30-50M to access $250M credit line
- Profit: Interest on credit lines
- Market Makers
- Match buyers and sellers, provide liquidity
- Also trade their own accounts (proprietary trading)
- Profit: Bid-ask spread + prop trading gains
- They see ALL order flow, all liquidity, all positioning
- Interbank Liquidity Providers
- Facilitate global institutional transactions
- Central Banks & Private Entities
- At the very top of the hierarchy
- Every level answers to the level above
Where exactly does the retail trader sit in this hierarchy? At the very bottom—the foundation that everyone else feeds on.
The 90-90-90 Rule: It's Not a Bug, It's a Feature
Here's an insider statistic that will change how you see this industry:
Brokers expect 90% of traders to lose 90% of their account within 90 days.
This isn't theory. This is a business metric. And because this number is so reliable, an entire financial product was built around it.
This product is called Contracts for Difference (CFDs).
What Are CFDs and Why They Exist
CFDs allow you to trade stocks, indices, crypto, and metals with extremely high leverage—sometimes 500:1. But here's the key:
You do not own the underlying asset. You're in a contract with the broker for the difference in price, which means your trade does not need to go to the real market.
This is where things get dark.
How Brokers Really Make Money: The 4 Revenue Streams
Brokers make money in four different ways:
- Spread or markup on your trades
- Commissions on your trades
- Financing and interest - holding trades overnight
- OTC Gain (Over-The-Counter gain) - taking the other side of your trade
That fourth one? That's the biggest. Let me explain.
A-Book vs B-Book: The Model That Changes Everything
Brokers divide traders into two categories:
A-Book (Losing Traders)
Your trades never leave the broker. They take the other side of everything. If you lose, they keep it all.
B-Book (Winning Traders)
They hedge your trades with the real market so they don't lose money. They still earn spread and fees, but not your losses.
Question: Which type of trader do you think a broker really prefers?
Now think carefully: If a broker encourages frequent trading, large position sizes, and maximum leverage, they increase ALL FOUR revenue streams—but especially one: your losses.
Critical Insight: Consider brokers advertising "zero commissions," "instant execution," and "ultra low spreads." Where is their profit coming from? Not commissions. Not spread. It comes from you losing.
Introducing Brokers: The Influencer Incentive Problem
An introducing broker is anyone who recommends a broker to you and has an affiliate agreement behind the scenes. This includes:
- Many influencers
- Educators
- Signal providers
What they receive: A percentage of spread, commissions, financing, and sometimes even YOUR losses.
So if they're teaching a strategy and pushing a specific broker, their incentive is clear: They benefit if you trade often and trade big—not necessarily if you win.
The Lifestyle Marketing Red Flag
You've seen it: Trading from a phone inside a Lamborghini, on the way to a private jet.
In over 12 years of professional trading, I have never seen a consistently profitable trader operate like that. Real traders:
- Trade focused
- Trade quietly
- Protect capital
Professionals survive by risk control, not by being a spectacle.
Rule of Thumb: If it looks designed to make you deposit money, it probably is.
How Dark This Gets
Some influencers have partnered so deeply with brokerages that the broker provides them real accounts with fake balances and helps them retroactively look like they had profitable trades.
That's how dark this gets. And now you know why they're so incentivized.
Market Makers: The Informational Edge
Market makers see all the detailed order flow through their books:
- All the liquidity
- All the positioning
- Where traders enter
- Where traders panic
- Where stops are clustered
They also trade their own capital. Whoever controls liquidity can influence price to a degree.
The Three Market Phases: How Market Makers Extract Money
Understanding how market makers conduct their business through these three phases can lead you to finding very high-quality trades.
Phase 1: Contraction (Tightening)
What happens: Straight-up trade matching. This is the bread-and-butter revenue stream of the market maker.
Market maker activity: As people buy and sell, they're doing massive trade matching in this area.
Phase 2: Expansion (The Manipulation Zone)
What happens: Market makers control supply, giving them power to manipulate within certain bounds.
Market maker activity:
- Not only market making but proprietary trading
- Looking to make money on bigger positions and distance
- Dump bad positions accumulated from Phase 1
- Set up good trades for Phase 3
Example: In an uptrend, if the market maker is net short (from market making), that's a bad position. They'll allow a breakout, then drive price down through stop-losses to create selling demand. This lets them offload bad positions and go net long.
Phase 3: Trend (Profit-Taking)
What happens: Heavy proprietary trading where they close positions accumulated earlier.
Market maker activity: Banking profits from the setup created in Phases 1 and 2.
The Market Maker's Real Edge
Informational Edge: They process ALL trades from their market making activity. They profit from Phase 2 and Phase 3 because of that knowledge.
Your Edge: By following this model and observing what they're doing, you understand these three phases, understand their intent, and can follow them into big trends.
Where most traders get crushed in Phase 2, you know it's prime for manipulation. You expect it. And that manipulation provides great entries.
The Retail vs Institution Myth
Right now, someone is getting ready to comment: "But banks don't care about retail volume because it's so insignificant!"
Here's what they misunderstand:
I'm not studying retail traders because they move the market. I'm studying retail traders because they reveal human behavior.
Retail traders are the purest, least filtered version of decision-making under uncertainty:
- Fear
- Chasing
- Panic exits
- Emotional conviction
- Late entries
Retail traders are the kings of these behaviors. And those behaviors don't disappear at higher levels—they just get dressed in better-looking suits and trade larger position sizes.
Critical Understanding: The market is not banks versus retail. The market is strong money versus weak money.
- Sometimes weak money is retail
- Sometimes weak money is a hedge fund
- Sometimes weak money is a major institution making a bad decision
The same patterns repeat at every scale.
Same Psychology, Different Scale
- A retail trader panics out of a position
- A fund manager capitulates under performance pressure
- A bank unwinds exposure after being offside
Different size. Same psychology.
When we analyze retail behavior, we're not analyzing a tiny part of the market. We're analyzing a simplified model of the entire market. Retail is the microscope version of weak institutional behavior—it shows the emotional mechanics in slow motion.
The Universal Law: The market doesn't hunt retail traders. It hunts trapped traders. And sometimes those traders manage billions.
The Bank for International Settlements and Central Bank Research regularly document liquidity cascades where forced liquidations from funds, banks, and leveraged participants create volatility events.
Those moves aren't about picking on small traders. They're about positions that cannot hold. The scale changes, but the behavior doesn't.
Strong Money vs Weak Money
Markets are not moved by intelligence alone. They're moved by:
- Conviction
- Liquidity
- Positioning imbalance
The strong volume consistently absorbs the weak volume. That's why:
- Some banks outperform other banks
- Some hedge funds collapse while others dominate for decades
It's not retail versus institutions. It's informed positioning versus uninformed positioning.
Whoever is forced to exit becomes liquidity for the side that isn't.
When I talk about retail behavior, I'm saying: Small traders reveal the universal law of markets. Price moves toward the side that must exit. And the side that must exit is always the weaker position—regardless of account size.
What This All Means For You
After going through all these conflicts of interest, the goal isn't to make you paranoid about brokers, educators, or the market.
It's to make you aware of incentives.
- Influencers benefit from selling you the dream
- Brokers and introducing brokers benefit from frequency and volume
- Market makers benefit from liquidity and processing order flow
- Banks skim off the top by dipping into everything
Once you understand that, you:
- Stop blindly trusting marketing
- Stop confusing entertainment with education
- Become far more selective about who you listen to and how you participate
Why Retail Matters
Retail traders aren't important because of their size. They're important because they clearly display losing behavior.
The mistakes you see at the retail level exist everywhere in the industry at different scales:
- Funds blow up
- Institutions get trapped
- Professionals panic too
Studying retail behavior teaches you to recognize weak positioning anywhere—including in yourself, which is the most important.
The Real Goal: Stop being the liquidity and start identifying where the liquidity is coming from.
Final Thoughts: Operating in the Real Game
Brokers and market makers are necessary. Without them, you can't trade. But they are not aligned with your success.
Your job is not to fight them. Your job is to understand them and operate where their incentives don't harm you.
This lesson covers the first core pillar: The Game. Understanding how money flows through this ecosystem is the foundation for everything else.
The next lessons in this masterclass continue through Level Two intermediate understanding across all four pillars. You definitely won't want to miss those.