A broker that can fulfill registration, spread, leverage, tools and account service requirements, is a good broker for you. However, there are many brokers which perform this on the surface only. It means that these requirements fulfilled will be good for nothing if your broker is not honest. Dishonest broker can cost you a fortune because they can fake any buying or selling position from the desired points. This usually referred to what is called as sniping and hunting.
Even though these kinds of brokers do exist, they will of course hide this from you. There are no reports or published list of this dishonest activity as well. So, how can you find out if they are honest or not? One best solution is to talk to the traders who have joined the broker. You may try to go visiting some online discussion forum on forex, or perhaps a direct simple conversation to other trader will somehow give you clue whether certain broker is trustworthy or not.
Margin rules are the other thing that you have to carefully watch from a broker. It is important because it is relating to the amount of money you borrow from the broker for your trading. Once you agree and sign to certain margin agreement, your broker has a right to determine the risk you can take in a trading. It means that your broker can buy or sell your position without you know it, in order to cover the interests of the brokerage firm. Trust me, it will be a great disadvantage for you. For example, you set your margin on a certain point, then the market is falling deep before it rebounds high. Even though your account is enough to cover it, your position can be liquidated by your broker once it touched a margin call. Something like this will be a great loss for you as a trader. And if it happens again and again, it can be assumed that the broker is actually delivering a wide spread. Even though your broker seems to show you tight spread. The common cheating strategies that many brokers use are rejected trade, delayed executions, slipping and even stop hunting. These are the clues when the brokers try not to deliver the tight spread as they might have promised you with.
Spread policies offered by brokers are difficult to understand and may change greatly. This is why you will sometimes find difficulties to make comparison. However, there are some brokers which offer you fixed spreads despite of any market liquidity. Using fixed spread can be good but it is usually higher than average variable spreads. Furthermore, in order to be protected from a short-term volatility, you need to pay an insurance premium. And it is done for almost trading day you have.
There are brokers which offer variable spread as well. This variable spread is changing according to the market liquidity. When the market liquidity is good, the spread offered is usually tight. While the market liquidity is dried up, you will get a wider spread. You can then come to a question, which spread is better for your trading? The answer depends on the trading pattern that you usually use. For example, if your trading is based on the news announcements, then it is suggested to have a fixed spread.
To some brokers, the variety of spread offered is based on the account’s type that the client has. For example, tighter spreads are given to those clients whose larger accounts or larger trades. While a wider spread is given to a client with a smaller account. Somehow, you can also find brokers which give the same spread for any type of account.
This spread offer can only by book. It is very possible that this is just the promise from a broker to attract you joining their brokerage firm. It can be a very tricky offer that traps you into disadvantages. So, to avoid this, it is highly recommended if you try out some different brokers and talk to some clients who has joined or are joining the firm.
Bookmark/share this article with others:Even though these kinds of brokers do exist, they will of course hide this from you. There are no reports or published list of this dishonest activity as well. So, how can you find out if they are honest or not? One best solution is to talk to the traders who have joined the broker. You may try to go visiting some online discussion forum on forex, or perhaps a direct simple conversation to other trader will somehow give you clue whether certain broker is trustworthy or not.
Margin rules are the other thing that you have to carefully watch from a broker. It is important because it is relating to the amount of money you borrow from the broker for your trading. Once you agree and sign to certain margin agreement, your broker has a right to determine the risk you can take in a trading. It means that your broker can buy or sell your position without you know it, in order to cover the interests of the brokerage firm. Trust me, it will be a great disadvantage for you. For example, you set your margin on a certain point, then the market is falling deep before it rebounds high. Even though your account is enough to cover it, your position can be liquidated by your broker once it touched a margin call. Something like this will be a great loss for you as a trader. And if it happens again and again, it can be assumed that the broker is actually delivering a wide spread. Even though your broker seems to show you tight spread. The common cheating strategies that many brokers use are rejected trade, delayed executions, slipping and even stop hunting. These are the clues when the brokers try not to deliver the tight spread as they might have promised you with.
Spread policies offered by brokers are difficult to understand and may change greatly. This is why you will sometimes find difficulties to make comparison. However, there are some brokers which offer you fixed spreads despite of any market liquidity. Using fixed spread can be good but it is usually higher than average variable spreads. Furthermore, in order to be protected from a short-term volatility, you need to pay an insurance premium. And it is done for almost trading day you have.
There are brokers which offer variable spread as well. This variable spread is changing according to the market liquidity. When the market liquidity is good, the spread offered is usually tight. While the market liquidity is dried up, you will get a wider spread. You can then come to a question, which spread is better for your trading? The answer depends on the trading pattern that you usually use. For example, if your trading is based on the news announcements, then it is suggested to have a fixed spread.
To some brokers, the variety of spread offered is based on the account’s type that the client has. For example, tighter spreads are given to those clients whose larger accounts or larger trades. While a wider spread is given to a client with a smaller account. Somehow, you can also find brokers which give the same spread for any type of account.
This spread offer can only by book. It is very possible that this is just the promise from a broker to attract you joining their brokerage firm. It can be a very tricky offer that traps you into disadvantages. So, to avoid this, it is highly recommended if you try out some different brokers and talk to some clients who has joined or are joining the firm.
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