Learn More Forex Broker Tricks
You need to understand that forex brokers are above all marketing machines. Forex brokers continuously require a flow of new clients, since many retail forex traders dont survive longer than a few months. After losing, more than 90% simply quit and give up forex trading.
Forex brokers spend vast sums of money on advertising to entice new traders. If you go on Google and search any forex related keyword, you will find most of the ads are by forex brokers. Forex brokers give many incentives to you to start trading.
One way is to announce forex trading contests that reward the winners with $2000, $1000 and $500 cash prizes. Who is the actual winner in these contests? Your forex broker!
This is like a lottery, only three win. The more you trade in order to win the contest, the more money your broker makes.
Since there is no central exchange to regulate the currency quotes, forex brokers are free to offer any price to clients. Most of the brokers simply add 2 or 3 or even more pips to the interbank market 1 pip or even lower spread, when offering rates to clients.
These 3 or 4 pips are the risk free profits that the brokers make for each round trip trade. You see why forex brokers are giving you free platforms and trading signals, only to make you start trading as soon as possible. Your broker will make more risk free money, the more you trade!
Price shading is another practice used by forex brokers. If the broker thinks that price of a particular currency is on a rising trend, the broker will add a few pips to the currency quote in anticipation of that move. You cant do anything.
One of the best tricks that forex brokers use is Stop Loss Tripping. If they find many stop losses at a particular level, there will be a momentary blip in the price feed to take out most of the stop losses.
The blip was so momentary that you cant do anything. It was a momentary spike, so small that you could not trade but enough to trip the stop losses.
Since, there is no central exchange to compare moment by moment prices, your broker can offer any excuse like there was sudden large order in the market or the broker feed is much faster and reflects true interbank rates.
Topics: Forex |
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