Ways Forex Brokers Play Games On You
Although, Forex brokers are supposed to work with you and help you to be successful in the Forex market, some unscrupulous brokers try to play games on you. Some of the ways in which the brokers play games on you are presented here:
Marking Up the PIP
Forex brokers are supposed to transfer orders to the banks and then get commissions for every order that they transfer. Commissions are the only way in which the brokers earn money. You will find some brokers adding an extra PIP to the spread. For example, if the spread for EUR/USD is 1 PIP, the broker with adds another 1 PIP making it a total of 2 PIPs. This means that the broker also makes money from the extra PIPs apart from making money from the commissions.
To avoid such a broker you need to do your research and find the best like the Forex brokers in Australia. Comparing the broker’s spread with the regular spread is the best way of doing it. If the broker’s spread is above the regular spread by 1–3 PIPs, chances are that the broker is marking up the spread.
This is where the brokers increase the price of the currencies when you are about to open a trade. They do this in order to prevent you from making a huge profit. When you are about to buy a given currency, the price automatically rises so that you end up buying at a slightly higher price than the one indicated on the chart.
It’s very easy to know that this is happening as you only need to compare the price that you have bought the currency and the one that you intended to buy at. If there is a discrepancy between the two, the broker is most likely playing games on you. To be on the safe side you should close your account as fast as you can.
Here the broker will delay for a little bit before you are allowed to make a trade. For example, if the price is going up strongly and you want to buy a currency, the broker will delay for a few seconds and wait for the price to go higher so that you can buy the currency at a higher price. The same thing happens when the price of the currency is going down-the broker will wait for a few seconds for it to go lower. A Forex broker in Australia will never do this.
You always need to check the reputation while choosing good currency trading brokers. Reputation is important in this business as there are quite a number of “fly-by-night” operations out there in the market. Basically, the rule of thumb is to stick with the more established Forex currency trading brokers who have a good track record.
An important factor to note is that all of their business dealings must be verifiable. Do they have a legitimate office with many satisfied customers? Have they been in business for many years or did they just pop up overnight?
You can find out a great deal of information from unbiased review websites that talk about their experiences with Forex brokers. If someone got ripped off before, you should probably steer clear.
Dependable brokers should be transparent in their dealings and operations.