Know Your Forex Broker
If you are serious about starting forex trading than you should know the games youre your forex broker can play with you. Most of the small forex traders dont know these facts and are easily taken for a ride by unscrupulous forex brokers.
Retail forex market is new and different from forex interbank market. Forex interbank market is only open to big players like banks, corporations, hedge funds, pension funds and other institutional investors and deals with large currency transactions.
Retail forex market was developed after the advent of the internet. Retail forex brokers offer online margin accounts to retail forex traders like you and me who are small time players in a huge market. Retail forex market is loosely regulated that lets the forex brokers play games with small forex traders.
You need to know the games; a forex broker can play with you. If you dont know what games a forex broker can play with you, you will never succeed at forex trading. Understand how the broker can trick you:
Pricing is Not Transparent: Being an OTC (Over the Counter) market, forex broker can quote prices that may not be fair but you have accept them or choose another broker. The prices that your forex broker is going to quote to you, is the price that you will get. You cannot do anything about it.
Leverage: Forex brokers let you trade forex with a high leverage like 100-1 or 200-1. Rather they will encourage you to use more leverage. Using leverage allows you to make high gains with a small price movement but it destroys you when you are on the wrong side of the market. Since most of the forex traders dont know how to trade. Giving you high leverage lets your broker gain when you lose.
Brokers try to trade against you: Forex brokers act as an intermediary between the retail trader and the interbank forex market. Since most of the retail trades are too small in size and cannot be immediately offset in the interbank market, forex brokers get the opportunity to trade against you. If you go long, the broker will go short and if you go short, the broker will take the long position. As most of the retail traders are not good traders and lose most of the time, forex brokers make profit from this.
Practices that are unfair: Forex brokers and Casinos have the same mentality: they dont like winner. If you are winning too much, the house will be stacked against you. Your forex broker may make the execution of your trades very difficult or start denying the service to you. Your trade may not execute due to slippage. There are many games the broker will play against you so beware.
Visit my Blog for finding a Forex Broker Scorecard that can help you in choosing a right broker. You also need to know what type of questions you should ask. - 23218
Retail forex market is new and different from forex interbank market. Forex interbank market is only open to big players like banks, corporations, hedge funds, pension funds and other institutional investors and deals with large currency transactions.
Retail forex market was developed after the advent of the internet. Retail forex brokers offer online margin accounts to retail forex traders like you and me who are small time players in a huge market. Retail forex market is loosely regulated that lets the forex brokers play games with small forex traders.
You need to know the games; a forex broker can play with you. If you dont know what games a forex broker can play with you, you will never succeed at forex trading. Understand how the broker can trick you:
Pricing is Not Transparent: Being an OTC (Over the Counter) market, forex broker can quote prices that may not be fair but you have accept them or choose another broker. The prices that your forex broker is going to quote to you, is the price that you will get. You cannot do anything about it.
Leverage: Forex brokers let you trade forex with a high leverage like 100-1 or 200-1. Rather they will encourage you to use more leverage. Using leverage allows you to make high gains with a small price movement but it destroys you when you are on the wrong side of the market. Since most of the forex traders dont know how to trade. Giving you high leverage lets your broker gain when you lose.
Brokers try to trade against you: Forex brokers act as an intermediary between the retail trader and the interbank forex market. Since most of the retail trades are too small in size and cannot be immediately offset in the interbank market, forex brokers get the opportunity to trade against you. If you go long, the broker will go short and if you go short, the broker will take the long position. As most of the retail traders are not good traders and lose most of the time, forex brokers make profit from this.
Practices that are unfair: Forex brokers and Casinos have the same mentality: they dont like winner. If you are winning too much, the house will be stacked against you. Your forex broker may make the execution of your trades very difficult or start denying the service to you. Your trade may not execute due to slippage. There are many games the broker will play against you so beware.
Visit my Blog for finding a Forex Broker Scorecard that can help you in choosing a right broker. You also need to know what type of questions you should ask. - 23218
About the Author:
Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in Options and Forex Trading. Read more about Forex Broker Scorecard.
posted by X - Men @ 9:18 AM
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