No matter how attractive a broker may seem at first you always have to remember that a broker IS NOT YOUR FRIEND. Brokers make money off the demise of us traders so you should understand that brokers are in no way inclined to give you more opportunitites unless they believe it is going to make their pockets fatter. There are even some fraudulent brokers who use several sneaky tricks to eat more and more out of your plate. Today we are going to discuss how brokers quietly steal your money and how to avoid these fraudsters.
Illegal Widening of “Spreads”
One of the tricky ways that brokers stop out traders is through the use of Widen Spreads. At the point of the chart where they know there are a lot of stop loss orders, when the price reaches that point brokers simply widen the spreads to stop out people who have placed their stop loss at those areas. The brokers are aware of where all the stop-losses are on the chart hence they will widen the spread to stop out as many traders as possible. If you are not watching the charts you may not even notice this happening, you will think a trade almost touched your stop loss but is going your way yet when you open the charts you discover that your trade has already been stopped out. This is usually their go-to trick during high volatile new releases. When you are looking for a broker, look for one that offers fixed spreads which means they guarantee that at no point in the trading period will they widen the spreads.
Slippage
This occurs when the transaction speeds for a broker are slow hence you are unable to execute or leave a trade at the price point that you desire. Meaning at a certain price point you desired to enter or leave a trade but the broker takes too long to execute your trade hence you are forced to enter several pips below or above the point you desired. This trick is especially common during high-volume events where the price is moving quickly. You will place a stop loss of say 15 pips, but the price will move so quickly and your trades will be excuted at a slow pace that you will only leave the trade at 25 pips, further than you intended. The broker simply gains of their negligence and their slow transaction speeds. They also have no incentive to fix it, so if your broker is pulling this off and is unregulated, chances are they will not stop as this is one of their money makers.
Illegal Opening of Trades
One of the least uncommon tricks by brokers that are usually in a pinch for money is to open negative trades on the behalf of a trader. This is so that they can balance their books at cheat their way out of a loss. On trading hours where the majority of traders are not active, brokers may decide to open and close trades on the behalf of traders to further deepen the losses of traders. This one strategy is very hard to hide though and it is usally the tale signs of a soon to close broker. If you hear of such things from a broker, you must know they do not have the liquidity to offer fair trading conditions and you must stay far away from them.
Denial of Withdrawals
It is always funny how brokers are so quick to take your trading deposit without collecting caring much about your personal details yet when its time to collect profits they suddenly become the Sherlock Homes of identity investigation. These brokers try and find each and every excuse to deny you your profits. They will request for irrelevant documents and take days to give you your hard earned cashed. This is usually because the broke is having a difficult time balancing its books and hence cannot give out withdrawals, but is it is covered up as this run around game as you chase the broker all around looking for your money. Always be on the look out for rumors of brokers denying withdrawals (especially in Africa), and stay FAR AWAY from these frausters.
How to avoid these actions by brokers
Before you even deposit money into a trading account you first need to ensure that the broker you are using is Regulated and Verified. There are a number of government agencies globally that regulated the activities of brokers to ensure fair trading conditions. If the broker that you use is unregulated there are high chances that your broker can execute these discussed tricks to steal your money and deny you your profits. To find a regulated broker I recommend you Brokersview.com