Prior to selecting a forex broker to trade with, consider this simple fact: most FX brokers want you to lose because they profit from your losses.
This is because most FX brokers are Market Makers.
Many Market Makers do not execute your positions on the FX market, so trading with them is like gambling with a bookmaker, or at a casino. They are the house, and the house always ensures that it wins.
This is also why their promotions are very similar to online casinos, offering bonuses that are intended to draw you in and tie up your capital until you lose the amount you deposited.
Market Makers that do execute your trades on the wider market trade against you, taking the opposite side of your positions in order to offset their risk. This is because 90% of Forex traders are unprofitable and the Market Makers know this.The other 10% of profitable traders are monitored by Dealing Desks and handled in the following ways:
- Spreads are widened making trades less profitable and certain positions less desirable.
- Trade execution is delayed, which increases re-quotes, resulting in orders not being filled or being filled with slippage.
- Stop losses are hunted, which means the Market Maker, knowing where client stop loss levels have been placed, deliberately triggers them either by widening the spread or artificially manipulating the price feed.
This is how Market Makers maintain an unfair advantage over their clients. So why trade with a company that profit when you lose?