Classic ways Forex brokers try to scam you

Forex Bucket Shops

Bucket shops are fraudulent brokerage firms that “book” a client’s orders but never really execute them on an exchange.  Forex bucket shops rely on the statistics that roughly 90% of all new traders fail and lose all of their money.

Knowing this, your broker will entice you to use a high level of leverage by saying that it will increase your profits. You are new, you don’t know how to use leverage. You end up losing. Because the forex bucket shop does not actually hold positions on the forex market, it collects all the money their clients (traders) lose.

Boycott

Sometimes, brokers even boycott the traders and try to boycott them completely. This usually happens when a trader is receiving a significant profit. The moment your profit history becomes consistent, brokers do whatever they can do to stop you from gaining more profits through them. This may sound unprofessional and even strange but it is true. This is because in the end, a broker does not care whether his/her client benefits as long as they are profiting themselves.

Clever Software Technology

When you search for a broker, you will find countless web results for online brokers trying to help you out through their “unique” software technologies. Needless to say, the very sound of an online broker is fishy. These online brokers use special kinds of software that help them scam you out of your money. As mentioned earlier in the book, their main aim is to somehow transfer your money into their own pockets. With all the websites these days, this makes it easier for them to do.

Stop-Hunting

This is the practice where a broker triggers a trader’s stop loss even when the actual market price is still a few pips away. Suppose you think a currency is heading up. You enter a position at 123.40 and you set your stop at 123.05, slightly below an obvious double bottom. Unfortunately, the trade begins to go against you and breaks down through support. Your stop is hit and you are out. This is when you might start to feel relief that you had that stop in place. Who knows how far it could drop, right? Wrong.

Guess what happens next. After taking out your stop, the price turns back and heads north, just as you originally thought. This is how your broker makes his money. The solution to this is to hide stop loss. The brokers what are commonly implicated in this dubious practice are market makers. A good way to detect this is if the trader opens three different trading platforms, and sees that the actual market price has not reached the stop loss level on other platforms. If a trader notices this pattern of persistent stop hunting by his broker, it is an indication that his broker is a scam Forex broker.

Spike prices

Your forex broker can turn your winning trade into a losing trade by using blip or a sudden spike in the price feed. What you don’t know is that the spike in the price action was artificially created by the broker. So my friend, if you are really serious about trading forex, you must know completely your broker first, before you start dabbling in the game of trading forex.