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|Forex trading classes in chicago||To put this in context, this is more than what the UK government spent on education last year. It shall not be intended as operational advice for investments, nor as an invitation to public savings raising. The normal spread in the market is usually very low. This last one 7. It does not store any personal data.|
|Falkovich weizmann forex||There is nothing wrong with that if, of course, the broker does it honestly. In a situation like this, a stop loss hunter will widen the spread from 2 pips to 5 pips, so that the short position is closed with a stop loss. Believe it or not, you can ask the broker directly. Identifying Fake Forex Brokers in Nigeria. To do that, make sure you trade on the right brokers that have a license from the bonafide regulator.|
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It is not guaranteed to help, but at least you will be sure that your broker does not see your stop loss and have a chance to take it out through dishonest means. Without the real transactions, the client is actually betting against the bucket shop operators also known as bucketeers. This is another dangerous type of broker strategy that is both dishonest and illegal in most countries. The following pointers help you to distinguish swindling brokers from honest ones.
These are just some ideas on what to look for in the broker you are selecting. Some of these you will be able to research on your own and some of these are not so easy to identify. The first and foremost distinction of a trustworthy broker from the fraudulent ones is the high level of security. You should choose a broker that is registered with a regulatory agency. Below is a list of countries with their corresponding regulatory agencies that checks the credibility of the Forex broker.
Forex regulatory agencies provide investors and traders with protection and security from fraud, scam, manipulation and abusive trade practices. To be registered, the broker has to pass the screening done by the regulatory agency and comply with the standards and regulations. If the broker is under-capitalized, your funds are at extreme risk.
Because broker accounts are not insured, there is a very little recourse for the individual retail trader if the broker goes bankrupt. You have to study the company in general terms: look at how long they have been in business, what their online reviews are like, and most importantly, look at their assets in the country. This is not the easiest thing to do, however, and once again you are back to reading online reviews and researching whatever info you can find online.
However, not all countries have the same regulatory policies and requirements when it comes to financial registration. Smaller Forex brokers can be hard to assess and there are no very strict regulations for Forex brokers in other countries and capital requirements are not closely monitored. Brokers in major economies such US, UK, Australia and Europe have more mature system set to regulate financial companies. And even this, however, is not enough to stop some brokers from acting dishonestly.
There was a broker in the United States that broke many laws and was fined several million dollars for these practices. Many traders were burned to never see their money again, even though the company was caught. Therefore, it is very important for any trader or investor to choose a Forex broker that based in a country where their activities are closely monitored by a regulatory agency.
The U. Next are U. K, Australia and Hong Kong. The MetaTrader trading platform is commonly used by most forex brokers, which has hundreds of custom-made indicators and templates for every trading strategy. Other brokers have more powerful custom trading platforms. The trading platform that suits you best is critical. The reliability should be more of a concern than how the platform looks and feels.
The platform should not crash or freeze during important economic news or events. Placing and closing an order should be done immediately with just one or two mouse clicks. One-click management of open trades and stop-loss, limit and other types of orders are other criteria that a trader may take into consideration. The overall navigation of the trading platform must be user-friendly. If there are additional charting tools, they should be very easy to access and apply.
A broker must comply with the minimum capitalization level required by the regulatory authority. The tightening of minimum capitalization in the US drove out Forex brokers that were too weak to acquire additional working capital.
Brokers that are unable to comply moved their U. Switzerland has set the minimum to 20 Million Swiss Francs. The better capitalized a broker, the more credible relationship it can establish with their liquidity providers. This simply means they can acquire more competitive pricing from the interbank market for their firm as well as for their clients.
Understanding how your broker conducts business according to the model they use is very important. There are currently a few different types of broker companies to trade with. Dealing desk and Non-dealing desk brokers conduct business oppositely, but no type of broker is better than the other because it all depends on your trading strategy and the type of trader you are. Generally, scalpers and day traders prefer tighter spreads because the market needs less ground to cover the transaction costs.
Position traders and longer term swing traders prefer to have wider spreads and pay no commissions since spreads tend to be insignificant over a longer period of time. Customer service and support is incredibly important for any type of business, and Forex brokers are not exempted. Brokers are not perfect, and you should choose a broker that could easily be contacted when problems occur and who responds quickly to your needs. As you probably know, the Forex market is open hours a day, so ideally, your broker should offer client support at any time.
Live chat and phone support is the best medium to contact the help desk rather than email. While trading, you may experience technical problems regarding your platform, trade orders, and other broker-related concerns. You may have just opened a big position and then your internet went down.
You may need to resolve this quickly by calling to your broker for help. The way they respond to your concerns can be a key in gauging the credibility of your broker. If this it the case for you then you may want to research another broker. The Forex market has many unique features that many brokers use to entice traders to open a live account with them.
Some promise no regulatory fees and exchange fees, others present no data fees, and most common to all, no commissions. However, no matter what type of Forex trader you are, you are always subjected to transaction cost. Every time you enter a trade, you are always required to pay for either the price spread or a commission.
Some brokers just charge the spread, others charge commissions per transaction made, while other brokers charge you both. The lower the spread, the greater the hypothetical profit a trader can make. Different brokers charge different number of spread pips.
However, paying a 10 pip spread on major currency pairs is a sign that there is something odd with the broker. Most brokers present the lowest spread they can offer because traders have a higher chance of profiting with lower spreads. You may choose the broker with the most affordable and cheapest spread. However, you have to balance broker reliability and low transaction costs. Choosing the broker with the lowest spread is important, but it should not override the most important factors in choosing a broker.
A competitive spread is useless if the other factors are poor. Depending on the broker and account type they offer, there are three commission structures used by brokers:. With the variable spread , the spread may be as low as 0 pips or as high as 3 pips on most major currency pairs. Spread also varies depending on the financial instrument that you trade and volatility of the market. Most brokers charge a 2-pip spread in a less volatile market. However, if the volatility increases, the spread may also increase, which means higher transaction cost for variable spread accounts.
Also, spreads between different currency pairs may change as the liquidity level of that certain currency pair changes. Every time you enter a trade, you will always start with a negative profit even if the price moved in the positive direction. The price has to change enough in order to cover the trading cost, the spread. Some forex brokers will publish their spreads live on their website.
Here is an example from one broker called FinFX. Most brokers who offer the least spread charge the transaction cost on every executed trade through commissions. Commissions are either fixed or variable. As the name implies, a fixed commission charges the same transaction cost regardless of the trade volume and size.
A variable commission is most common for brokers. Transaction cost is calculated based on the trade volume and size that you executed. Generally, the cost is calculated from a fixed dollar value per million. Trades held overnight are subjected to overnight rollover or interest fees.
Every currency pair that you trade has its own overnight interest rate. Overnight interest rates are determined at the Interbank level, not by the broker, and it varies between 1. This trading cost is calculated based on the leverage, which means the higher the leverage a trader uses, the higher the overnight financing cost. Rollover fees on currency pairs depend on the difference between the interest rates of the two countries whose currencies are paired. If he was shorting the pair, then he would be charged with 1.
Some brokers apply inactivity fees if you do not make any transactions within a set period of time. There are some brokers that require a minimum amount of trading activity that must be met each month, quarter, of a year.
A very volatile market condition and lack of liquidity can force a broker to apply a slippage on the currency price. This occurs when a position is executed away from the average spread. This usually happens during major new releases because of increased market volatility.
Some brokers protect their clients from slippage by effectively handling news releases, others do not. Fixed spreads may protect you from this unwanted cost. Although fixed spreads are slightly higher than the average spread, your trades will be filled at the desired price even if the market volatility increases. There are certain brokers that cheat their clients by manipulating the bid and ask spread. Typical spreads of major currency pairs among regulated brokers on normal market conditions ranges from 1 — 3 pips, but may reach as high as 6 pips during highly volatile market.
Scammers would have spreads around 4 to 8 pips on major currency pairs on normal market conditions, and may reach as high as 10 pips or more during high volatility. Another way that fraudulent brokers cheat their clients is through stop hunting. Brokers know where their clients place their stops. Suppose you opened a long position at 1. Unfortunately, the trade initially went against you and almost hit your stop loss price.
However, your position was closed, but the market did not even touch your exact stop loss price 1. Then the market begins to take off to your desired direction. There are still brokers that claim to be regulated but practice spread manipulation and stop hunting, especially during times of high volatility. The speed at which your orders get filled is very important and it is mandatory that brokers should fill orders with the best possible price.
Your orders should be executed at that price, or within micro-pips of the price. Reputable Forex brokers offer a hassle-free method to deposit funds and withdraw earnings. Whatever methods they use, brokers have no reason to deny withdrawal of your funds and profits because they only hold your funds to facilitate trading. Note: the amount of paperwork required by brokers has increased much in recent years to protect against money laundering and other illegal practices. Some brokers will require more paperwork than others, depending especially on the country they are in.
Almost all brokers offer two or more account types, which depends on the size of lots traded. The most common type of accounts are micro-accounts, mini-accounts, and standard accounts. The micro and mini-account allows you to trade with a very low minimum initial capital, while the standard account requires a higher minimum capital. Minimum capital for each account type varies from one broker to another. New forex traders tend to choose brokers with higher leverages.
Although higher leverage can lead to bigger profits, it also magnifies your losses in exactly the same way as your gains. A relatively small movement against your position can result to an immediate and large loss which can be greater than your initial investment capital.
Traders who get attracted by high leverage end up benefiting the broker and harming themselves. If the market moves against your position, margin levels are increased and you may be called upon to deposit additional funds into your account to maintain your position. The final aspect in choosing a forex broker is reputation. Only a few brokers have well deserved reputations and are loved by their clients, while some brokers are despised by many.
Disreputable brokers often use high spreads and slippage to prevent huge losses. Others cancel the trade if it turns against the broker. The moment your profit history becomes consistent, dishonest brokers do whatever they can do to stop you from gaining more profits through them. The only way to protect your investments and money is to keep and an open mind and make smart decisions. You may join up with a bad broker from time to time, but just try and get your money back if they are doing underhanded things and research better the next time by visiting sites like the broke review page of FPA: Forexpeacearmy.
But do not just stop with this one site. Research and read all that you can about all the brokers you researching. Try to find out the truth about them and when you do select a broker make sure you start with a small deposit at first. You may even try to withdraw profits on the account first before deciding to keep more money with them. A broker will always be tested at the point of withdrawing profits.
Contrary to the beliefs of most losing traders, Forex brokers are not designed to make retail traders lose money. Forex brokers want to do business with you, and not to lose your trading business. If you lose all your money in trading, they too will lose clients. But then again, this is not true of all brokers.
Although most brokers that are regulated by financial authorities conduct business ethically, some brokers usually unregulated only wants your money rather than seeing you succeed in the trading business. As a general rule, a broker will only help you when your interests are aligned with theirs. A broker who contacts you many times in order to convince you to deposit money or open an account with them, is a sign that the broker only wants your money, not to help you succeed in your trading career.
The best criteria are the size of the company financial stability , speed of their platform and as well as their credibility and honesty. Also, security of your funds and as well as the assurance that you are in good hands are the most important considerations. One of the best places to start when looking for a good broker is a review site like ForexPeaceArmy. They have some great reviews here on this site from traders just like you.
You can find some of the answers online with their websites but otherwise you can get on with their live support or call them on the phone to ask these questions. Make sure that you get solid answers, not just wishy-washy ones. And this one really looks very useful. Broker Comparison Guide should really help you with your decision when choosing a broker.
Trading directly with the exchange market and avoiding the intervention of the Forex broker on the trading process is nearly impossible for retail traders. Brokers act as mediator between the interbank market and retail market, in return for a commission. These two major categories of brokers conduct business oppositely, but no type of broker is better than the other because it all depend on your trading strategy and type of trader you are.
Trading with the right broker is very critical to trading success. Many brokers help their clients succeed, while some brokers are setup to make traders fail. The choice of broker you make will influence your ability to make profits month by month. Make sure that you trade with the broker that you prefer the most.
Giving your time and effort into investigating the factors outlined above can save you from much heartache and grief. No broker is perfect for every trader, but by considering the key factors on choosing the right broker, the chances of your trading success can increase substantially. Do you have a good broker?
Share it here if you think that others would benefit from it. I am also a Forex trader, a programmer, an entrepreneur, and the founder of ea-coder. I have created two of the most popular trade copiers and other trading tools for MT4 that are already used world wide by hundreds of currency traders.
As usual, very comprehensive and educational article that every new trader should read. Having been trading for quite a few years now, I have seen some very suspicious activities with various brokers, including some of the better known ones. I do feel sorry for my US trading buddies though as their govt treats them all like little kids, with all their restrictions in place.
Just too risky for my liking. Stick with the more popular better known brokers that have been around for a few years also. Not sure about your overnight rollover interest calculation, as I always seem to get charged more than I earn when trading the same pair in opposite directions with the same position size.
I think it is a money spinner for brokers. Thanks for the article Rimantas. Jim, I am glad you like it. Definitely U. Very comprehensive article. There is not enough transparence in their calculation. Moreover, you end up paying higher interest to hold a spot pair overnight than an equivalent futures contract.
Overall, I prefer futures to spot rates. Robert, glad you like this information. Interest rates can be mysterious for sure. I agree with you. If you are getting close to a margin call they will delay processing your deposit to cover the call. This is a nasty trick, I experienced it before my own eyes. They waited for my margin call and stop out, then appx seconds later my funds went in. Needless to say I no longer trade this way. I also used to be quite common for brokers to change your leverage during high volutiliy to cause margin calls.
Do you ever whatch the market moved against you immediately after placing your trade? Meanwhile all other pricing does not make the same move. Conway, those are golden stories. I really love reading them and it is so good to learn about them. The one with oil positions is the funniest. That is a great snippet of news about broker tricks.. There are proofs that those regulations are done by the governors who directly or indirectly own brokerage companies and make millions through them.
They made the regulation rules to prevent the traders to open accounts with the offshore brokerages, so that the money stays in their own countries, and the traders become obliged to open accounts with those brokerages owned by the governors. I am sure you can guess the rest of the story….
They get regulated and registered because they have to, not because they are honest. There are dirty hands behind these kinds of apparently good actions regulation. Indeed, they created a funnel to drain the funds to their own pockets. However, people just see the surface and are not aware of what is going on behind the scene. Let me ask you a question. Many of them wipe out their accounts at least a few times, before they give up on forex trading. Many of them lose a lot of money.
What these so called regulations have done for these people? What the governors have done is not about supporting the traders. It is about driving the funds toward the direction they want. They could do the same with having a live account too. You know the answer. They want you to open a live account before you learn to trade properly, and lose your money.
Before the regulations, they were worried about you to lose your money to the overseas brokerages, but now it is OK if you lose, because your money goes to their own pockets now. This is not true. Stop loss hunting is a very effective way that market maker brokers use to make the traders lose money.
However, many of them who are greedy, want to make more money through some other ways. In this case, the broker makes 1 pip, in addition to the commission it is legally allowed to charge. You can ask the broker first. Sometimes they tell you that they are doing it. Many of them deny it, and claim that the spread they offer is the normal forex market spread. If it is pips above the regular spread, then they are adding markups to the spread.
When you found out that your broker charges markups too, it will be your choice to withdraw your money and close your account, and find another broker. A high spread because of adding markups can be easily seen on the platform, by checking the difference of the bid and ask prices.
However, slippage is hidden to the traders. Slippage is a trick made by the market maker brokers. As your profit is their loss, then they have to do their best not to let you win. One of the ways is that they slip the price when you want to take or close a position.
When you want to buy and click on the buy button, they suddenly take the price higher, so that you will enter with a higher price than what you see on the chart. You click on the buy button and you enter, but when you check your entry price you will see that it is much higher than what you saw on the platform. For examples it is 1.
However, when you want to close a short position you buy they slip the price and you get out with a higher price. It is all done automatically and through some special settings of the platform. If you ask them why this happened, they will answer that it is because of the market situation, volatility and…. In contrast, they want you to win, grow your account and keep on trading with them, so that they will also make more money in long term.
Although this is done automatically and electronically, but it takes some time and it is possible that the price changes during this time, specially when the market is moving strongly. So you will enter with a different price than what you saw on your platform. Re-quoting is another trick made by market maker brokers. When the price is going up strongly, and you choose the right direction to enter you click on the buy button , the broker delays for few seconds, and then instead of taking the position for you, gives a new price which is higher than the price you want to enter because the price is going up strongly.
They do it when you choose the right direction. Then you will have to click on the buy button again to enter. It is possible that they re-quote again, and repeat this process for a few times, to either stop you from entering the market, or make you enter with a much higher price. They just want to sabotage your trading. They cause you to enter with a lower price to prevent you from making a good profit from your short position.
If you find out and complain, they will say they have no idea, and re-quoting is just the result of the markets volatility, and they have no control on it, and…. Whereas this is absolutely a big lie. They do the re-quoting through some special software and settings they apply to the platforms.
It will have no advantage for them. It is a market maker broker. Swap has to be calculated through a special formula, and as each currency interest rate is clearly stated by the related central bank, the swap has to be a constant amount with all of the brokers, banks and liquidity providers. However, the swap you actually pay is different from broker to broker.