You as a retail forex trader need to understand that forex brokers are in the end above all marketing machines. Since more than 90% of the new traders dont survive long and give up trading after losing their hard earned money, forex brokers need a constant flow of new clients.
For enticing new clients, vast sums of money are spent on advertising by forex brokers. You can check this fact by going on Google and typing any forex related keyword. Almost all the ads will be by forex brokers. Each click costs them around $1.
Forex brokers want you to trade more. They use many methods as incentives to make you do that. One of the methods is to hold a Forex Trading Contest by announcing cash prizes of $2000, $1000 and $500 for the top three.
Most of the traders get wiped out trying to win the contest. This trick is almost like a lottery. Only a few win, rest loses! But in the end its your forex broker who makes the most money.
Since there is no central exchange to regulate the currency quotes, forex brokers are free to offer any price to clients. Most of the brokers simply add 2 or 3 or even more pips to the interbank market 1 pip or even lower spread, when offering rates to clients.
Now you must know how forex brokers make so much money and are even willing to spend so much on advertising. These 3 or 4 pips are risk free profits for the forex brokers.
There is a practice used by forex brokers called Price Shading. For example, if the broker is convinced that Euro is on an uptrend and its price is going to rise, the broker will shade his price quote slightly higher to take advantage of the likely increase in Euro price.
One of the best tricks that forex brokers use is Stop Loss Tripping. If they find many stop losses at a particular level, there will be a momentary blip in the price feed to take out most of the stop losses.
You cant do anything. It was a momentary spike, so small that it only tripped the stop losses.
If you complain, your broker can say there was a sudden large transaction in the interbank market or his feed is faster and reflects the interbank rates better.
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