Shocking Details Of Forex Broker Frauds!

Forex market is an unregulated over the counter market. As compared to the futures market that is highly regulated, there is very little regulation in the currency market. You see, in the futures market, there is a clearing house that enforces the execution of trades. Unlike the futures market, forex dealers and brokers also known as FCMs are free to do whatever they want. Many people start trading forex without the shocking forex broker frauds. There are many games and tricks that a forex broker can play with their clients. Many traders keep on losing without knowing the reason for their losing trades. If you want to seriously dabble in forex trading than you must know these forex broker frauds.

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.

Your broker will tell you the benefit of using leverage. Leverage can increase your profits. But if you lose, it can hurt you badly by wiping out your account as well. Brokers can give you leverage as high as 1:200 and even 1:400. What this means is that for ever $1 that you have, you can borrow $200 or even $400 from your broker to enter a trade. As an inexperienced trader, chances are you will lose. This is what the broker wants. The more you lose, the more your broker makes.

Your broker can easily turn your winning trade into a losing trade. Many traders keep on losing without knowing the fact that the broker is using sudden spikes in the price feed to periodically trigger your stop losses. This is also known as stop hunting. When a broker finds many stop orders close to a price level, they can generate a sudden spike or blip in the price feed to take out most of these stops. Most traders never find out that the spike was artificially generated by their broker. If you have an independent price feed, you can compare the two price feeds. You will be astonished to find that there was a spike in the broker price feed whereas in the other price feed there was none. Forex brokers can play many games with their clients. They can make the excuse of slippage to suddenly widen the spread upto 10 pips when they quote rates to their clients. So before you start trading seriously with your hard earned money, know the shocking forex broker frauds!

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