How do Forex Brokers Cheat Traders?

Category: Broker Guides | Author: Trading Brokers | Date: December 23, 2022

If you have made it here, you are probably worried that a forex broker will cheat you or feel like you have already been cheated by your broker. Don’t worry, it is normal to feel like that from time to time, even if you are using a completely safe broker. However, there are scam brokers out there who are in business simply to cheat traders. There are ways in which you can spot them and filter the good from the bad brokers, which I will try to cover in this guide.

Do forex brokers trade against you?

Yes, believe it or not but there are some forex brokers who do trade against you. These are known as market making brokers and they usually operate with a dealing desk. When you place a trade, they can use inhouse liquidity to take the opposite side of your position.

For instance, if you want to sell the EUR/USD currency pair, they would match your trade with a buy trade. If your trade was a loss, the broker would make money. On the other hand, if you were a good trader and made a winning trade, the broker would be at a loss.

You can therefore understand why this type of broker would want you to lose. That being said, a large majority of retail traders do actually lose money which is not necessarily because the broker was trading against them. It is often because they lack the experience or skills to trade successfully.

You can avoid the chances of a broker trading against you by opting for a no dealing desk broker with straight through processing. Any trade you place should get executed direct to the market without any interference from the broker. Even then, these brokers can implement plugins on their trading platforms to cause delays and other problems for traders. It is like the wild west out there sometimes.

Can forex brokers manipulate price?

I see losing traders complain a lot that brokers are cheating them as they do not like to admit they were wrong, had poor trading strategies and bad money management. Granted, there can be brokers that deliberately make things harder for you by causing unnecessary delays (slippage) and hunting stop losses. This is why you should always do your research before choosing a broker.

That being said, there are brokers who will employ tactics to make your life harder. If an unscrupulous broker decides they are going to cheat you, there is nothing you can do about it other than switch to another broker or give up trading altogether.

If you are still losing trades or just don’t feel comfortable with your broker, perhaps take a step back as this could impact your trading decisions. Human emotions can have a huge impact on the results of any trading strategy. You don’t want to make silly mistakes out of fear, anger or greed.

Perhaps think about moving over to a demo account to refresh yourself and see if you still feel cheated by your broker. However, most dodgy brokers wouldn’t bother interfering with demo accounts. In fact, it can be the opposite. Some brokers might even make trading conditions look even better on a demo account to make you think about switching over to a live account.

Can a forex broker steal your money?

If we are talking about a broker blatantly stealing funds from your account, yes it can happen. If you are using a forex broker that is a scam, they can close shop at any moment and ride into the sunset with your funds. If they were an unregulated brokerage then there sadly might not be anything that you can do about it.

This is why so many professional traders and finance experts would not trade with an offshore broker. Yes, they might be able to give you high leverage a no-deposit bonus and other features you cannot access with a regulated broker, but the risks are much greater. Therefore, make sure you do proper research and conduct your own due diligence when on the lookout for a suitable broker.

Do forex brokers want you to lose?

If a broker is operating as a market maker and providing their own liuqidity, they might want you to lose because it means they will be winning from your trade. If you keep on winning, the broker could start to manipulate the price by causing fake slippage and spiking the price to take out your stop loss.

Some brokers might just be upfront and block your account because you are such as good trader. No lie, I have seen this happen with my own eyes. I was using a so-called fixed spread broker and made quite a significant amount of profit over the course of a few months. They contacted me and told me they would not honour my gains and would reset the account to the initial balance. The broker stated the account would be blocked if I used the same strategy again.

However, there was nothing wrong with strategy that I was using. The problem was they had advertised fixed spreads that were actually lower than the spreads they were getting from the liquidity providers. Therefore, the broker was paying for some of the spread out of their own pocket. I did not kick up a fuss nor am I saying that they deliberately cheated me. It could have been an honest mistake and even if I felt cheated, there was nothing I could do about it.

Are forex brokers honest?

Not all forex brokers are honest. Whilst this does not mean they are all liars, simply by making it sound like you are going to be a successful trader can be considered dishonest in itself. I have researched and tested hundreds of brokers over the years and the majority tend to have clear risk disclaimers.

However, every so often you will come across a forex broker that has a flashing banner stating you can make “x” amount of returns over “x” amount of time. Just remember, nobody can predict the future so if any broker is making guarantees on earnings, I would take that as a huge red flag.

I feel like the most honest forex brokers are those who are regulated and provide plenty of educational content to help traders improve their knowledge of the markets so that they can make informed trading decisions. They should be putting clients before profits.

Why do forex traders lose money?

Forex traders can lose money because their broker is cheating them or simply because they are bad traders to be brutally honest. I have seen traders complain that their broker is cheating them when they are using dangerous martingale money management systems or grid trading strategies. Even with the best forex broker in the world, this type of trading can cause huge drawdowns, margin calls and blown accounts.

I think that a lot of forex traders lose money because they are not that well educated. Maybe they have rushed into trading and put a ton of pressure on themselves to make a million overnight. It is not that easy. Successful forex trading can take many years of study and practice. Even then, the chances of making a living from forex are pretty slim and the income is not consistent.

It is also quite common that forex traders lose money because of poor discipline and letting their emotions take over. Even the best forex strategy in the world can produce a completely different set of results depending on who is trading it. A focused trader might execute the plan flawlessly, whereas a trader who has a lot on their mind might make silly mistakes that they could have otherwise avoided.

Conclusion: do forex brokers cheat traders?

Yes, there are some forex brokers who cheat traders but that does not mean we should tarnish all forex brokers with the same brush. There are also good forex brokers who have client’s best interests in mind. You can reduce the chance of a broker cheating you by going with a regulated broker that must follow a strict rules and regulations put in place to protect traders and investors. They are more likely going to operate in an open and honest manner.

Please feel free to browse our best forex brokers if you are looking for some inspiration. Trading forex is hard enough without having to worry about if your broker is legit or not. Remember, a forex broker can only cheat you and take your money if you put yourself in a position which gives them the opportunity to do so.


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