Ever thought what is the worst secret of the forex market? That is that Brokers Can Trade Against You! YES, THEY CAN! How do they do so? Unbelievable! Unfortunately, it happens.
Brokers play a crucial role in the forex trading market. That means you have to select the best broker for trading. It is a challenging task to find a responsible broker as this market is full of fraud brokers. Such brokerage firms first aim to fill their own pockets so they try their best to manipulate you. As a newcomer, you need a lot of knowledge about brokers.
So, how do forex brokers trade against you?
The truth is that they use many tricks to do that because they want to get as much profit from you as possible. They cheat you by requoting, increasing markups, high leverages, stop loss hunting, slippage, and by swap.
It is necessary for you to know all about them and also their solutions. In this article, we have mentioned three easy ways that will help avoid such scams created by unregulated brokers.
Let’s read them carefully before entering this trading market.
6 Ways Brokers Can Trade Against You
It is a plain fact that most brokers try to cheat their clients by holding opposite positions. They act like market makers broker and trade as opposed to their client’s loss.
Here we are going to display 6 common tricks that a broker wants you to lose. Read them carefully as you may be able to protect yourself from such scams.
Brokers Trade Against You By Requoting
When there comes a delay in trade execution, that is known as requoting. In this case, the broker will offer you a new quote to continue your entry. Usually, such brokers cheat to prevent a trader to obtain a profit that is enough in comparison to the latest price trend.
For example, when you find that the price trend is falling rapidly, you can decide to take action with a sell entry. To avoid such a framework, you can delay the order execution.
On the other hand, the broker will offer you a different price, which can affect your sell order at a lower level of price. If the broker will requote you, again and again, it is difficult for you to get more profit.
Brokers Trade Against You By increasing Markups
Well, this one is another fraud that a broker uses to cheat his client secretly. Most STP (Straight Through Broker) brokers do that type of cheating. No doubt that they can transfer orders directly to liquidity providers and also claim them.
Not all types of brokers can apply for the original spreads. That’s why some of them want to earn a large amount as profit and finish the increasing markups. So, the untrustworthy brokers will add extra units from liquidity providers to fresh spreaders.
For example, the EUR/USD spread can be increased 0.5 to 1.5 pips and the purchaser will not be aware of the spreader markup.
Brokers Trade Against You Causing Stop Loss Hunting
The main cheating that a broker made to its client is to stop loss hunting. In this way, they try to get high profits. All this process is done with the help of a certain type of software. Brokers who do this many times are called Stop Loss Hunters.
This trick is not limited. Forex broker manipulates price using different algorithm software. Usually, they hire experts to continue these malicious acts. They use this trick when they find the market price goes against their orders.
For example, the USD/EUR position at 1.2180 is put down at 1.2280 with a stop loss. When it moves up to 1.2275, the current market price is at the difference of 5 pips with a stop loss. If 2 pips costs spread initially, 3 pips left behind before the stop loss hit by the order.
In such conditions, stop loss hunters will expand the pips 2 to 5, so the stop loss will close the short position.
Such cheatings of a forex broker are difficult to identify because most of the traders think that they miscalculate the price actions.
Brokers Trade Against You Through High Leverage
It was considered that leverage is a powerful feature in forex trading as it can support a trader to take a large trade size in comparison to stock strength. But if you use this opportunity excessively, it may leave an account at risk of brink calls.
Usually, this type is used by brokers who are the market makers. When they offer leverage up to thousands, instead of helping you, that’s mean your trading account will quickly sink into the river of loss.
Mostly, ECN/STP brokers have no permission to use this opportunity. So, why? As well as the liquidity providers are concerned, they are not allowed to take the risk of using high advantages, thus keep out the brokers, is cheating from this type of forex brokers.
Brokers Trade Against You By Slippage
Before talking about it, do you know what slippage is? Let me tell you!
Slippage is an implementation of the order at a price that was not ordered.
This is the most talking issue among retail traders. A trader can face this situation when the market is active due to a stream of instability.
Naturally, this only applies to the STP or ECN brokers at the system that allows them to make a connection with the client to supply orders directly to the liquidity providers. This process runs automatically but it takes time due to potency.
The price of volatility will increase speedily when the market is active. No wonder that orders can be accomplished from your ordered price at different levels. Now, the slippage is logical.
But if it occurs frequently, when the price is stable, that’s mean the broker is cheating you.
The broker uses this way to get an advantage from the client’s losses.
Brokers Trade against You By Swap
What do you know about a swap? A swap is a kind of commission that a trader has to pay on an overnight position.
It also has the fee that is calculated from the difference between the rate of a currency pair interest. Generally, it can fluctuate between brokers.
In this case, you have to check the comparison between brokers rates and differences in standard rates of central banks. If the comparison is not substantial, that’s mean your broker is loyal and not manipulating the swap rates.
On the other hand, if you find it increasing high, it is a sign that your broker is collecting too much profit from it.
Usually, long-term traders have to face such frauds because they leave their positions open for days. This may happen especially when their swap rates are not in the favour of their orders.
We have a detailed article about: do forex brokers want you to lose? You can check it out to know more.
3R Strategy to Avoid Forex Broker Scams
What can you do to prevent such scams and frauds? If you don’t fully aware of these tricks of brokers you may lose your money.
Three basic ways can help you to survive in forex trading and enable you to make a profit. These are known as the 3 R Strategy.
Let’s have a look at them:
At first, you have to make sure that the selected broker is regulated. Your broker must be registered with a Legitimate Financial Regulator.
A new trader must be aware of the claims of regulations that bogus companies show him. If an agency has less operating history, independence, and the charge to culprits, it will not be able to protect the investor.
If a broker is not regulated by a reputed agency, you should avoid opening an account with it.
● Reading Views
Another way of knowing about the fraud broker is by Reading views. A trader may know about the reputation of a broker by reading his views. Through them, he can check the broker’s originality.
If a broker has a lot of complaints by the customers about commissions, high spreads, problems of funds withdrawal, lavish trading systems, and educational materials, you have to look for another brokerage firm.
As we mentioned above that to avoid a broker’s cheating, you must have complete information about the broker. For this purpose, proper research is very important.
You can get all related info by reading and researching the website of the broker firm before opening the account.
A responsible brokerage firm will provide you with detailed information about leverages, price rates, margin requirements, offered products, and trading platforms.
For the broker choice, we found ICMarkets is one of the better options. It’s a regulated broker, currency pairs spread is very low and the broker review is also positive.
To sum up, most forex brokers indeed trade against you secretly. They convince you to open an account through them but internally, they are cheating you.
According to my opinion, the main cause of a trader’s failure in the forex market is cheated by the broker. If you don’t know the tricky ways of deceiving, you can’t get success. It can affect your whole trading process.