So you say that you are interested at partaking in foreign currency
trading and that you are currently looking for good forex brokers to
help you with your investments. Though there are so many brokers that
are out there, not all of them have your best interest in mind. There
are almost as many unscrupulous brokers out there as there are good
ones, it is up to you to find out which is which before you even try to
talk to them.
Retail Brokers
A retail forex
broker is one that specifically caters to individual traders; these
brokers usually say that they do not charge a commission, and that is
the first huge red flag that you have to look out for. Retail brokers
will often use a lot of fancy words and numbers to convince you that
they are the best choice if you want to make money on forex trading,
which of course is a big lie; you need to avoid such retail brokers at
all costs.
The way retail brokers make money off of their
clients/victims is by creating their own market, which is why they are
sometimes called "market makers". For instance if the spread for the
EUR/USD market is between 1.2567 and 1.2568, the retail broker will be
asking their clients to sell for 1.2566 or buy it for 1.2569, this will
effectively give them a two pip profit that they will be keeping for
themselves.
How can they cheat you?
Besides
price fixing, retail forex brokers will even trade against their
clients. Going back to the EUR/USD market mentioned earlier; if both you
and your broker enter the same trade at 1.5674, and the market moved
against you and the price went down to 1.5628, your retail broker might
offer you a much lower price, like around 1.5624 so you can exit. Once
you are out of the trade, your broker is left with a four pip difference
between the actual price of the spread and what you were told, which
your broker will pocket as pure profit.
And, because a retail
broker can and will trade against you, you will most certainly lose
because your broker has access to your data; he will know all your
entries, targets, and even the stop-losses that you have on your trading
platform. Your broker will take advantage of all of these bits of
information so when your trades go sour, you will be the only one taking
a hit.
These are only some of the reasons why you should avoid
retail forex brokers. If you really want to become a success at forex
trading, then you need to look for brokers who have a good reputation;
these are the ones who will not tell you extravagant promises just so
they can cheat you later.
إرسال تعليق