Forex Trade – Intelligent Forex


Know More Forex Broker Tricks

Posted in Forex Brokers by intelligentforex on January 8, 2010

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 don’t survive longer than a few months. After losing, more than 90% simply quit and give up forex trading.

For enticing new clients, vast sums of money are spent on advertising by forex brokers. You can check this fact by going on Google and typing any forex related keyword. Almost all the ads will be by forex brokers. Each click costs them around $1.

Most popular way used by brokers to make you trade more and more and burn your money is to announce monthly Forex Trading Contests. Cash prizes of $2000, $1000 or $500 are announced.

In order to win, many small traders get wiped out; losing their money. This is just a trick fx brokers use to make you trade more. The more you trade, the more money your broker makes. This trick is similar to a lottery.

Forex brokers are free to offer any price to their clients. Most of the brokers get price quotes from the interbank market with a 1 pip or even lower spread. To this pip spread they add 2 or 3 or even more pips as the price quote to their clients.

These 3 or 4 pips are the risk free profits that the brokers make for each round trip trade. You see why fx 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!

There is a practice used by forex brokers called Price Shading. For example, if the broker is convinced that Euro is on an uptrend and its price is going to rise, the broker will shade his price quote slightly higher to take advantage of the likely increase in Euro price.

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.

You can’t do anything. It was a momentary spike, so small that it only tripped 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.

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