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Forex Broker Frauds Shocking Facts



Many forex traders keep on losing and don't know the reason. Know these shocking truths about forex broker frauds that can make your winning trades turn into losing trades. Do you know this fact that most of the time, forex brokers are trading against you. If you take a long position, the broker will take a short position. This has something to do with the unregulated nature of the forex market. You see, forex market is an unregulated over the counter market. There is no central clearing house like that in the futures market in the forex market.

This unregulated nature of the forex market means that most brokers are free to quote currency rates of their own. What many brokers do is add 1-2 pips to the interbank rate that they get. In times of volatility, you will find that the spreads might suddenly widen. All these are forex broker games that you need to be aware of if you want to seriously dabble in the game of forex trading.

All brokers tell their new clients that they charge no commission. This is portrayed as a plus point of forex trading as compared to stock trading where brokers usually charge commission per trader. What they don't tell is that their commissions are hidden in the form of bid/ask spreads when they quote currency rates. You see the 2-5 bid/ask spread is your trading cost whereas it is the broker's profits. Each time, you buy or sell a currency pair, you will pay this spread to the broker. The more you trade, the more the broker will make.

Now, if you are new to forex trading chances are that you will lose 99% of the time. You lose, your broker wins as the broker has to provide liquidity to the clients and most of the time cannot immediately offset the position in the interbank market as the size of the most transactions are usually small. What this means is that most of the time, your broker is trading against you. The more you lose, the more your broker wins.

Add leverage to this. Your broker will entice you to use a high level of leverage by saying that it will increase your profits. You are new, you don't know how to use leverage. You end up losing. The more you lose, the more your broker will make.

These are all games that your broker is continuously playing with you. Your forex broker can turn your winning trade into a losing trade by using blip or a sudden spike in the price feed. This is also known as stop hunting. Stop hunting is what many brokers continuously do. You suddenly find that your stop loss order has been triggered and your trade is closed. What you don't know is that the spike in the price action was artificially created by the broker. So my friend, if you are really serious about trading forex than know your broker first before you start dabbling in the game of trading forex.


About Author Ahmad Hassam :

Mr. Ahmad Hassam is a Harvard graduate. Give Forex Income Engine 2.0 60 days RISK FREE trial. It teaches trading not more than 20 minutes each day and making 5 figures monthly: http://www.ninjatraderblog.com/trading/2009/11/forex-income- engine-flexible-forex-day-trading-with-this-risk-shield/ Discover Forex Mastery; http://www.ninjatraderblog.com/trading/2009/11/forex-mastery -and-the-new-m3-forex-predictor-software/


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Article Added on Wednesday, June 16, 2010
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