Know More Forex Broker Tricks
Forex brokers are more of a marketing machine than market makers. Forex brokers need a constant stream of new clients to keep making money since most of the new traders dont survive longer than a few months.
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.
Forex brokers want you to trade more. They use many methods as incentives to make you do that. One of the methods is to hold a Forex Trading Contest by announcing cash prizes of $2000, $1000 and $500 for the top three.
Most of the traders get wiped out trying to win the contest. This trick is almost like a lottery. Only a few win, rest loses! But in the end its your forex broker who makes the most money.
There is no check on the forex brokers. They can quote any rate to you. Forex brokers do this by adding 2 3 or even more pips to the interbank market pip spread
Just imagine by acting only as middlemen between the interbank market and retail forex trader, forex brokers make risk free profits of 3 to 4 pips on a round trip trade.
Price shading is one of the practices used by forex brokers. If the price of a particular currency is rising, the broker may shade the price quote by adding a few pips in anticipation of the rise in currency rate. You wont even know it.
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.