Do Forex Brokers Trade Against You? (Find Out The Truth)


In the foreign exchange market, brokers play a pivotal role. You don’t need a random broker for trading; you need the best broker for trading. Finding the best broker is a difficult task for the new traders, in this market of full of unregulated brokers. As a newbie in the market, you need to gain as much knowledge as possible of this market. There are various ways you can start learning about the forex market when you are a brand new in this market. You need to choose the recommended broker for your trading.

forex brokers trading against you

So, Do FOREX Brokers trade against you? The truth is, most of the forex brokers are trading against their clients. Most of the brokers in this market, trade opposite you to make the profit. Forex brokers generally target those traders who are new to this market and do not have sufficient knowledge of trading.

As a new client for the broker, forex brokers generally keep your trades ‘in house’. Generally, your trades are not sent to the market. The broker executes your trade and bets against you. Such brokers are known as Dealing Desk Brokers (popularly known as Market Makers)

Market makers are the ones who trade against you. So, if you are interested in investing in the forex market, you need to learn its concepts first. You also need to learn how it works and what are the different strategies you should follow to get the most out of it. Use of demo account is the best option for a brand new trader. Demo account helps you in understanding some basic concepts of this market such as long positions, short positions, pips etc.

Demo accounts also help you in trying out different methods. A new method you cannot take the risk to try out on your live account hence, a forex demo account is the best option for that. After trying out a demo account, if you like the service provided by your selected broker, you can also use their micro forex trading account. It helps you in experiencing the real risk of investing in the forex market. Micro forex account is considered to be more effective than the forex demo account.

Before opening the micro forex account, you should be sure about the broker, whether he is genuine or not. There are many brokers who trade against you. It depends upon the type of broker, whether they trade against trader clients or not. Here are some ways through which a broker trade against you:

Ways through which brokers trade against you

When a new trader finds out that a broker’s service is regulated with well-known and powerful authorities, they think they are at a safe place and are not going to cheat or traded against anymore, but sadly, this is not true. There are some ways through which a broker trade against you:

1. Stop Loss Hunting

Stop loss hunting is one of the effective ways for a broker to cheat or trade against you. Market makers make money when you take the position, they charge you some pips when you buy a currency pair. The number of pips charged by a broker is called spread. ECN/STP does not make money through the spread, they make money through commissions.

In stop loss hunting, they have some robotics or employees hired who monitor the client’s trades. When a trader goes for short position and set stop loss, and when the market goes against the position and it becomes so close to the stop loss, the robot or hired employee increases the spread manually to help the price hit the stop loss hunter.

2. Slippage

Slippage is the trick made by Dealing Desk brokers or Market Maker brokers. As we all know, market makers are trading against you, their profit is in your loss, they will try not to make a profit.

In this method, they slip the price when you want to take a position or close a position. When you click on the buy button, suddenly, they take price higher, so that you will enter with a higher price. This method is used by market makers to not to allow you in taking the position at a low price.

Slippage makes you huge loss because it makes you not to make a profit with your winning positions and you lose more with your losing positions. This process is done by market makers with some special settings on the platform. If you ask your broker why it is happening, they generally tell you it is because of market situations, volatility etc.

3. Re-quoting

Re-quoting is another trick used by market maker brokers to trade against you. When the price in the market is going up strongly, and you chose to buy and when you click on the buy button, it delays for a few seconds, and instead of taking the position selected by you, gives you a new price that is higher than the price you want to enter.

Similarly, when the price is going down strongly when you chose to short, it doesn’t let you enter and wait for the price to get lower. This is called Re-quoting. This trick by market maker brokers does not allow you to go with your ideal position. Through this method, brokers don’t allow you to take the right position because your loss is their profit.

4. Leverage

Leverage is a good facility that helps traders in trading large amounts with smaller accounts. Market makers are aware that most of the new traders, they are inexperienced, are going to misuse the leverage. They generally take huge positions than their account balance. There the positions go against them, they get a margin call and stopped out very easily.

Real STP and ECN brokers that are connected to the real liquidity providers, cannot offer leverages more than 100:1. While market makers can offer any leverages they want.

5. Markup

ECN and STP brokers should only transfer order to liquidity provider i.e. banks. They are allowed to charge only a fixed commission for each order, and this commission is the only way ECN and STP  brokers make their profits. Sometimes, they use a trick to increase their profit.

Markup is an extra pip added by the broker to liquidity provider’s base spread. So, how you can find out whether your broker adds markups? You can directly ask him about this. Some brokers tell you that they are doing, some tell you it is their right and some deny it.

Conclusion

Therefore, most of the forex brokers trade against their clients and make more profits. There are different ways mentioned here through which they generally trade against you, especially when you are a beginner in this market.

Forex Brokers are aware of the fact that more than 95% of traders are new to the market and don’t know how to trade and they wipe out their account sooner or later. If you are a new trader, you should be aware of different ways used by market makers or dealing desk brokers nowadays to trade against you.

Hence, it is very important to select a genuine trader who can help you in achieving your trading goals. A trader should be careful of such brokers who use different tricks to trade against their clients.

Tab Winner

Hello I am Tab Winner welcome to my Forex blog. I have been trading Forex for over 2 years now and a stay at home dad for about the same amount of time.

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