How forex brokers cheat their clients
Few days ago I chated with one of my facebook friends and the theme was the order executions. When I sow how his ‘forex broker’ cheats, I decided to write this post. In his case, pending sell order was executed 100 pips below the price, which can’t be explained not even with a slippage, but only with scam in my point of view. After few sentences latter, I’ve asked him how can you be profitable at all, that’s simply impossible with such a ‘broker’!? On that question he admitted that he lost u huge amount of money lately or to be more clear, he lost the 90% of his account and it’s a pretty big account. Well, isn’t that surprise!?
This is certainly a topic that brokers will never talk about, but is unavoidable if you want to be a profitable trader. I know, they all advertise themselves as a ‘best forex broker’, ‘#1 forex broker’, ‘awarded forex broker’, ‘true STP/ECN broker’, etc. But, the truth is far from what they claim they are. Most of them, no matter if they are really STP/ECN broker work against you for their personal benefit. Those brokers usually hunt stop losses, they increase slippage (example with my friend), they do re-quotes or delay execution and fill your orders at a worse price, they have different price, etc. Why they do that? The answer is simple, they win if you lose! How is that possible?
There is several things which can be important during your trading and most of them can strongly affect your performance, even the minor things which you are not aware at all. The first and the most important one is that your orders should always be executed directly in the intermarket and most of your orders never see that. They are usually executed by the ‘market-making broker’ (B-book), who has a benefit on your loss. No matter that your broker claims that he is a true STP/ECN broker, that doesn’t mean that he realy is a true one. Based on regulations (licence), he can’t act like a direct market-maker, but what they do is that they send your transations to another entity for an execution, mostly to the market-maker, which is mostly owned by the same company. How not to complicate this article too much, this is how that looks in the market.
Well, there are some claims that more then 90% of the forex brokers deal mostly over the market maker and that’s what you should be worried about. I will not write any names of the potential ones who cheats or who are the real one, you should find that by your own.
But, if you trade forex seriously, you need to find the real broker who has his trading platform (MT4 or something else) connected trough a bridge to one of the interbank trading platforms. I know, there will all said again, yes we have that, we are the real one. How you can recognize that they are not?
- When you placed your position and the execution is too slow
- When your SL is hitted and the price was far away from it
- When your order is closed way above or under your SL (slippage)
- When your pending order is executed far from the price (slippage)
- When you can’t close your order running in profit
- When the price is different from other (prime) brokers
- When you trade well and your broker is trying to disrupt your trading
This last one (7.) is especially dangerous and it’s common among the brokers, I can say that I’ve experienced that for few times as well during my career. You’re trading is going great and you make a lot of money quickly, but suddenly there is some problem with your platform, you can’t execute your orders, your statement is totaly disrupt, there is some strange withdrawals/deposits of your capital, etc. It’s not an accident, it is done intentionally to disrupt your psychology. After that you can easily lose your calmless and starat to make mistakes, your angry and you want revange… Well, they know that and how you will react on something like that. It means that you’re trading well and that you’re taking money from your broker, not from the market and they want to stop that! Believe me, it’s true. How many of you have experienced something like this?
For the end, I can say that the biggest problem are the SCAMMERS. There is so many brokers who are not regulated at all and you can have huge problem when you want to withdraw your money, earned one or even the deposit. Ever heard of that? Well, I am for so many times. My facebook friends usualy write me about everything and I see that there is so many forex brokers who are simply cheaters. That’s why you should be very careful when you experience something listed above.
Maybe there is something more as well, so do share your bad experience here in my blog, how to help traders around the world. Please do so.