Know 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.

To entice new traders, vast sums of money are spent on advertising. Just Google, any keyword related to forex and you will find so many ads by forex brokers giving you so many incentives to start trading forex.

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

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.

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.

Now you must know how forex brokers make so much money and are even willing to spend so much on advertising. These 3 or 4 pips are risk free profits for the forex brokers.

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.

If the broker sees that many traders have placed stop orders at a certain price level, he will mount a sudden attack to take out all the stop order by momentarily spiking his price feed.

Naturally you cant complain. It was a momentary blip not enough to trade but enough to trip most of the stop orders.

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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