Although, Forex brokers are supposed to work with you and help you to be successful in the Forex market, some unscrupulous brokers try to play games on you. Here are some of the ways in which the brokers play games on you:
Marking Up The PIP
Forex brokers are supposed to transfer orders to the banks and then get commissions for every order that they transfer. Commissions are the only way in which the brokers earn money. There are some brokers who add an extra PIP to the spread. For example, if the spread for EUR/USD is 1 PIP, the broker with add another 1 PIP making it a total of 2 PIPs. This means that the broker not only makes money from the commissions, he/she also makes money from the extra PIPs.
To avoid such a broker you need to do your research. The best way of doing it is comparing the broker’s spread with the regular spread. If the broker’s spread is above the regular spread by 1-3 PIPs, chances are that the broker is marking up the spread.
This is where the brokers increase the price of the currencies when you are about to open a trade. They do this in order to prevent you from making a huge profit. When you are about to buy a given currency, the price automatically rises so that you end up buying at a slightly higher price than the one indicated on the chart.
It’s very easy to know that this is happening as you only need to compare the price that you have bought the currency and the one that you intended to buy at. If there is a discrepancy between the two, the broker is most likely playing games on you. To be on the safe side you should close your account as fast as you can.
Here the broker will delay for a little bit before you are allowed to make a trade. For example, if the price is going up strongly and you want to buy a currency, the broker will delay for a few seconds and wait for the price to go higher so that you can buy the currency at a higher price. The same thing happens when the price of the currency is going down-the broker will wait for a few seconds for it to go lower.
Many brokers do this 100% intentionally and aim at reducing your chances of making good profits.