Knowing your broker intimately is very important for you because most of the time, brokers may trade with you without you realizing it. Forex is the Over of Counter Market which is not regulated. This means that there are no such central agents in the futures market that can function as a clearing house.
What this means is that most of the time, free forex brokers quote their own currency levels. Most retail forex brokers get tariffs from the interbank market and add 1-2 pips to spreads when quoting rates to their clients. Especially during high volatility, a forex broker suddenly widened spread. The higher the spread, the more costs of your trading.
All brokers told their new clients that they did not demand a commission. This is described as a plus point of forex trading compared to stock trading where brokers usually collect commissions per trader. What they don’t say is that their commission is hidden in the form of bidding / question spread when they quote currency exchange rates. You see 2-5 Offers / Ask Spreads are your trading fee while it is a brokerage advantage. Every time, you buy or sell a currency pair, you will pay this spread to the broker. The more you trade, the more brokers.
Brokers encourage their clients to trade more. There are many games used forex brokers to make you trade more. A broker will invite you to take part in the trading competition with an announcement of around $ 2000- $ 2500 as a gift to win the competition. Most new traders lose 99% of the time. The more you lose, the more brokers. Now it also has something to do with the nature of the retail forex market.
The retail forex market is different from the interbank market which is very regulated. But as retail traders, you don’t have access to the interbank market. The only way you access the market is through intermediaries in your forex broker form. Most retail traders have a small account size. So when you open a trade, keep the small size of trading, the broker is forced to take the opposite position just to give liquidity. It provides forex brokers to trade against you. Since, most new traders are inexperienced, they lose a lot. Lost you, your broker’s advantage!
Add leverage for this. Your broker will captivate you to use a high level leverage by saying that it will increase your profits. You are new, you don’t know how to use leverage. You finally lost. The more you lose, the more your brokers will be made.
Your broker can easily change your trade into a losing trade. Many traders continue to lose without knowing the fact that the broker uses a sudden nail in a price feed to trigger your termination regularly. This is also known as Stop Hunting. When a broker finds a lot of stop orders close to the price level, they can produce a surge or blip that suddenly in the price feed to issue most of these stops. Most traders never know that the surge was produced by artificially by their brokers.
If you have independent price feed, you can compare two price feeds. You will be surprised to find that there is a surge in feed price brokers while in other price feeds do not exist. Forex brokers can play many games with their clients. They can make excuses of slippage to suddenly widen spread up to 10 pips when they quote the level to their clients. So before you start trading seriously with your hard-earned money, know the fraud of a surprising forex broker!